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

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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...

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They estimate sales at that location will be 100 million dollars a year.

What is funny is when people bash apples reasonable 30% cut from the app store you know they have no idea how traditional retail works nor how expensive to operate.

CalWizrd said:

Holy crap! This is a joke, right?

$300,000 is excessive for anyone? Are you serious? Are you occupying somewhere right now?

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This person couldn't be an occupier, they are clearly anti-labor, and it wasn't until organized labor showed up that OWS started to get any traction in NYC.

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goodcow said:

Wow. Do you live in New York City? Do you realize the cost of living here?

You think the person in charge of a $10+ billion budget should make a maximum salary of $100,000 a year? Are you delusional? You expect to attract competent talent at that salary? Even $300,000 is low considering the scope of the job.

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There was a time when yes, $300k would have been considered more than an appropriate salary and attracted plenty of talent, in reality it still could.

Much of what is going on at the upper echelons is more about ego and compensation competition amongst those in the inner circle than a real indication of talent and skill. HP and Disney are great examples of where this requisite insane compensation in order to attract talent logic falls apart.

Quick reading

Here's the layman's guide to the story.

MTA, though it has had problems in the past, has made a good deal with Apple. A million a year in rent, vs. $250,000 from the former tenant. Lots of costs for Apple, which will benefit all the other retailers and Grand Central as well, strangely not counted in the Post account.

"They shoulda soaked them for $5 million!" I suppose. (Note: Apple is not the target here. The public sector is, which means, to the Post and to Murdoch, inflated costs (labor contracts which mean people are paid living wages), and an important rallying point for the Fox lumpen idiots. The idea? Turn the rage people are feeling towards those not responsible for the damage.

So the civil servant who might be afraid of being dragged into this story launches an investigation. Good publicity for him. He's slaying Rupert's imaginary dragons!

The store will open. Big money will pour in. Everybody will be happy. Story will be over. Target for the lumpen rage will switch to some other labor contract, or racial outrage, any target that distracts the Post reader from the guys who are really screwing them.

-30-

MTA is getting "quadruple" the normal fees? Well, if they charged the normal rates, they'd get even more for a severely cash strapped city and state. And before you all start whining about how quadruple is still such a great deal, remember that the city and state of New York NEVER misses an opportunity to wring out every last dime from its taxpaying citizens to the max - the heaviest taxed state in teh union. Yet businesses like Apple get the best terms possible, and a big ol' smooch? Good for NY for investigating. Chances are, someone is getting paid off.

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ecphot said:

when people say the apple store will increase foot traffic thus benefiting other stores:
its GRAND CENTRAL STATION!

the place is packed at all times as it is. I would say from going there that its is too congested to shop comfortably right now.

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This new Apple Store won't do a damn thing to change the foot traffic in and around Grand Central Station. As I learned from the movie "Inside Man", Grand Central Station is the post office, Grand Central Terminal is what we're talking about here.

cmwade77 said:

$300,000 per year is excessive for anyone, except maybe the President of the United States and governors of the largest states and even then, it might be too much. I would say $100,000 per year should be good enough for any public sector job aside form those listed above and that is assuming there are absolutely no other benefits. How much do you need to live anyway?

18% of the budget is going to pay down debt? That's it? Really, should be at least 25% of the budget.

The unions are a major part of the problem, they prevent you from firing people who are doing a bad job, insist on pay raises for everyone, even when those in the private sector are having to take pay cuts, insist on hiring more people, even when there are lay offs elsewhere, etc. All of this does cost money.

Bottom line is greed is what is the source of the problem.

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With all due respect, who the hell put YOU in charge of how much others should or shouldn't earn?

kaibelf said:

with all due respect, who the hell put you in charge of how much others should or shouldn't earn?

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qft!!!!

cmwade77 said:

$300,000 per year is excessive for anyone, except maybe the President of the United States and governors of the largest states and even then, it might be too much. I would say $100,000 per year should be good enough for any public sector job aside form those listed above and that is assuming there are absolutely no other benefits. How much do you need to live anyway?

18% of the budget is going to pay down debt? That's it? Really, should be at least 25% of the budget.

The unions are a major part of the problem, they prevent you from firing people who are doing a bad job, insist on pay raises for everyone, even when those in the private sector are having to take pay cuts, insist on hiring more people, even when there are lay offs elsewhere, etc. All of this does cost money.

Bottom line is greed is what is the source of the problem.

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You do not seem to have a real good handle on skilled executive management or even basic cost of living. It would be impossible to find a person qualified to manage a $30 billion budget for $100k in NYC. In fact it would be impossible to find someone qualified to manage a $30 million budget for that salary.

I know nothing of the current person holding the job and if they are qualified.

HuskyOffset said:

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This new Apple Store won't do a damn thing to change the foot traffic in and around Grand Central Station. As I learned from the movie "Inside Man", Grand Central Station is the post office, Grand Central Terminal is what we're talking about here.

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Thank you, grand retail oracle. Perhaps I can consult the tea leaves on Netflix for my next lottery ticket.

Rafterman said:

MTA is getting "quadruple" the normal fees? Well, if they charged the normal rates, they'd get even more for a severely cash strapped city and state. And before you all start whining about how quadruple is still such a great deal, remember that the city and state of New York NEVER misses an opportunity to wring out every last dime from its taxpaying citizens to the max - the heaviest taxed state in teh union. Yet businesses like Apple get the best terms possible, and a big ol' smooch? Good for NY for investigating. Chances are, someone is getting paid off.

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The alternative was Apple not buy out the lease and they continue to receive 1/4 the fees...

Liquorpuki said:

That's why you put a contract out for bid, so you can find out who's interested. If Apple was the only company who bothered to submit a bid, then whatever dollar amount they bid is legal as long as they meet the bid requirements. They could've probably low-balled the rent even more.

If both Apple and some other company submit a bid, whoever submits the higher bid is supposed to win. IE if some other company said, I'm willing to pay for everything that Apple said they'll pay for in their bid, have the brand recognition to generate the same amount of foot traffic, plus I'm willing to pay 8x the rent instead of 4x, the MTA is legally required to go with the other company.

If no other company was allowed to bid except Apple, or another company submitted a higher bid but was ignored, that's a sweetheart deal and it's illegal. That's what the comptroller is trying to find out.

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The comptroller seemed to say he is investigating because he felt the property space was worth more because it was "prime real-estate". From what the MTA said and from past reports it seems that MTA definitely received a bid from Apple and there was a period of decision making (the initial negotiations fell through in February and then resumed in June). The strange thing here is that the space in question was not available for rent. Anybody making a bid for it would have ALSO had to come to some terms with the existing tenant who was not obligated to put his lease up for competitive bid.

Apple negotiated with the existing tenant first, and presented their bid to the MTA with the deal with the existing tenant being contingent on the MTA approving it. I don't see how MTA could turn around say "anybody else what to pitch an offer to the existing tenant and then come talk to us?" Maybe they did, but this is not the same situation as a vacated space being rented out. If I were an existing tenant, I would be annoyed if the MTA asked for folks to bid on buying me out of my lease if I was not interested in selling.

I like the MTA's response to this regarding the investigation: "Bring it On!"

Rafterman said:

MTA is getting "quadruple" the normal fees? Well, if they charged the normal rates, they'd get even more for a severely cash strapped city and state. And before you all start whining about how quadruple is still such a great deal, remember that the city and state of New York NEVER misses an opportunity to wring out every last dime from its taxpaying citizens to the max - the heaviest taxed state in teh union. Yet businesses like Apple get the best terms possible, and a big ol' smooch? Good for NY for investigating. Chances are, someone is getting paid off.

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Chances are you are overlooking that the MTA was already locked into a terrible $15 per square foot deal for the next eight years. Apple knew they were screwed and in no position to negotiate. MTA's other option was to accept what they had for the next eight years and then hope to find a new tenant.

What was MTA going to do? Announce to the public that one of its tenants was willing to deal with Apple to buy-out his lease and ask other companies to make him offers to buy out his lease and then come to talk to them about getting their proposal approved?

Was MTA going to buy-out the existing tenant on their own and then try to put the empty space up for competitive bid? What if Apple walked and nobody was interested? Then not only would MTA be out the $250k per year, but they would also be out the $5M to buy out the existing lease.

MTA was in no position of power in these negotiations. Only the restaurant owner and Apple had any sort of leverage. The restaurant owner could have refused Apple to a point or put his lease out for competitive bid to other companies -- but Apple may have made it clear that they would withdraw their offer if he did that. Further, Apple could have easily found another location in NYC that was high-traffic and used it as leverage against MTA.

The NY State Comptroller should have considered investigating when that restaurant got a long-term lease at $15 per square foot, not when MTA manages to improve their revenue on that space.

The big advantage that MTA gets out of this is that Apple will only increase the value of the space through exposure and through capital improvements, and in ten years then the MTA will be in a position to negotiate with Apple for much higher rent. They could have waited eight years for the restaurant owner to move out with no capital improvements and no increased exposure because of Apple store or they could get four times the rent for those eight years, wait two more years and then be able to really negotiate with Apple.

Anybody who thinks MTA negotiated poorly does not understand that "leverage" is the most important thing in any negotiations. MTA had no leverage in this case. In ten years, they will have tons of leverage.

Kaibelf said:

Thank you, grand retail oracle. Perhaps I can consult the tea leaves on Netflix for my next lottery ticket.

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You should go back and read what you responded to...

Sad ...

Doesn't the NY State Comptroller have better things to do? Like helping to reduce the cost of government, eliminating waste, etc.?

BC2009 said:

The comptroller seemed to say he is investigating because he felt the property space was worth more because it was "prime real-estate". From what the MTA said and from past reports it seems that MTA definitely received a bid from Apple and there was a period of decision making (the initial negotiations fell through in February and then resumed in June). The strange thing here is that the space in question was not available for rent. Anybody making a bid for it would have ALSO had to come to some terms with the existing tenant who was not obligated to put his lease up for competitive bid.

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According to what I read, buying off the other tenant WAS part of the contract that went out for bid.

BC2009 said:

What was MTA going to do? Announce to the public that one of its tenants was willing to deal with Apple to buy-out his lease and ask other companies to make him offers to buy out his lease and then come to talk to them about getting their proposal approved?

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That's what the MTA is required to do. And if they did do that and Apple gave the best offer or the only offer, the Comptroller is gonna find nothing wrong. I have a feeling the MTA will be fine. Most retailers that can set up shop as anchor stores (IE Macy's) need a much larger space and probably wouldn't bid on such a small area. And smaller retailers that could use the space probably don't have the capital to pay off the old tenant, front the extra rennovation costs (which I'm sure was in the contract), and still outbid Apple.

I'd love to know the reason for the "negotiations breakdown" though. I have a feeling what happened is the first time around, the MTA couldn't legally award the contract to Apple (maybe some other bidder slipped through and gave a better offer), so they canceled it. Then maybe they rewrote it, added a few more line items that only Apple could fulfill, and put it out for bid again.

A/C situation

I wonder how they will deal with cooling. I've ate at some of the restaurants there in the Summer (like Michael Jordans) and they have ineffective spot coolers blowing in the area, but the terminal itself can get quite warm so the ambient temp stays high (not to mention those spot coolers are not venting heat outside but just right back into the terminal)

Maybe they'll put up glass walls around the edges of the balcony. I think Apple knows how to deal with glass walls!

A little something is forgotten

As previously noted, Apple stores have the highest per square foot revenues, and there is this little thing they have in NYC called sales tax. My guess is the city and state come out way ahead on the deal. Maybe the best thing is to make the politicians pay for the investigation out of their pocket because it is not in the common good, rather in their individual reelection good. Really people, don't we have a few more pressing problems than a lease that was negotiated between public officials, their lawyers and Apple. My guess is both sides got what they needed to make it work. And there is this little thing called jobs that stores like this generate.

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cmwade77 said:

goodcow said:

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.



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?



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.

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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.

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$300,000 per year is excessive for anyone, except maybe the President of the United States and governors of the largest states and even then, it might be too much. I would say $100,000 per year should be good enough for any public sector job aside form those listed above and that is assuming there are absolutely no other benefits. How much do you need to live anyway?

18% of the budget is going to pay down debt? That's it? Really, should be at least 25% of the budget.

The unions are a major part of the problem, they prevent you from firing people who are doing a bad job, insist on pay raises for everyone, even when those in the private sector are having to take pay cuts, insist on hiring more people, even when there are lay offs elsewhere, etc. All of this does cost money.

Bottom line is greed is what is the source of the problem.

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300K/year excesive for anyone?
After having specialized training for the last 15 years ai expect my starting salary to be higher than that.

Jeez Apple can't breathe without the media being all over them. Let the company live... ****.

BC2009 said:

What was MTA going to do? Announce to the public that one of its tenants was willing to deal with Apple to buy-out his lease and ask other companies to make him offers to buy out his lease and then come to talk to them about getting their proposal approved?

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The tenant may not have been obligated by their lease to even look at any other buy-out offer. Which might leave the MTA stuck with any offer significantly better than the existing 8-10 year lease.

goodcow said:

Wow. Do you live in New York City? Do you realize the cost of living here?

You think the person in charge of a $10+ billion budget should make a maximum salary of $100,000 a year? Are you delusional? You expect to attract competent talent at that salary? Even $300,000 is low considering the scope of the job.

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I dont think he knows the average 1BR price in NYC....

ecphot said:

when people say the apple store will increase foot traffic thus benefiting other stores:
its GRAND CENTRAL STATION!

the place is packed at all times as it is. I would say from going there that its is too congested to shop comfortably right now.

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GCT is busy all the time. Most of the comments posted about adding foot traffic are ridiculous. You can barely navigate there now. If tourists arent shopping there now, there is little apple can do to change that. Unless we're talking about ilaunches where fools can get meals while they camp.

According to an article I just read at 1010 WINS radio, the Apple flagship store on Fifth Avenue currently pays a percentage of earnings... about $15 million a year.

At Grand Central, Apple gets another prime location for only $1 million a year, and no percentage required.

kdarling said:

According to an article I just read at 1010 WINS radio, the Apple flagship store on Fifth Avenue currently pays a percentage of earnings... about $15 million a year.

At Grand Central, Apple gets another prime location for only $1 million a year, and no percentage required.

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Well, based on what I understood from this thread, Apple could have gotten away with paying much less a year. So either way, it is already being quite generous...

kdarling said:

According to an article I just read at 1010 WINS radio, the Apple flagship store on Fifth Avenue currently pays a percentage of earnings... about $15 million a year.

At Grand Central, Apple gets another prime location for only $1 million a year, and no percentage required.

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Question is: Did the MTA have any better offer? It also seems that Fifth Avenue is actually the best location of all, with the store there being the highest revenue Apple store of all at an estimated $350 million, about the same as ten average stores.

ecphot said:

when people say the apple store will increase foot traffic thus benefiting other stores:
its GRAND CENTRAL STATION!

the place is packed at all times as it is. I would say from going there that its is too congested to shop comfortably right now.

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Exactly! Grand Central always has so many people passing through it at all hours, it's hard to imagine any store - including Apple - increasing that traffic even more.

I'm looking forward to this, though, since it'll give me something to do when I'm waiting for a train back to CT.

Any word on this store's hours? Grand Central only closes for a few hours each night...will Apple be open whenever the station is open?