Apple Asks UK Retail Landlords for 50% Rent Cut Despite Record Sales

[cmaier]

Ultimately? Nothing. Just wish those Apple evangelicals could see the cutthroat company behind the soft cuddly PR. Apple waxes lyrical about sustainability, social responsibility etc but thinks nothing about sh*tting on those companies that supply them, that literally enable their operation to exist. Can't say they're alone in this by any means, though they do seem to be among the most aggressive at it.

My point is there doesn’t seem to be anything particularly cutthroat about this. People renegotiate leases all the time. And that’s going on in spades right now. I’d rather they reduce payments to millionaire landlords and keep paying out-of-work employees. I don’t see anything sinister here.

 

[InGen]

To anyone feeling Apple doesn’t have the right to be negotiating rent, just think for a second the kind of person who would own the kind of property Apple would be renting from in the first place. This isn’t your Aunt & Pop’s single investment property in the middle of London that are making ends meet with the rent. These are usually very wealthy corporate estates or corporations that own these properties in the locations Apple rents. The negotiation of reduced price for longer term leasing period is a fair trade and it’s up to those owners to decide if they would rather keep making the same money and have Apple find elsewhere in a few years or not.

 

[Falhófnir]

My point is there doesn’t seem to be anything particularly cutthroat about this. People renegotiate leases all the time. And that’s going on in spades right now. I’d rather they reduce payments to millionaire landlords and keep paying out-of-work employees. I don’t see anything sinister here.

LOL! As if it's a dichotomy for a company that's just raked in record profits? And my point was Apple does this to everyone who supplies them, whether with a service (as these landlords are) or with physical components for their products. They are renowned for sitting heavily on suppliers to pad out their own margins. From my own experience with a small business supplying components, this sort of behaviour can be absolutely devastating, while other businesses that do try and cut you slack, throw a few orders your way if you're quiet can be literal lifesavers.

 

[dogslobber]

You can tell Cook is a logistics guy.
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I see no issue with this. If market rates have fallen, there's no reason for Apple to pay more.

They're not paying more though are they?

 

[cmaier]

LOL! As if it's a dichotomy for a company that's just raked in record profits? And my point was Apple does this to everyone who supplies them, whether with a service (as these landlords are) or with physical components for their products. They are renowned for sitting heavily on suppliers to pad out their own margins. From my own experience with a small business supplying components, this sort of behaviour can be absolutely devastating, while other businesses that do try and cut you slack, throw a few orders your way if you're quiet can be literal lifesavers.

Again, how is this devastating? I’m a landlord. I have a lease with Apple. Apple comes to me with this deal. I say no.

Now what?

I get EXACTLY the deal I bargained for (fixed term lease with financial terms as written). I was never entitled to demand that apple renew the lease when it is over, and that’s the only possible penalty here for me - Apple gets pissed off and leaves when the lease is over.

They’ve hurt nobody by offering this deal.

 

[hot-gril]

This is obscene. After just posting those profits recently and only paying £8 Million in tax on UK profits of £1.8 billion, they've got some nerve. Never underestimate the greed.

No doubt fanboys will be along shortly to say how unfair it is to call them out etc, etc.

Apple are tone deaf to the pandemic. They need to look at the optics of how this looks.

Yes, it's perfectly within their rights to do this. But just because they can doesn't mean they should.

Maybe the landlords shouldn't be charging above market rate for rent. My landlord just raised my rent last month, betting I wouldn't move to one of the places that slashed it for coronatime, and they were wrong.

 

[hans1972]

Ultimately? Nothing. Just wish those Apple evangelicals could see the cutthroat company behind the soft cuddly PR. Apple waxes lyrical about sustainability, social responsibility etc but thinks nothing about sh*tting on those companies that supply them, that literally enable their operation to exist. Can't say they're alone in this by any means, though they do seem to be among the most aggressive at it.

There is no secret that Apple is very fierce with their suppliers and most of their business partners. Steve Jobs even threatened to start a thermo-nuclear war with one of them.

But as a customer you are almost immune to the effects of this and as a shareholder you benefit.

 

[hot-gril]

Ultimately? Nothing. Just wish those Apple evangelicals could see the cutthroat company behind the soft cuddly PR. Apple waxes lyrical about sustainability, social responsibility etc but thinks nothing about sh*tting on those companies that supply them, that literally enable their operation to exist. Can't say they're alone in this by any means, though they do seem to be among the most aggressive at it.

If this landlord loses Apple as a customer, another landlord will gain them as a customer. I know Apple does unethical things, this isn't one of them. Current landlord is asking too much for rent.

 

[SuperCachetes]

Based on the deal indicated here that they are supposedly offering landlords, I similarly will offer to buy an iPhone 13 at 50% off, maybe even the 14 the following year at the same. They and the defendants on here cannot possibly grumble at my suggesting such a deal. Although, I am sure they will.

I have no issue with you trying that at your local store, though I doubt the 50% number holds. Surprise, it probably won't end up being 50% for Apple, either.

That's how you can tell the social justice keyboard activists around here don't know a whole lot about business. Apple offers 50% and a x-year renewal. There will be negotiation. After stressful correspondence and posturing from both sides, what will result is a 15% discount and a y-year renewal. This is a capitalist corporate nothingburger, except that COVID-19 has inspired the laypeople to demand Apple be charitable in every single facet of everything they do. Including lease negotiations with the owners of some of the most expensive commercial real estate in the world.

BTW, when I bought my very first Mac (2009 MBP), I negotiated with a store manager. Luckily, they didn't "call my bluff," and I got a discount in line with the education pricing at the time. I have sunk tens of thousands of dollars into the ecosystem since. Mutually beneficial.

 

[dlondon]

Maybe the landlords shouldn't be charging above market rate for rent.

Landlords don't reduce their prices mid-contract, in the same way that landlords can't make increases (unless it's part of the contract). Apple made an arrangement with their landlords. The market has changed and Apple is using this as a tool to reduce the rates during their contract (in return for potentially extending their contract).

 

[abhibeckert]

Apple retail outlets are among the most profitable in the industry

I bet they're not doing great in London right now, and when this is over they've still got Brexit to handle - that will be a lot more challenging now they're doing it during a global recession.

I can't see any non-essential retail outlet doing well in london for the foreseeable future. A drop in rent makes perfect sense - and so does replacing that store with a cheaper one a few blocks away.

 

[dlondon]

To anyone feeling Apple doesn’t have the right to be negotiating rent, just think for a second the kind of person who would own the kind of property Apple would be renting from in the first place. This isn’t your Aunt & Pop’s single investment property in the middle of London that are making ends meet with the rent. These are usually very wealthy corporate estates or corporations that own these properties in the locations Apple rents. The negotiation of reduced price for longer term leasing period is a fair trade and it’s up to those owners to decide if they would rather keep making the same money and have Apple find elsewhere in a few years or not.

I suspect the landlords would have given Apple favourable terms to get them in, knowing that they are financial sound. However, two of the largest shopping centre owners in the UK are in financial difficulties – rental collations are down 50% at Unibail-Radamco-Westfield (which owns two of the largest shopping centres in London and has seen income drop 27% for the first half of this year) and Intu is in administration.

 

[PJWilkin]

Shopping centres and businesses throughout the UK are going to the wall

And here is the most valuable company in the world trying a shakedown

Next they'll ask staff to take a pay cut

 

[UrbanJoe1]

I see no issue with this. If market rates have fallen, there's no reason for Apple to pay more.

Never let a crisis go to waste, eh? Maybe, but this could very well be a temporary low. Seems Tim is spending his time in quarantine trying to take advantage of this situation. If rates likely go up he wants to lock in the artificially low pandemic rates.

 

[Digital Skunk]

Now that's some kinda greed there Apple.

 

[cmaier]

Now that's some kinda greed there Apple.

No it’s not

 

[CarpalMac]

I have no issue with you trying that at your local store, though I doubt the 50% number holds. Surprise, it probably won't end up being 50% for Apple, either.

That's how you can tell the social justice keyboard activists around here don't know a whole lot about business. Apple offers 50% and a x-year renewal. There will be negotiation. After stressful correspondence and posturing from both sides, what will result is a 15% discount and a y-year renewal. This is a capitalist corporate nothingburger, except that COVID-19 has inspired the laypeople to demand Apple be charitable in every single facet of everything they do. Including lease negotiations with the owners of some of the most expensive commercial real estate in the world.

BTW, when I bought my very first Mac (2009 MBP), I negotiated with a store manager. Luckily, they didn't "call my bluff," and I got a discount in line with the education pricing at the time. I have sunk tens of thousands of dollars into the ecosystem since. Mutually beneficial.

That'd be absolutely fair and normal business, I've done it myself and normally woukd have no grumble. The timing of this however and the indicated rate cut they want is, well as Arn says, icky. Like I said in my first post though, economies will only recover if money continues to change hands and Apple based on this evidence seems to be even more eager than ever to stockpile it, using the economic symptoms of a pandemic to their advantage.

Their altruistic mask slips with this one.

 

[daved2424]

F.off Apple.

 

[az431]

Disgusting. Sorry.

There’s nothing “disgusting” about a tenant asking for concessions in exchange for extending a lease. Happens all the time, but it’s only news if Apple does it.

 

[cmaier]

That'd be absolutely fair and normal business, I've done it myself and have no grumble. The timing of this however and the indicated rate cut they want is, well as Arn says, icky. Like I said in my first post though, economies will only recover if money continues to change hands and Apple based on this evidence seems to be even more eager than ever to stockpile it.

Why is it icky to *want* that rate cut? They aren’t forcing it. If the landlord wants to make a counter proposal, perhaps apple accepts. Or if the landlord doesn’t want to counter, then the lease remains in effect, but only until the end of the current term, and apple won’t promise to extend (and apple has no obligation to do so)

 

[Falhófnir]

Again, how is this devastating? I’m a landlord. I have a lease with Apple. Apple comes to me with this deal. I say no.

Now what?

I get EXACTLY the deal I bargained for (fixed term lease with financial terms as written). I was never entitled to demand that apple renew the lease when it is over, and that’s the only possible penalty here for me - Apple gets pissed off and leaves when the lease is over.

They’ve hurt nobody by offering this deal.

You're really asking that? In the middle of a crisis when many clients will be shutting permanently, and Apple is using that to pressure landlords into what is almost certainly a very advantageous deal for Apple - these supply businesses also support the livelihoods of a lot of folks, you know. You and others try to paint this as a victimless transaction, but this will almost certainly have an impact on those individual employees involved further down. No, not the millionaire landlord owners, but those who actually run these commercial property businesses. Makes all that 'social responsibility' talk ring a bit hollow, no?

 

[Nacho1234]

They can cut cost by asking to pay less rent or releasing employees. Which one is worse?

 

[ArPe]

Some of the comments here. Facepalm.

Rents are calculated by square foot and a budget is set aside for paying those rents. Any business wants to make sure that each square foot is turning a profit, especially if they have dozens or hundreds of stores worldwide.

Two of the biggest landlords in the US are Simon Properties Group abs Macerich. They have reported that since March they only collected half the rents from tenants across the US.

In London the two big landlords are Crown Properties and the Corporation of London. Again, many businesses can’t pay the full rent and are renegotiating. Many restaurant chains are suffering after booming last year. Some may shut down forever.

So this is a universal problem for businesses. Nobody knows how long this pandemic will last or how big. Money has to be saved wherever possible.

Edit: also many of these big landowning corporations have investment arms. They own Apple stock so they don’t exactly hurt by losing some rent.

 

[ComRadMac]

But just because they can doesn't mean they should.

Why shouldn't they? It's a business. No one here is involved in anything but business. The idea that this is "obscene" makes no sense unless you have absolutely zero idea of how business works.

No one is being forced to do anything, no laws are being broken, no ethics are being violated, no one is being taken advantage of... it's just companies negotiating, as they do worldwide, every moment of every day. I'm not sure why anyone would expect anything else.

 

[Alan Wynn]

I'd call it using their heft to try and squeeze a better deal out of a supply company

I would call it what it is - a retailer that draws a huge amount of foot traffic into its stores (and as a consequence, neighboring stores) offering terms to their counter parties for what they hope will be a mutually advantageous business deal.

(something they're very aggressive about doing in all parts of their business) - this is asking for both a rent-free period and a longer term rate cut of up to 50% - meaning basically they want to lock in what will be a below-market rate when things begin to recover. No wonder they'd then want to lock that in for a longer term which is what they're 'offering' in return =P

None of us know exactly what they are requesting, nor what they are offering. What we do know is that they are not doing anything to threaten anyone. We also know that the brick and mortar retail market has been in decline for a while, and this pandemic has just accelerated that trend. If property owners feel the same way you do, they will not reach agreement. If they realize they are better off with Apple as a long term tenant, they will.

This is against the backdrop of a lot of other store closures which will likely put more pressure on these companies who are just trying to maintain a functioning business out of this themselves not to lose another client, one which is almost certainly a big anchor store in most locations.

You seem to be arguing both sides. Apple is evil because they are trying to lock in rates that will only go up, and at the same time arguing that the market for retail is terrible and property owners have to do whatever it takes to keep Apple? The new source says they are only doing this with landlords that have several years left, not those with whom they were already in negotiations. That means that if they think as you do that everything will get better for them as soon as this is over, they need do nothing and keep their current deal.