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MacRumors
Nov 30, 2011, 10:51 AM
http://images.macrumors.com/im/macrumorsthreadlogo.gif (http://www.macrumors.com/2011/11/30/terms-of-apples-sweetheart-deal-for-grand-central-terminal-retail-store-revealed/)


The New York Post reports (http://www.nypost.com/p/news/business/one_weet_deal_deXMn1XIxsXJPKQaP7xfPJ) on some of the details of Apple's contract with the Metropolitan Transportation Authority (MTA) for its Grand Central Terminal retail store, noting that Apple received an extremely favorable deal for the space compared to other tenants at the terminal. Among the most significant concessions made by the MTA was a lack of any revenue sharing from what has been estimated to be a potential $100 million per year sales location.But while real estate insiders estimate the shop will rake in $100 million a year in sales, Apple won't be sharing a nickel with Grand Central's operator, the Metropolitan Transportation Authority.

The tech giant is the only retailer in the fast-growing retail transit hub to have such a sweet lease.

Critics likewise note that Apple's $60-a-square-foot lease is well below what many other tenants are paying -- including a future Shake Shack burger joint that will be shelling out more than $200 a square foot, according to the leases, copies of which have been obtained by The Post.All other tenants at the terminal with the exception of a Chase ATM branch pay a percentage of their sales to the MTA once an agreed-upon threshold has been reached. The MTA has apparently been willing to sacrifice such an arrangement in order to land Apple as a tenant, projecting that the company's presence will drive increased sales at many of the over 100 other retail stores at the terminal.

http://images.macrumors.com/article-new/2011/11/apple_store_grand_central_nov29.jpg


Apple's Grand Central Terminal retail store (Thanks, Tom!)
Apple has posted digital signage (http://www.macrumors.com/2011/11/23/apple-posts-digital-sign-at-grand-central-store-arriving-soon/) advertising the forthcoming store, with The New York Post having indicated that it will be opening on December 9th.

Article Link: Terms of Apple's Sweetheart Deal for Grand Central Terminal Retail Store Revealed (http://www.macrumors.com/2011/11/30/terms-of-apples-sweetheart-deal-for-grand-central-terminal-retail-store-revealed/)



ghostface147
Nov 30, 2011, 10:53 AM
Now that is power. Getting special deals in primetime space.

maflynn
Nov 30, 2011, 10:54 AM
I question the legality of a public institution giving sweet heart deals like this. Doesn't seem in the best interest of the tax payers

kiantech
Nov 30, 2011, 10:55 AM
Rich get richer!

Spectrum Abuser
Nov 30, 2011, 10:55 AM
Knowing Apple the display panels for the words are really iPads running the special version of iOS for the show models. Wouldn't shock me.

lightmyway
Nov 30, 2011, 10:56 AM
I question the legality of a public institution giving sweet heart deals like this. Doesn't seem in the best interest of the tax payers

The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

julesj66
Nov 30, 2011, 10:57 AM
A Shake Shack is coming to Grand Central?! Awesome! (though prob impossible to deal with!)

TWSS37
Nov 30, 2011, 10:58 AM
Because NY and it's municipalities are so flush with cash...

duffer6
Nov 30, 2011, 10:58 AM
Knowing Apple the display panels for the words are really iPads running the special version of iOS for the show models. Wouldn't shock me.

I doubt it. Those panels are bigger than an iPad. Much bigger.

gillybean
Nov 30, 2011, 10:58 AM
I can see how it would help the other retailers nearby.

There's an apple store here that's next to a restaurant and I think I do eat more at that restaurant now because I can stop by the apple store before or after.

maflynn
Nov 30, 2011, 10:59 AM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

From the article
Still, the MTA didn’t estimate what kind of increase it expects, and some real estate experts are skeptical.

It seems not everyone agrees with that, especially since the MTA has no estimates or done any studies on what potentially that increase could be

radge
Nov 30, 2011, 10:59 AM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

jtsnyc47
Nov 30, 2011, 11:02 AM
The biggest determiner in the price/sq ft difference between the Apple Store and the Shake Shack is the amount of space occupied. Apple's is 23,000; SS is 2,270.

You wouldn't know that by reading the article, but we are talking about the Post here. I guess it's remarkable that the words "mangled" "toilet" or "hooker" weren't somehow worked in.

*LTD*
Nov 30, 2011, 11:04 AM
Now that is power. Getting special deals in primetime space.

It creates traffic for everyone else. Apple can draw crowds like no other.

Apple Store halo-effect.

centauratlas
Nov 30, 2011, 11:06 AM
There was a report on what they were and they were not iPads. It was linked to from MacRumors.
Knowing Apple the display panels for the words are really iPads running the special version of iOS for the show models. Wouldn't shock me.

jtsnyc47
Nov 30, 2011, 11:08 AM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

Like people going "out of their way" to see the 5th Avenue store? Manhattan is a densely-packed tourist magnet. There's going to be plenty of people there with no other agenda other than to see to the largest Apple Store in the world.

puma1552
Nov 30, 2011, 11:08 AM
The biggest determiner in the price/sq ft difference between the Apple Store and the Shake Shack is the amount of space occupied. Apple's is 23,000; SS is 2,270.

You wouldn't know that by reading the article, but we are talking about the Post here. I guess it's remarkable that the words "mangled" "toilet" or "hooker" weren't somehow worked in.

The size has no relevance, it's not like a company with $80B in the bank can't afford $200/sq. ft. anyway. The commercial value of the real estate doesn't change due to the size of the place, not where I'm from anyway.

It's a classic case of the rich getting richer, and much like Apple's $7B quarters where half the people on this site practically cream themselves and then decry Apple when they cut enormous bonuses to their executives, people will do the same here--say how great and awesome and powerful Apple is, and then complain when they give the money to the top executives at the company.

Gasu E.
Nov 30, 2011, 11:08 AM
It's good to be the king.

guzhogi
Nov 30, 2011, 11:08 AM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

Can anyone in the area tell me how crowded the 5th Avenue shop is? Just wondering how many people will think "The Apple Store on 5th Avenue is always packed so I guess I'll go to the Grand Central Station one instead."

As for Apple not paying the revenue sharing, how much do they pay for lease and does it go to the MTA? Just curious.

rwilliams
Nov 30, 2011, 11:08 AM
It creates traffic for everyone else. Apple can draw crowds like no other.

Apple Store halo-effect.

We'll see how that goes. If this new store doesn't drive business to the other establishments in the terminal, the MTA is going to hear about it, and loudly.

mutantteenager
Nov 30, 2011, 11:09 AM
Isn't it great when public utilities bend over for big business. I feel like emptying my wallet into the hands of the next rich person I see....

burjeffton
Nov 30, 2011, 11:11 AM
Yikes... this feels slimy. If it was a company like Walmart people would be rioting.

mutantteenager
Nov 30, 2011, 11:12 AM
It creates traffic for everyone else. Apple can draw crowds like no other.

Apple Store halo-effect.

....and on the seventh day Apple rested on a huge pile of money.

It's just a shop, of which there are many.

Rafterman
Nov 30, 2011, 11:13 AM
The size has no relevance, it's not like a company with $80B in the bank can't afford $200/sq. ft. anyway. The commercial value of the real estate doesn't change due to the size of the place, not where I'm from anyway.

It's a classic case of the rich getting richer, and much like Apple's $7B quarters where half the people on this site practically cream themselves and then decry Apple when they cut enormous bonuses to their executives, people will do the same here--say how great and awesome and powerful Apple is, and then complain when they give the money to the top executives at the company.

A sweetheart deal for Apple where NY is practically giving away the space. Meanwhile, NY will continue to blame its budget shortfalls on pension outlays, unions and other hardworking New Yorkers for "not doing their fair share". Even though NY is already the highest taxed state in the union :mad:

gillybean
Nov 30, 2011, 11:15 AM
A sweetheart deal for Apple where NY is practically giving away the space. Meanwhile, NY will continue to blame its budget shortfalls on pension outlays, unions and other hardworking New Yorkers for "not doing their fair share". Even though NY is already the highest taxed state in the union :mad:

How is this a "sweetheart deal" when they didn't get any other bids for the space, and they'll now making 4x more from that space than they used to?

kdarling
Nov 30, 2011, 11:16 AM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

This is New York. It actually would not be surprising if some money passed under the table to get a deal like this, whether Apple directly knew about it or not.

The MTA does what it wants to, regardless of best interests.

Didn't they use to spend millions buying rare artwork as an investment instead of using the money to fix bridges?

daxomni
Nov 30, 2011, 11:16 AM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.
Except that the sweetheart terms don't appear to be based on actually meeting those goals and simply give Apple everything they wanted regardless of how it actually pans out.

ivladster
Nov 30, 2011, 11:18 AM
They know that Apple is gonna bring in thousands of people and make them stay longer at the Grand Central, this is why they just wanted to have Apple Store and didn't care about profit from Apple. They will profit in other areas when people talk about Grand Central, eat there, shop or just visit.

Mad-B-One
Nov 30, 2011, 11:19 AM
I don't see a problem in that. Apple attracts the paying customer kind of people and revenue for all goes up. Won't be true for a lot of other shops and that is why they agreed to pay some of that profit back. None of those shops is forced to be there, so it seems that it is a mutual agreement. Coming up with arguments that this is unfair if somewhat far-fetched. Apple could open a store across the corner and get the same amount of customers not leaving as many dimes as anticipated at this location.

BKF
Nov 30, 2011, 11:19 AM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

Well, maybe, but a lot of people use Grand Central Station. Also, this isn't the suburbs where you get in a car and drive a mile when you want something. It's a pedestrian/mass transit city, different dynamic, and this is in the heart of eye of a lot of pedestrian and mass transit traffic. It's going to be swarmed.

Lindenhurst
Nov 30, 2011, 11:21 AM
The biggest determiner in the price/sq ft difference between the Apple Store and the Shake Shack is the amount of space occupied. Apple's is 23,000; SS is 2,270.

You wouldn't know that by reading the article, but we are talking about the Post here. I guess it's remarkable that the words "mangled" "toilet" or "hooker" weren't somehow worked in.

Exactly..Cost per square foot is usually based on the amount of square feet rented. You would think the writer of the article would have included that in the article instead of written a piece of journalism that portrays Apple as getting something for nothing at the cost of others.

Spoony
Nov 30, 2011, 11:22 AM
First off this is the NY Post. They just like to cause drama. It's a gossip rag.

Comparing the space necessary for a shake shack and the space that Apple is renting is dumb. Apple's space is probably 30X larger. No one is going to pay 200 a square foot for a space that massive. They'd need to break it up into smaller spaces.

Prob makes more sense to just have apple there, drive increased traffic to other stuff and get the whole space leased out and keep it looking elegant. Win / Win.

The revenue sharing component just shows how powerful the appeal of apple is. Nothing illegal about that. This is still most likely still market rate rent for such a massive and large space.

Fazzy
Nov 30, 2011, 11:24 AM
So why doesn't apple have to pay a percentage of their profits, just like everyone else?

LeoFio
Nov 30, 2011, 11:24 AM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

A mile in Manhattan is like 20 miles or more anywhere else. This store will add much convenience to those in the area as well as those travelling. Plus, apple stores in this city are tourist attractions themselves.

daxomni
Nov 30, 2011, 11:25 AM
It creates traffic for everyone else. Apple can draw crowds like no other. Apple Store halo-effect.
If this is true then Apple should have zero problem signing a contract based on actual improvement. If there turns out to be less improvement than predicted then why shouldn't there be less of a discount given?

TWSS37
Nov 30, 2011, 11:25 AM
Isn't it great when public utilities bend over for big business. I feel like emptying my wallet into the hands of the next rich person I see....

I love how every person who is looking at this from a taxpayer and logical way (and I'm assuming are NY residents) are getting down voted!!! :D

Business like Apple doesn't need incentives. Job growth (and thus APPROPRIATE lease and tax breaks) is spurred by moderate to high level paying jobs. Minimum wage (or close to it) salaries does nothing to help the economy.

macus3r
Nov 30, 2011, 11:25 AM
Wait... They seriously estimated only $100million in sales per year for this location? /facepalm

This store will do at least $750mm-1 billion/year, easily. Stupid move on the MTAs party.

Liquorpuki
Nov 30, 2011, 11:27 AM
I question the legality of a public institution giving sweet heart deals like this. Doesn't seem in the best interest of the tax payers

Politics as usual. And what will happen later is some watchdog group will challenge the MTA. Then the MTA will spend more taxpayer money to hire an independent auditor. In response the watchdog group will hire their own independent auditor. And both independent auditors will arrive at different conclusions. By then a couple years will have passed and nobody will care anymore.

A Shake Shack is coming to Grand Central?! Awesome! (though prob impossible to deal with!)

As a westcoaster who thinks the Shack Stack is one of the best burgers I've ever ate, I'd go for the Shake Shack more than the Apple Store.

The City of LA should give Shake Shack a sweetheart deal so they can stick one a block away from my apartment.

Tiger8
Nov 30, 2011, 11:31 AM
The biggest determiner in the price/sq ft difference between the Apple Store and the Shake Shack is the amount of space occupied. Apple's is 23,000; SS is 2,270.

You wouldn't know that by reading the article, but we are talking about the Post here. I guess it's remarkable that the words "mangled" "toilet" or "hooker" weren't somehow worked in.

Agree. The per sq ft drops SIGNIFICANTLY in the city for larger space, retail or residential.

So a 1200 sq ft 2 Bedroom is NOT twice the price of a 600 sq ft 1 bedroom

pjfanelli
Nov 30, 2011, 11:32 AM
Knowing Apple the display panels for the words are really iPads running the special version of iOS for the show models. Wouldn't shock me.

I think they are Apple Thunderbolt Displays. I took a good look yesterday, and I snapped a shot a few weeks ago of a Display box outside the front door. I commute through GCT every day.


Edit: Or they could be ACDs

vitzr
Nov 30, 2011, 11:34 AM
Now that is power.
Now that is Blantant Greed.

Apple: The Company That Takes & Takes & Takes.

As Nefarious as Big Oil.. ha.. ha.. :)

All Hail Apple.

AppleMad98004
Nov 30, 2011, 11:35 AM
I love Apple but I got to say not paying their fair share here and getting a deal that takes away from the MTA is not good.

This goes along with Apple's lobbying for no tax on their overseas profits (which are bigger now than US profits).....

They are totally in bed with the 1%. Good for them but pay the taxes!

SeanMcg
Nov 30, 2011, 11:35 AM
So why doesn't apple have to pay a percentage of their profits, just like everyone else?

or we could ask

Why does everyone else have to pay a percentage?

This is an honest question.

Thunderhawks
Nov 30, 2011, 11:35 AM
From the article


It seems not everyone agrees with that, especially since the MTA has no estimates or done any studies on what potentially that increase could be

Yes, let's waste more money in cash strapped NYC to study this!

Really? It's a no brainer.

Especially when you open up the leasing app:

Large space leased all at once!
Tenant good for the money!
Long term no hassle lease!
Drawing power will generate more traffic and more traffic
means more business for surrounding stores.

And yes, more taxes for NY state, due to sales!

Not directly for the MTA, but they get their share via Albany.

BTW: All of NY State is technically bankrupt, due to politicians. They invent new taxes (Metropolitan Commuter Tax) make them retroactive and grab, grab, grab. Did I mention: GRAB?
But that is another subject.

JangoFett124
Nov 30, 2011, 11:36 AM
The MTA fares are already too high, and now instead of making money off of their rich tenants profiting off the commuters, the MTA will have to raise ticket prices even more. This makes me quite angry.

luckysob
Nov 30, 2011, 11:37 AM
That is a big space. What was in that space before? A single merchant or multiple?

I don't see how they dodged the revenue sharing aspect that the rest of the merchants are required to follow. Could have bought a few train cars per year with the Apple Store revenues....

RobNYC
Nov 30, 2011, 11:38 AM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

Not really since the MTA is hurting for cash. They'll just raise the rates on all the commuters again to compensate for their bad financial dealings. This isn't an isolated incident either, they're notorious for pissing away money and giving sweetheart deals.

http://www.sheepsheadbites.com/2011/05/how-political-deals-have-shortchanged-the-mta/

GQB
Nov 30, 2011, 11:40 AM
This is New York. It actually would not be surprising if some money passed under the table to get a deal like this, whether Apple directly knew about it or not.


Proof please?
Seriously, the tin foil hat crowd is out in full force today.
This store will drive more affluent buyers into nearby stores and produce more revenue per sq foot than any rental scalping could accomplish.
Apple stores, particularly this one, are destinations.
Go find a bank to occupy.

Thunderhawks
Nov 30, 2011, 11:40 AM
So why doesn't apple have to pay a percentage of their profits, just like everyone else?

When somebody leases space/a store to sell something they do not owe anything to the landlord, but the rent (and whatever is included in that number).

By your logic a landlord would have to participate in a stores' losses.

El Cabong
Nov 30, 2011, 11:40 AM
Grand Central is crowded enough without an Apple store. However, this may have the positive effect of diffusing the crowds at the 5th Ave store, which I currently avoid in favor of the Soho location, which is far less crowded.

However, I wouldn't be at all surprised if some palms at the MTA were greased to make this store's seemingly sweet deal go through (in fact, I'd be surprised if that didn't happen, given the MTA's track record - no pun intended). I'm sure that we'll be subsidizing this through yet another fare increase in the near future.

Liquorpuki
Nov 30, 2011, 11:40 AM
How is this a "sweetheart deal" when they didn't get any other bids for the space, and they'll now making 4x more from that space than they used to?

It's a sweetheart deal if it shows favoritism. Lack of revenue sharing = favoritism. The revenue sharing could have been mandated in the contract that went out for bid, like it was for every other space in the terminal, but it wasn't.

Also wondering how you know there were no other bids for the space.

Laird Knox
Nov 30, 2011, 11:40 AM
Knowing Apple the display panels for the words are really iPads running the special version of iOS for the show models. Wouldn't shock me.

I doubt it. Those panels are bigger than an iPad. Much bigger.

Early production run of the iPad 3.

aristotle
Nov 30, 2011, 11:41 AM
I question the legality of a public institution giving sweet heart deals like this. Doesn't seem in the best interest of the tax payers
I question the legality of the MTA being able to charge a lease and a percentage of the revenue. When the mafia does that, it's called racketeering.

Bubba Satori
Nov 30, 2011, 11:43 AM
Not really since the MTA is hurting for cash. They'll just raise the rates on all the commuters again to compensate for their bad financial dealings. This isn't an isolated incident either, they're notorious for pissing away money and giving sweetheart deals.

http://www.sheepsheadbites.com/2011/05/how-political-deals-have-shortchanged-the-mta/

Oops.

Somebody has to look out for the special interests of the 1% corporations.
I bet the iChristmas gadgets will be crowded under the trees of the MTA mafia.

ufwa
Nov 30, 2011, 11:43 AM
Wait... They seriously estimated only $100million in sales per year for this location? /facepalm

This store will do at least $750mm-1 billion/year, easily. Stupid move on the MTAs party.

ahahahaha.

you realize that all their stores combined for 14 billion for all of their last fiscal year.

This location isn't going to be bring in anywhere close to 750 million.

hobo.hopkins
Nov 30, 2011, 11:49 AM
This all only makes sense; this way more people will be in the area and therefore more likely to purchase goods/services from surrounding shoppes.

rwilliams
Nov 30, 2011, 11:51 AM
This all only makes sense; this way more people will be in the area and therefore more likely to purchase goods/services from surrounding shoppes.

And if they don't?

fultonjt
Nov 30, 2011, 11:54 AM
It's standard for retailers to pay a percentage of sales after hitting a certain threshold. Apple is one of the few who don't have to.

applesith
Nov 30, 2011, 12:00 PM
I question the legality of the MTA being able to charge a lease and a percentage of the revenue. When the mafia does that, it's called racketeering.

Exactly. Honestly, there is so much corruption with the MTA, who gives a crap about this? It's better than giving more money to the MTA and government to misspend.

----------

And if they don't?

Life will go on.

hurley999jb
Nov 30, 2011, 12:00 PM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

What about the millions of tourists who goto Grand Central each year? This is a great opportunity to draw even more in. This will be good for everyone.

RobNYC
Nov 30, 2011, 12:00 PM
Proof please?
Seriously, the tin foil hat crowd is out in full force today.
This store will drive more affluent buyers into nearby stores and produce more revenue per sq foot than any rental scalping could accomplish.
Apple stores, particularly this one, are destinations.
Go find a bank to occupy.

That might make sense if this was a mall but it's not, its a major train station. They already have the foot traffic built in. Adding an Apple store isn't really likely to change the amount of pitas Eata Pita sells.

In fact it's more advantageous for Apple to open a store there than for the MTA to have it there.

gnasher729
Nov 30, 2011, 12:01 PM
Now that is Blantant Greed.

Apple: The Company That Takes & Takes & Takes.

As Nefarious as Big Oil.. ha.. ha.. :)

All Hail Apple.

You really must hate Apple. But since Apple cannot force anyone, including the MTA, to enter a lease contract on the terms that Apple demands, it would seem that the terms were satisfactory to the MTA. And you can bet that the MTA now has a station that is a lot more attractive then it was before.


Wait... They seriously estimated only $100million in sales per year for this location? /facepalm

This store will do at least $750mm-1 billion/year, easily. Stupid move on the MTAs party.

Well, of course. They will be selling one iPad every 20 seconds, 24 hours a day, 365 days a year. About 1.5 million a year. As you say, /facepalm.

kalex
Nov 30, 2011, 12:01 PM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

Since when does MTA actually think? It is the most corrupt useless corporation in existence. Of course these morons decided that this is a good idea.

pjfanelli
Nov 30, 2011, 12:02 PM
It's a sweetheart deal if it shows favoritism. Lack of revenue sharing = favoritism. The revenue sharing could have been mandated in the contract that went out for bid, like it was for every other space in the terminal, but it wasn't.

Also wondering how you know there were no other bids for the space.


Apple bought at the existing lease at a big premium. It still had many years remaining. This was not a property that was on the market. Apple approached the lessee and the MTA. Other bids are highly unlikely.

JAT
Nov 30, 2011, 12:03 PM
When somebody leases space/a store to sell something they do not owe anything to the landlord, but the rent (and whatever is included in that number).

By your logic a landlord would have to participate in a stores' losses.

I question the legality of the MTA being able to charge a lease and a percentage of the revenue. When the mafia does that, it's called racketeering.

You guys must not be familiar with the retail marketplace. Percentage rent is the rule, Apple is apparently an exception.

applesith
Nov 30, 2011, 12:03 PM
That might make sense if this was a mall but it's not, its a major train station. They already have the foot traffic built in. Adding an Apple store isn't really likely to change the amount of pitas Eata Pita sells.

Since when is it Apple's obligation to increase business for other organizations? No one cares about a pita pit or a shake shack. Giving Apple a discount is a marketing move to make the overall area there more appealing. People love Apple stores especially ones in unique locations like this- why not leverage that?

vitzr
Nov 30, 2011, 12:06 PM
I'd wager that many of those who are posting responses have _never_ been to Grand Central Station. If you had, your response would possibly be quite different.

It's easy to sit back fantasizing an Apple Store being of great interest to the general population. Then again you might be shocked to know many passers by could care less. They don't eat, breathe, and sleep all things Apple.

To actually think it's a destination is a bit wacky. Apple stores are becoming as common as WalMart.

bbeagle
Nov 30, 2011, 12:06 PM
MacRumors seems to be catering to the anti-Apple crowd recently. All these incorrect inflamitory headlines are just too much.

Wigletbill
Nov 30, 2011, 12:07 PM
It creates traffic for everyone else. Apple can draw crowds like no other.

Apple Store halo-effect.

All this talk about bringing in traffic to Grand Central Station is funny.

Hasn't everyone said "Man, that place was like grand central station" before to refer to a place that is heavily trafficked?!!?!?

J

KPOM
Nov 30, 2011, 12:11 PM
Can anyone in the area tell me how crowded the 5th Avenue shop is? Just wondering how many people will think "The Apple Store on 5th Avenue is always packed so I guess I'll go to the Grand Central Station one instead."

As for Apple not paying the revenue sharing, how much do they pay for lease and does it go to the MTA? Just curious.

5th Avenue is usually teeming with tourists. Grand Central may get a mix of tourists, suburbanites coming in from Connecticut (en route to or from shopping trips elsewhere), commuters passing through, and people living in Midtown and Murray Hill who don't want to walk all the way to 59th Street.

The 59th Street store is just outside Central Park in a location of similar prominence. Based on the size of the store, Apple is paying about $1.4 million per month for Grand Central, or just shy of $17 million vs $20 million or so for 59th Street (if the $5 million plus $15 million revenue share is accurate).

Based on those figures, the Grand Central deal doesn't look quite as bad for the MTA as the headline makes it out to be, but perhaps they could have done a little better. I doubt the restaurant that occupied the space before was paying what Apple is.

Tiger8
Nov 30, 2011, 12:11 PM
Not really since the MTA is hurting for cash. They'll just raise the rates on all the commuters again to compensate for their bad financial dealings. This isn't an isolated incident either, they're notorious for pissing away money and giving sweetheart deals.

http://www.sheepsheadbites.com/2011/05/how-political-deals-have-shortchanged-the-mta/

God! Looks like MTA sucks as much as NJ Transit, probably even more, and we all knwo NJ Transit sucks!

Rafterman
Nov 30, 2011, 12:12 PM
How is this a "sweetheart deal" when they didn't get any other bids for the space, and they'll now making 4x more from that space than they used to?

Oh please. Apple would have paid them almost anything for the space. It was corporate welfare, plain and simple.

charlieroberts
Nov 30, 2011, 12:12 PM
#OccupyGrandCentral

superman23
Nov 30, 2011, 12:14 PM
Wait... They seriously estimated only $100million in sales per year for this location? /facepalm

This store will do at least $750mm-1 billion/year, easily. Stupid move on the MTAs party.

LOL!!!! If the average sale was $1,000 (it wont be even close to that) they'd need 2,739 sales per day being open 365 days/year to hit $1 billion or $3,000 per minute if they were open 14 hours a day.

KPOM
Nov 30, 2011, 12:15 PM
Oh please. Apple would have paid them almost anything for the space. It was corporate welfare, plain and simple.

Only if someone was willing to pay more for that space and was turned down.

alhedges
Nov 30, 2011, 12:20 PM
I question the legality of the MTA being able to charge a lease and a percentage of the revenue. When the mafia does that, it's called racketeering.

It's racketeering because they'll break your legs if you don't pay. It's not racketeering to ask for a percentage of the revenues; that's standard at pretty much all malls.

ecib
Nov 30, 2011, 12:21 PM
I question the legality of a public institution giving sweet heart deals like this. Doesn't seem in the best interest of the tax payers

It isn't a question of legality. All leases are negotiated on a case by case basis.

The MTA is looking at the presence of Apple as a *revenue stream*. They will certainly increase traffic by a large amount, and the other tenants will reap the reward (as will the MTA through larger returns on revenue sharing at these other locations, -it's not like their not getting some additional revenue with Apple there).

Also, that MTA is a public entity makes no difference. The same forces are at work in the pure private sector. Large companies with a lot of clout, that bring customers and revenue, get to dictate better terms. Kudos to Apple for using their leverage to negotiate better lease terms. It's called business.

Bluefusion
Nov 30, 2011, 12:22 PM
"$100 million a year" location? Sounds pretty low to me. I thought Apple's flagships were doing a solid 25-35 million a quarter (anyone know?). This will inevitably outperform them all, probably even double what UWS makes-- but maybe not double 5th Ave's sales.

Swift
Nov 30, 2011, 12:23 PM
What this article exhibits is that the Post has decided to throw its phony Murdoch populism at a random subject. Now there is, for a space more than 20,000 square feet, 4 times what they got before when there was a tenant. A burger joint is paying a higher rate for a much, much smaller space.

But the goal of a Murdoch paper is to selectively, very selectively, ignite a fake populism. No profit-sharing? Well, who says there should be? The city will get four times the rent.

If Apple puts a store in a shopping center, does it share profits? No. If Murdoch runs a TV network in New York, does it share profits? Why, no. What is generally the attitude of a Murdoch publication towards the municipalities' power to tax? Why, the taxes should be lower!!

But this article is all angry huffing and puffing over nothing. Got to give the masses a target for rage. Just make sure it doesn't mention phone hacking scandals or anything inconvenient.

Bluefusion
Nov 30, 2011, 12:24 PM
And as a New Yorker, I'm thrilled Apple got the MTA to buzz off. Good riddance! Grand Central is "THE WORLD'S" terminal: to have the MTA receiving kickbacks as though they were JUST a mall operator (and not a massive transit agency) has always seemed scammy to me. I mean, the MTA raises transit rates whenever they feel like it anyway. The amount of money they've got coming in is obscene. Kudos to Apple for negotiating a better deal than anyone else gets-- that's Steve's way and I'm happy to see it still in force.

Kabeyun
Nov 30, 2011, 12:33 PM
Yikes... this feels slimy.
Er, what? Would you be slimy for negotiating a low price for a new car?
If it was a company like Walmart people would be rioting.
Er, what?

aristotle
Nov 30, 2011, 12:35 PM
It's racketeering because they'll break your legs if you don't pay. It's not racketeering to ask for a percentage of the revenues; that's standard at pretty much all malls.
Breaking legs or kicking you out of a mall retail space if you don't pay protection money is the same difference to me.

There should be a set lease rate and set rate for utilities, security services etc.. Expecting a percentage of sales is extortion to me.

iSee
Nov 30, 2011, 12:38 PM
Wow, I can't believe how seriously some people are taking a New York Post story. Come on, use your brains a little.

E.g.,

Apple will initially pay rent of $800,000 a year, nearly half a million more than Metrazur paid.

(from an earlier item on this deal http://www.macrumors.com/2011/07/25/apple-signs-deal-for-23000-square-foot-grand-central-terminal-store/)

So... the MTA will be making more on the space than before AND supposedly get the benefit of increased traffic to all of the other stores.

Maybe the MTA could have gotten more -- I doubt anyone on this forum is in a position to know though... are any of you experienced in Manhatten retail real estate?

But it's hard to call it a bad deal it's a lot better than what they had before.

Eric S.
Nov 30, 2011, 12:40 PM
I remember when "Grand Central" referred to software. :(

addicted44
Nov 30, 2011, 12:40 PM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

Dude, this is Manhattan. Where you have 3 Starbucks, and 5 McDonalds within a 1000 feet radius. The whole island is ~30 sq mi in size. A mile is an eternity away in the city.

FreakinEurekan
Nov 30, 2011, 12:41 PM
So why doesn't apple have to pay a percentage of their profits, just like everyone else?

Because they didn't want to. It's called "Negotiation".

MTA decided that leasing the space for 4X the previous tenant's rate, with no revenue share, combined with the cachet and increased buyer traffic of having an Apple store on site was better than letting the space sit vacant and bringing in $0 income.

marting
Nov 30, 2011, 12:43 PM
If it was a company like Walmart people would be rioting.

Didn't you see the news last Friday, they were rioting in Walmarts...

hobo.hopkins
Nov 30, 2011, 12:43 PM
And if they don't?

Then, as others have said, the MTA will enjoy the increased rent received from Apple than it was previously. It's a win-win situation for everyone involved.

DeuxIt
Nov 30, 2011, 12:44 PM
sales tax on every single item sold in a store that will have the highest (or near highest) retail sales per square foot of any retail store IN THE WORLD = profit sharing.

mjoshi123
Nov 30, 2011, 12:50 PM
Sounds more like someone is playing golf with someone here....
"All pigs are equal but some pigs are more equal than others"

napabar
Nov 30, 2011, 12:57 PM
Because they didn't want to. It's called "Negotiation".

MTA decided that leasing the space for 4X the previous tenant's rate, with no revenue share, combined with the cachet and increased buyer traffic of having an Apple store on site was better than letting the space sit vacant and bringing in $0 income.

Wow.

Well spoken, logical and precise. Such a rarity in these forums.

Keep up the good work.

Liquorpuki
Nov 30, 2011, 01:00 PM
It isn't a question of legality. All leases are negotiated on a case by case basis.

The MTA is looking at the presence of Apple as a *revenue stream*. They will certainly increase traffic by a large amount, and the other tenants will reap the reward (as will the MTA through larger returns on revenue sharing at these other locations, -it's not like their not getting some additional revenue with Apple there).

Also, that MTA is a public entity makes no difference. The same forces are at work in the pure private sector. Large companies with a lot of clout, that bring customers and revenue, get to dictate better terms. Kudos to Apple for using their leverage to negotiate better lease terms. It's called business.

No, since taxpayer money is at work in the public sector, any contract has to be standardized and fair. Otherwise, the municipality or department can get sued. So contractors can't haggle and only the municpality can set the contract terms. And if someone in the municipality is conspiring with the contractor to award them contracts, that's one of the reasons politicians go to jail every year.

Apple bought at the existing lease at a big premium. It still had many years remaining. This was not a property that was on the market. Apple approached the lessee and the MTA. Other bids are highly unlikely.

From what I read, they paid off the restaurant to vacate and are going to occupy both the restaurant space, another retail space that was already vacant, and a bunch of public property that was never designated as retail.

The minute that public property was going to be used for corporate revenue, it should've gone out to bid. The MTA could've written the contract terms to target Apple (IE lessee is required to generate X amount of foot traffic... or whatever metric separates Apple from other potential bidders - that would be legal). Still should've gone to bid. Otherwise some other company will sue the MTA in a year saying they were never given the opportunity to acquire the space.

wikus
Nov 30, 2011, 01:06 PM
Critics likewise note that Apple's $60-a-square-foot lease is well below what many other tenants are paying -- including a future Shake Shack burger joint that will be shelling out more than $200 a square foot, according to the leases, copies of which have been obtained by The Post.

Another reason to DISLIKE Apple.

alent1234
Nov 30, 2011, 01:07 PM
MTA is technically a private corporation but with a lot of government control and oversight

pjfanelli
Nov 30, 2011, 01:08 PM
Because they didn't want to. It's called "Negotiation".

MTA decided that leasing the space for 4X the previous tenant's rate, with no revenue share, combined with the cachet and increased buyer traffic of having an Apple store on site was better than letting the space sit vacant and bringing in $0 income.

I agree with you in principle, but it wouldn't have been vacant. Metrazur would still be there.

theBB
Nov 30, 2011, 01:12 PM
That is a big space. What was in that space before? A single merchant or multiple?
Multiple. Wholesale usually results in lower prices, so bigger space has something to do with lower per sq ft rate.

Apple also spent a ton of money to renovate the area, knock down walls etc. It puts in $10 million on average for each store (not including lease payments) since they started opening them 10 years ago. This is more of a flagship, so it may have spent even more.

I never thought of Grand Central as a place to hang around and shop, so an Apple store would definitely change my perception and make me more likely to spend money there.

And, of course, this is from NY Post, so who knows how accurate the reporting may be...

----------

The minute that public property was going to be used for corporate revenue, it should've gone out to bid. The MTA could've written the contract terms to target Apple (IE lessee is required to generate X amount of foot traffic... or whatever metric separates Apple from other potential bidders - that would be legal). Still should've gone to bid. Otherwise some other company will sue the MTA in a year saying they were never given the opportunity to acquire the space.
Although I generally agree that there should be a bid, but if it is targeted to Apple, just without naming it, it would not really make it fair, it would just keep up the appearances.

defyingtech
Nov 30, 2011, 01:13 PM
The Apple Store Lenox Square in Atlanta rakes in an average of 150 million a year in sales which is also a substantially smaller space. I would imagine the grand central store would do well over 100 million a year in sales. Im also curious as to how many employee's they will have onboard. As reference Lenox Square has over 160 employee's. I guess there's gonna be jobs for some of the wall street folks. Apple's retail stores have the highest sales per square foot of any retailer in history by far.

deannnnn
Nov 30, 2011, 01:15 PM
The genius who was helping me at the 14th Street Apple Store yesterday said he's on the new Grand Central team "if it ever opens." He seemed frustrated that it is taking so long. But then again he wasn't a very friendly or helpful genius.

wikus
Nov 30, 2011, 01:18 PM
But then again he wasn't a very friendly or helpful genius.

Nor was he an actual genius.

TallManNY
Nov 30, 2011, 01:25 PM
$100 million a year of sales does seem small, but obviously it won't be anywhere close to $750 million year. That would require over $2 million in sales every day. That ain't going to happen even with all the foot traffic of grand central station. Keep in mind that probably half of that traffic is commuters. Apple may now get all of those commuters business, but even a fan boi doesn't spend more than $2,000 a year on Apple stuff (right?). A million fan boi commuters dropping $2,000 a year doesn't get you close to $750 million. Big numbers really are that big.

For those who don't know, the MTA has been very aware of the appearance of these retail spaces which are visible from the center of the iconic station. They would not want to split it up and they would not rent it to a giant Shake Shack. There is just a decorum aspect that must be preserved (yes, while transvestite hookers are plying their trade in the bathrooms). There was a Michael Jordan Steakhouse in that space at one point, then another upscale restaurant and bar that I recall. If it was going to be retail, it was only going to be a certain class of retail. I suspect Apple knew this in negotiation and that allowed them to get a better price.

Digitalclips
Nov 30, 2011, 01:28 PM
The MTA thought it was in the best interest of the taxpayers– that it would drive increased traffic/revenues to the other stores in the terminal. Not only legal, but great.

An anchor store, exactly. It is not an uncommon practice in Malls to do similar sweet deals for a store that will enhance the entire Mall. The other stores should be grateful to have such an anchor.

proehrich
Nov 30, 2011, 01:32 PM
The store on 5th Ave is about a mile away. All this is going to do is give the people who already use grand central a place to buy Apple products. I doubt the other businesses in the station will be benefited much, people aren't going to go out of their way just to see the Grand Central store.

Actually it probably will. I work 2 blocks from Grand Central and almost never go there (been in there maybe twice in last 18 months). With the Apple store there I will probably stop in at least 1 per month on my lunch break and then buy lunch at GC.

allmIne
Nov 30, 2011, 01:38 PM
The size has no relevance, it's not like a company with $80B in the bank can't afford $200/sq. ft. anyway. The commercial value of the real estate doesn't change due to the size of the place, not where I'm from anyway.
.

The commercial value, in terms of sq ft leasing costs, is heavily dependant on size. Here on earth, anyway!

So many people, so little knowledge!

rtdunham
Nov 30, 2011, 01:40 PM
Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A405 Safari/7534.48.3)

Avoiding percentage rent is a good deal. But the comparison between apples $60/sf rent and snack shack's $200 per is, well, AAPLs and oranges: Smaller occupancies routinely pay higher rents.

yyc engineer
Nov 30, 2011, 01:41 PM
Yikes... this feels slimy. If it was a company like Walmart people would be rioting.

#Occupy Grand Central?

vvswarup
Nov 30, 2011, 01:43 PM
I love Apple but I got to say not paying their fair share here and getting a deal that takes away from the MTA is not good.

This goes along with Apple's lobbying for no tax on their overseas profits (which are bigger now than US profits).....

They are totally in bed with the 1%. Good for them but pay the taxes!

It's called business. Apple didn't force the MTA to make that deal. It was a deal signed by both sides in good faith.

Also, Apple is not the only company lobbying for no tax on overseas profits. There's quite a few other companies besides Apple lobbying for it.

It's nothing more than business.

BJMRamage
Nov 30, 2011, 01:45 PM
It will no doubt increase traffic/customers to other tenants. Think of a crazy Apple device/product release where people are lined up in anticipation...they need to eat right...or get a drink afterward, or buy a magazine to wait, or a new outfit to look uber cool with their new toy.

And I also think there will be some people who go there just to go there (I did with the 5th Ave store) and then being at a "mall" will wander around going into stores, who knows what you might pick up.

TallManNY
Nov 30, 2011, 01:50 PM
Grand Central Station should really be on any tourists list of sights to see in New York, but I suspect coupled with "largest Apple store" it will go up on that list. Tourists will shop for other stuff.

But if I were MTA I would have hung in there for some of the upside. Even 0.1% of the sales would have given some upside and also given MTA some visibility into the sales level for when the lease comes up for renewal.

Mad-B-One
Nov 30, 2011, 01:54 PM
Yikes... this feels slimy. If it was a company like Walmart people would be rioting.

Well, I don't think so. Ever heard what happens behind the scenes before a WalMart comes to a new community? They get the land for free or almost for free, get big tax brakes, and destroy local businesses. Apple - not so much. Also, see what an employee at both companies makes and you will see who exploits. There is a website, a movie, and more (http://www.walmartmovie.com/facts.php) dedicated to this issue - so your comparison is kinda off.

I don't understand why this is such a big deal. Apple is hip right now and is an attraction no one has to pay for as a mall/business center owner when they move in. Look at Las Vegas - they pay tons of money for shows that people come and visit. Grand Central gets even $60 / square foot for getting a consumer magnet. And don't forget - people who buy at an apple store are usually not the ones who cannot afford a Starbucks drink or a newspaper from the next corner store. And the best thing about it is that it is in no way a competition for the rest of the businesses.

kugino
Nov 30, 2011, 02:19 PM
but android is winning!

addendum: i'm ashamed of the folks around here, giving this post negative points...um, i guess sarcasm is lost on this crowd. thought y'all were smarter. ;)

Mad-B-One
Nov 30, 2011, 02:20 PM
but android is winning!

I watched War of the Worlds and the Androids lost! :D

tbrinkma
Nov 30, 2011, 02:22 PM
Breaking legs or kicking you out of a mall retail space if you don't pay protection money is the same difference to me.

There should be a set lease rate and set rate for utilities, security services etc.. Expecting a percentage of sales is extortion to me.

You obviously don't understand *why* profit-sharing is part of many (most?) small business leases. The base rental rate is usually only slightly over what the maintenance and upkeep costs for the space with a tenant in place. There's enough for the mall/whatever to keep the shop and surrounding 'public space' in good upkeep and handle the seasonal decorations and such. They do this to attract businesses to the space, because a mall full of shops is much more attractive to shoppers than a mall with a bunch of empty store fronts.

Apple, as a renter falls into three categories which help them get better lease rates.
1) They're a known entity, and they're interested in long-term leases. You know they're going to be around long-term. This means less costs to renovate the space for new customers.
2) They're interested in *large* spaces. This means you don't have the added overhead of dealing with 20 businesses in the same space. They also have predictable sales, which means they can budget for the space they need without having to resort to profit-sharing arrangements.
3) They're viewed as a high-end retailer by the public at large. Simply having them in a location makes the location more attractive for shoppers. This also helps the space attract *more* high-end shops, many of which have lower volume, less predictable sales rates, leading to better (for the mall) profit-sharing arrangements with *their* leases.

These three factors, along with others, mean that Apple is capable of getting good deals on it's leases simply because solid, predictable income is better than astounding, but unpredictable income associated with large, unpredictable expenses.

The small food shop mentioned in the article has none of those advantages. And to top it off, they have expenses for their space that Apple doesn't. Extra power (or gas?) requirements for a restaurant, possibly requiring extra plumbing for lavatories depending on the details of the space, the overhead of health inspections that the mall has to deal with, etc.

Thunderhawks
Nov 30, 2011, 02:23 PM
You guys must not be familiar with the retail marketplace. Percentage rent is the rule, Apple is apparently an exception.

I guess not. Is that a NYC thing for larger chains?

Say a low base rent, plus percentage of sales?

I rent 3 stores to people (not in NYC) and would actually never think to ask them for a percentage of their sales.

How is one to get correct numbers and who audits this?

Always willing to learn:-)

defyingtech
Nov 30, 2011, 02:31 PM
Not sure where 750 million came from. The average computer transaction at an apple store is over $2,000, so yes it is very possible that the "fan boi" spends that much a year. They will also see a lot of foreign traffic that most stores in the U.S. don't see. In regards to the space, its possible that the jobs the Apple store will create had an impact. I can't think of another store or restaurant that would employee as many people in that space. For example the 5th Ave store has over 500 employee's.



$100 million a year of sales does seem small, but obviously it won't be anywhere close to $750 million year. That would require over $2 million in sales every day. That ain't going to happen even with all the foot traffic of grand central station. Keep in mind that probably half of that traffic is commuters. Apple may now get all of those commuters business, but even a fan boi doesn't spend more than $2,000 a year on Apple stuff (right?). A million fan boi commuters dropping $2,000 a year doesn't get you close to $750 million. Big numbers really are that big.

For those who don't know, the MTA has been very aware of the appearance of these retail spaces which are visible from the center of the iconic station. They would not want to split it up and they would not rent it to a giant Shake Shack. There is just a decorum aspect that must be preserved (yes, while transvestite hookers are plying their trade in the bathrooms). There was a Michael Jordan Steakhouse in that space at one point, then another upscale restaurant and bar that I recall. If it was going to be retail, it was only going to be a certain class of retail. I suspect Apple knew this in negotiation and that allowed them to get a better price.

Thunderhawks
Nov 30, 2011, 02:31 PM
Well, I don't think so. Ever heard what happens behind the scenes before a WalMart comes to a new community? They get the land for free or almost for free, get big tax brakes, and destroy local businesses. Apple - not so much. Also, see what an employee at both companies makes and you will see who exploits. There is a website, a movie, and more (http://www.walmartmovie.com/facts.php) dedicated to this issue - so your comparison is kinda off.

I don't understand why this is such a big deal. Apple is hip right now and is an attraction no one has to pay for as a mall/business center owner when they move in. Look at Las Vegas - they pay tons of money for shows that people come and visit. Grand Central gets even $60 / square foot for getting a consumer magnet. And don't forget - people who buy at an apple store are usually not the ones who cannot afford a Starbucks drink or a newspaper from the next corner store. And the best thing about it is that it is in no way a competition for the rest of the businesses.

Stop trying to make sense. This is a rumor website and people don't care about the realities of business.

They don't think deeper than a retina display ipad and missing specs in an iphone.

They have been brainwashed by Fox news and other stations that big corporations are bad and just want our money (Duh!)

Who provides the jobs and drives economy and pays taxes (As much as is legally required) ?

With the current generation's attention span, deeper thinking is the exception.

Like somebody already posted:

The tin foil hat crowd is out in force!

gnasher729
Nov 30, 2011, 02:36 PM
"$100 million a year" location? Sounds pretty low to me. I thought Apple's flagships were doing a solid 25-35 million a quarter (anyone know?). This will inevitably outperform them all, probably even double what UWS makes-- but maybe not double 5th Ave's sales.

According to Google, the average revenue is about $35 million per store per year. So $100 million would be three times the average.

aristotle
Nov 30, 2011, 02:41 PM
You obviously don't understand *why* profit-sharing is part of many (most?) small business leases. The base rental rate is usually only slightly over what the maintenance and upkeep costs for the space with a tenant in place.
No, I do get why "small" business leases are this way. The retail business is very seasonal and smaller operations have a much lower operating margin than Apple for example especially when you average it out over a year.

Some of the commentators here did not seem to get the difference between a large retail chain like Apple and a smaller franchise owner or independent retailer. They expect Apple to both pay the fair market value for the space and infrastructure and a percentage of sales which would be wrong.

Apple is able to afford paying the actual fair market rental rate upfront for a whole year whereas smaller companies are willing to pay a smaller base rate in exchange for a percentage of sales which will fluctuate throughout the year.

japasneezemonk
Nov 30, 2011, 02:56 PM
With these numbers we can also figure out how much the shake shack expects to sell annually. Probably $6-8 million.

mgradilone
Nov 30, 2011, 03:07 PM
they are going to make a killing from people like me who forget their headphones on average once a week, and dont want to take a 60 minute train ride without their music... :)

hbunting
Nov 30, 2011, 03:32 PM
I'd wager that many of those who are posting responses have _never_ been to Grand Central Station. If you had, your response would possibly be quite different.

I'd be willing to wager you've _never_ been there either considering you're calling it Grand Central _Station_.

defyingtech
Nov 30, 2011, 04:19 PM
Holy crap google said that? Well if google says it then we know its true....right? lol The revenue information per store is not public, nor would there be much up to date statistics. I am telling you from being a former employee of Lenox Square Mall that 35 million a year per store is not what you want to base any revenue numbers on currently. There are several Apple stores at about 3,000 sq feet and along with the average shopper at the grand central store being higher than a store in suburbia. A 23,000 foot store in NYC has the makings of over 250 million a year.

According to Google, the average revenue is about $35 million per store per year. So $100 million would be three times the average.

3goldens
Nov 30, 2011, 05:16 PM
MTA are morons for letting Apple get away with that!

They are constantly crying about income generation, raising commuters costs, charge Movies and commercials outrageous location fees to film on their properties and then they give Apple a free ride on this!

These contracts should be approved by someone other than the boneheads running it!

macus3r
Nov 30, 2011, 05:28 PM
those of you discounting the location's ability to crack $750mm+ are not taking into consideration the volume of iPhones Apple sells per quarter now, and the speed at which they sell these devices per hour in the store.

The average sales price of a product at the store is definitely going to hover around the $1,000 range when you take into consideration the quantity of phones and ipads sold vs. cpus.

couple that with the new "easytheft" stuff, the real number you have to look at is transactions per hour x avg transaction price. and with all these retail sales-driven enhancements apple is making, the quicker the customer turnaround will be.

$750 million+ by end of year FY12. mark my words.

edit: if we are to believe 9to5 mac's screenshot of apple retail beating it's forecast (which was set at 4x last year for black friday), then yea, please assume that run rate will only multiply as 2012 goes on.

Thunderhawks
Nov 30, 2011, 05:36 PM
With these numbers we can also figure out how much the shake shack expects to sell annually. Probably $6-8 million.

That's a lot of dead cows.

Let's blame the MTA for allowing that!

the8thark
Nov 30, 2011, 07:11 PM
Exactly..Cost per square foot is usually based on the amount of square feet rented. You would think the writer of the article would have included that in the article instead of written a piece of journalism that portrays Apple as getting something for nothing at the cost of others.

You know how journalism is though. The more people that read/hear the story the better. Nothing else matters to those journalists.

i.mac
Nov 30, 2011, 07:21 PM
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Yikes... this feels slimy. If it was a company like Walmart people would be rioting.

Apple is no Walmart. Folks go to grand central just because. Now there is another reason.

the8thark
Nov 30, 2011, 07:25 PM
So why doesn't apple have to pay a percentage of their profits, just like everyone else?
People pay a percentage of their profits to be in a location? This is madness. That'd not happen in my part of Australia. Here you just pay your per square metre rate for site rental per month and also pay for the utility fees (power/water/etc). That's it.

And if you are required to upkeep the premises every X years, you pay that yourself.

addicted44
Nov 30, 2011, 08:00 PM
Yikes... this feels slimy. If it was a company like Walmart people would be rioting.

Hmmm…you really think Walmart will draw the same people Apple does? And Walmart competes with everybody. If this was Walmart, all the rest of the stores in Grand Central would have to shut down. The Apple Store will draw a lot of people, and a much much higher proportion of extremely well heeled people.

Here are the rich neighborhoods from where people who will be coming to the Grand Central Apple Store:
1) People living in the Upper West Side (Take the 1/2/3 down to Times Square and take the S over).
2) People on the Upper East Side (Take the 4/5/6 directly to Grand Central).
3) Midtown East (All the embassies/consulates, the UN, are located here. Well heeled diplomats from all over the world).
4) Connecticutt, and North NY… Metro North runs out of here.
5) Around 2016, the LIRR will also run here. All the Long Island people will be leaving from Grand Central. Currently, a lot of people using the LIRR probably already use Grand Central to get to the West side, since a very large number work on the East side).

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Apple is no Walmart. Folks go to grand central just because. Now there is another reason.

Grand Central is the best connected station on the East side. It is the best way to go West/East in Midtown (the S that runs between Times Square and Grand Central, and the 7, which will soon extend even further west).

Apple is the only store, possibly in the world, which will bring vast numbers of well earning people to Grand Central, in great numbers. The Grand Central store will be the busiest in NYC on a per square foot basis, because it is the best connected. The 59th St. Store only has the NQR close by. The F is about 2 avenues away. And thats it.

No one is going to the SOHO store, unless they are going to SOHO for shopping, or they live downtown. Venturing south of Houston is an adventure.

Grand Central Terminal will have the 4/5/6, which connects the entire east side, and the 7 and S, which form the best way to move East/West, and West/East in NYC. Additionally, it also has Metro North, and will have LIRR within the next decade.

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People pay a percentage of their profits to be in a location? This is madness. That'd not happen in my part of Australia. Here you just pay your per square metre rate for site rental per month and also pay for the utility fees (power/water/etc). That's it.

And if you are required to upkeep the premises every X years, you pay that yourself.

Do you have airports in Australia? Then it's likely they take a percentage of sales.

In reality, it doesnt really matter, because either way the proprietor is going to get a certain amount of money, and if they werent taking it as a percentage of sales, they would take it as a flat rent. The percentage method in fact, probably works better, since it allows smaller stores to weather weaker periods of the year better.

Also, besides the "driving traffic to Grand Central" reason, it doesnt make much sense for MTA to take a percentage of sales from Apple, because a large part of the Apple Store is intended to serve purposes other than selling. In lieu of taking a cut of sales, the MTA is probably charging a higher per square foot rent (or so I hope).

Frankly, all the MTA needs to charge Apple is the amount of money they would expect another retailer to pay them if they had occupied the space. Since Apple is the most successful retailer in the world in terms of sales/sq. ft. (more than 2-3 times greater than the next batch, which are high end jewelry chains like Tiffany). This is all the MTA needed to charge Apple, because if they charged more, Apple may have refused and this is all they would have got.

With Apple, as long as they make as much money that the next best retailer would have drawn them, they get additional perks like:
1) Drawing vast numbers of people to Grand Central.
2) Stability. The Apple Stores are not going anywhere in the near/medium term. Additionally, Apple is unlikely to leave Grand Central, because historically, they have wanted "iconic" stores, which the Grand Central one will certainly be.
3) Having a huge space rented out by a single, reliable tenant. This means they dont need to worry about refilling that space when a smaller retailer goes bust, or decides to move out.

Apple 26.2
Dec 1, 2011, 12:12 AM
Business. Ethics. 101.

kalsta
Dec 1, 2011, 01:45 AM
The size has no relevance, it's not like a company with $80B in the bank can't afford $200/sq. ft. anyway. The commercial value of the real estate doesn't change due to the size of the place, not where I'm from anyway.

The commercial value, in terms of sq ft leasing costs, is heavily dependant on size. Here on earth, anyway!

So many people, so little knowledge!

Well said! :)

Area is a big factor, in addition to the potential of the store to draw more people. In your local shopping mall, you would find that your larger supermarket is paying significantly less per square foot than your small hair salon—for both those reasons.

^^BIGMac
Dec 1, 2011, 07:25 AM
So simple...it's called iPower.

dokujaryu
Dec 1, 2011, 08:29 AM
To me, this is just another example of a space wanting the Apple Store enough to offer a good sq/ft deal. Why does it have to be something more sinister than that? Why give it a provocative name like "sweetheart deal"? Grand central wants an Apple Store, Apple wants a good deal, so they make it happen. That's capitalism baby.

Rocketman
Dec 1, 2011, 09:09 AM
So I took the time to actually read the underlying and related articles. Apple is paying 4x the rent the prior tenant was. In addition to that they built out an area that was not being rented at all to add square footage to the overall effort. It turns out this space is considered "oddball" because it is not formatted in a way very many tenants could find a way to make it work.

A similar situation arose when Apple took an underused basement and turned it into the 5th Avenue store. They turned lemons into lemonade and brought HUGE foot traffic to the site and the neighboring stores.

Now there is a "probe" by NYC over the terms of this lease. This is clearly caused by whiners making noises to annoy/harass Apple. While it is true they are not paying a percentage of gross in addition to rent, they are paying four times the prior rental rate to offset it.

If there is any blast back over this transaction resulting in breach of contract, Apple should simply declare a breach, sue for the upgrade and special costs they incurred (moving the prior tenant out at their expense), and go elsewhere.

At some point politically motivated breaches by governmental authorities should be treated exactly like any other landlord, because in this context they are nothing but a landlord.

Rocketman

G4DP
Dec 1, 2011, 09:50 AM
Now that is power. Getting special deals in primetime space.

No, power is not having to pay any rent what so ever. Marks and Spencer used to have that situation in the UK. That was power. Not sure if they get away with it now though.

Liquorpuki
Dec 1, 2011, 10:32 AM
So I took the time to actually read the underlying and related articles. Apple is paying 4x the rent the prior tenant was. In addition to that they built out an area that was not being rented at all to add square footage to the overall effort. It turns out this space is considered "oddball" because it is not formatted in a way very many tenants could find a way to make it work.

They're not occupying the same space as the prior tenant, they're occupying that space plus a ton more space. Including that oddball section of prime real estate that was previously off limits. Larger apartment = higher rent. Larger apartment + demolishing a chunk of the parking garage to make your room bigger = much higher rent.

Now there is a "probe" by NYC over the terms of this lease. This is clearly caused by whiners making noises to annoy/harass Apple. While it is true they are not paying a percentage of gross in addition to rent, they are paying four times the prior rental rate to offset it.

The probe doesn't care about Apple. It's targeting the MTA because it's a public entity. If the MTA, with its 30 billion in debt and taxpayer funding, is turning down revenue streams for no good reason, that's mismanagement. If the MTA is skirting the bidding process to issue a sweetheart deal under the table, that's illegal.

kdarling
Dec 1, 2011, 12:13 PM
Not only could the rent increase be from using more space, it's also very common in NYC for new tenants' rent to be several times higher than the old rent.

You see this all the time with rent-controlled apartments along Central Park that should be going for $5,000 a month, but the original tenants are still only paying around $1,000... 1971 prices. Once it goes vacant, the rent control disappears.

jtsnyc47
Dec 2, 2011, 09:17 AM
First of all, much like everything else in life, a lease is a negotiation. Percentage of sales leases are risk mitigation tools for renters as well as incentive for landlords of well-maintained properties. It's an assurance that the tenant will get a certain return on their lease investment and that, mostly in cases where the leaseholder is in communal setting like a mall, that the landlord will maintain the environment to the degree necessary to ensure people go to the leaseholder's business.

Percentage of sales leases are not "you'll pay what I require plus a percentage of your sales". This may sound too straightforward for some of people commenting in this thread, but if you're in a PoS lease, you're paying less base rent and your sales upside becomes the landlord's upside.

The Grand Central location guarantees a certain level of foot traffic. The Apple Store magnet effect assures that people will find them among other retailers. Apple does not need to enter into a PoS lease, so they're paying more not to. They're taking up a huge chunk of irregular floor area, which is gold to a landlord, and paying less than Shake Shack on a square-foot basis because that's what happens when you take more space. The commenter that stated that "this doesn't happen where I'm from" should seriously look to opening several small businesses in that Bizarro universe. That's ain't the way stuff works in Manhattan, where Apple's real store is located.

I've negotiated with the MTA before. They're a huge NYC landholder and shrewd negotiators. Although I have the utmost respect for Apple's retail prowess, I seriously doubt that the MTA was "fleeced". The terms of the deal are fair, and I'm sure the other GS tenants are excited about it. Apple-haters, and/or (I tend to think "and") people who don't know anything about the NYC real estate market or the dynamics of lease negotiations are still going to be pissed.