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MTA on State Investigation of Apple Grand Central Terminal Deal: 'Bring It On'

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Original poster
Apr 12, 2001
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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.jpg



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."
Click to expand...
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.
Click to expand...
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.

Article Link: MTA on State Investigation of Apple Grand Central Terminal Deal: 'Bring It On'
 
Article Link
https://www.macrumors.com/2011/12/02/mta-on-state-investigation-of-apple-grand-central-terminal-deal-bring-it-on/
L

levitynyc

macrumors 65816
Aug 19, 2006
1,123
3,704
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.
 
LimeiBook86

LimeiBook86

macrumors G3
May 4, 2002
8,001
45
Go Vegan
Haha, I knew Apple didn't have to worry about this. The lure to visit the store and buy products or just 'hang out' will bring a lot more foot traffic then the previous store I'm sure.

I too wish this would do something about the MTA toll prices, but that's a whole other story to get into. :p :rolleyes:
 
B

btbeme

macrumors 6502
Jul 29, 2010
289
749
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.
 
Sasha-1

Sasha-1

Contributor
Aug 11, 2001
467
182
levitynyc said:
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.
Click to expand...

Welcome to union labor.
 
P

paulrbeers

macrumors 68040
Dec 17, 2009
3,963
123
I know Apple makes a crap load of money each year, but does any one wonder if Apple will make back all the money they spent on this location based on sales at this location? They must be expecting a staggering amount of sales from this location or they look at their retail sales as a whole, meaning even if a location loses money, getting products into more people's hands/word of mouth is worth taking a hit here...
 
V

Vantage Point

macrumors 65816
Mar 1, 2010
1,169
1
New Jersey
levitynyc said:
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.
Click to expand...

EXACTLY!!! I'm from NYC and now live in NJ. Even the railroad fares to get into NYC skyrocketed in the last year or so. It is disgusting. As a result I go to NYC about 1/4 as much as I used to only five years ago. The less people go the more money they need to squeeze out of those that do, so they just keep raising and raising the cost of 'fill in anything here'
 
Liquorpuki

Liquorpuki

macrumors 68020
Jun 18, 2009
2,286
8
City of Angels
paulrbeers said:
I know Apple makes a crap load of money each year, but does any one wonder if Apple will make back all the money they spent on this location based on sales at this location? They must be expecting a staggering amount of sales from this location or they look at their retail sales as a whole, meaning even if a location loses money, getting products into more people's hands/word of mouth is worth taking a hit here...
Click to expand...

I'm sure they will, but even if they didn't, iconic Apple stores are like tourist attractions in themselves. When I visited the 5th Ave store, you could tell most of the people weren't planning to buy anything. They just wanted to chill in the basement under the glass cube because there's no other building like it. With the Grand Central Terminal, you'll have an iconic store inside a public landmark. This will do wonders for branding and marketing.
 
applesith

applesith

macrumors 68030
Jun 11, 2007
2,777
1,573
Manhattan
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?!
 
D

duncanapple

macrumors 6502
Jun 12, 2008
472
12
Anytime you have a high visibility company such as Apple, everyone wants to share the limelight - whether it is praising or attacking the company is really irrelevant. Before even looking into the details it seems the state has put action ahead of research. I'm sure the state comptroller has more important issues but likely non as public/career bolstering.
 
I

iRCL

macrumors 6502
Nov 2, 2011
284
0
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.
 
theBB

theBB

macrumors 68020
Jan 3, 2006
2,453
3
paulrbeers said:
I know Apple makes a crap load of money each year, but does any one wonder if Apple will make back all the money they spent on this location based on sales at this location? They must be expecting a staggering amount of sales from this location or they look at their retail sales as a whole, meaning even if a location loses money, getting products into more people's hands/word of mouth is worth taking a hit here...
Click to expand...
Average store made $35 million revenue last year. I don't know how much of it is their wholesale cost to figure out their margin, but this store may have sales higher than an average one due to its location and the foot traffic that already passes through here everyday. $2.5 million spread out over a few years is not that much.
 
Liquorpuki

Liquorpuki

macrumors 68020
Jun 18, 2009
2,286
8
City of Angels
duncanapple said:
Anytime you have a high visibility company such as Apple, everyone wants to share the limelight - whether it is praising or attacking the company is really irrelevant. Before even looking into the details it seems the state has put action ahead of research. I'm sure the state comptroller has more important issues but likely non as public/career bolstering.
Click to expand...

The state controller's job is to audit the money trail of state agencies. Any project that gets politicized by the media automatically goes to the top of the list for practical reasons. The guy's just doing his job. And he doesn't care about Apple - he's not a lawyer, there's nothing he can do to Apple. All he cares about is whether the MTA is doing something stupid.

iRCL said:
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.
Click to expand...

If the deal was normal, the MTA will have records on file to prove it. Then once the audit is completed, the Comptroller will issue a report concluding it was normal.
 
J

JHankwitz

macrumors 68000
Oct 31, 2005
1,911
58
Wisconsin
btbeme said:
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.
Click to expand...

Yeah, that darn Apple must be one of those Wall Street 1%ers. How dare they make life better for so many. I demand free Apple products now or I'm going to sit on their steps in protest until I get them. I demand my 'fair share'!
 
G

goodcow

macrumors 6502a
Aug 4, 2007
749
1,001
levitynyc said:
With all that extra revenue, tolls for bridges and tunnels will be less and their will be better train service right?
Click to expand...

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.

levitynyc said:
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.
Click to expand...

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?

levitynyc said:
Top level executive pay keeps going up as does the amount of money put into pensions of the lazy employees.
Click to expand...

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.

----------
sfoalex said:
Welcome to union labor.
Click to expand...

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.
 
BC2009

BC2009

macrumors 68020
Jul 1, 2009
2,237
1,393
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.
 
Rot'nApple

Rot'nApple

macrumors 65816
Dec 27, 2006
1,152
1
I DID build that!
A Steve Jobs Carol by Chuck Dickins...

Me thinks that New York State Comptroller Thomas DiNapoli will be getting a visit from the Spirit of Apple CEO Passed and show him time is running out unless he changes his current path... :rolleyes: :apple:
/
/
/
 
P

paulrbeers

macrumors 68040
Dec 17, 2009
3,963
123
Liquorpuki said:
I'm sure they will, but even if they didn't, iconic Apple stores are like tourist attractions in themselves. When I visited the 5th Ave store, you could tell most of the people weren't planning to buy anything. They just wanted to chill in the basement under the glass cube because there's no other building like it. With the Grand Central Terminal, you'll have an iconic store inside a public landmark. This will do wonders for branding and marketing.
Click to expand...

That was my point, that I assume they probably won't make any money off the location, but that it is going to be another iconic location that the word of mouth is worth it.

----------
theBB said:
Average store made $35 million revenue last year. I don't know how much of it is their wholesale cost to figure out their margin, but this store may have sales higher than an average one due to its location and the foot traffic that already passes through here everyday. $2.5 million spread out over a few years is not that much.
Click to expand...

Revenue generated vs profit though. Salaries alone in the New York area could eat most of that! That's all I am saying.
 
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