Apple Paid Peanuts For Its New Grand Central Store Space, Which Will Open Next Week [Rumor]

Apple Paid Peanuts For Its New Grand Central Store Space, Which Will Open Next Week [Rumor]

Courtesy 9to5Mac.com

Apple’s new retail store set in the heart of New York’s Grand Central station is set to open its doors next week, according to a report from the New York Post. And thanks to Apple’s infamous negotiation skills, the Cupertino company paid peanuts for the lease.

Other retail tenants in the station typically pay approximately $200 per square foot to the Metropolitan Transportation Authority, according to the report, in addition to a certain percentage of their sales if they surpass a specified threshold. However, Apple’s deal is a little different.

Despite estimates claiming the store will rake in around $100 million a year in sales for the company, it will reportedly pay just $60 per square foot for its retail space, and it won’t share a penny of its revenues with the MTA. Its deal is said to be “well below” what many other tenants are paying, according to leases obtained by the New York Post.

Apple’s deal is so good, in fact, that the MTA has received criticism for leasing the space out at such a reduced rate. Robin Adams, executive vice president at real estate firm Lansco, said Apple’s no-percentage deal is surprising:

I am surprised they didn’t get some kind of percentage. You’d think if they were going to do, say, $50 million in sales, the MTA would at least get some percentage of anything over that.

Despite the criticism, however, the MTA maintains it is happy with the deal it has reached with Apple. Aaron Donovan, a spokesman for the MTA, said:

We set out to maximize the rent we receive for this space, and we’re thrilled that we were able to more than quadruple what we had been receiving previously.

In contrast to the new deal, Apple’s flagship retail store on Fifth Avenue costs the company around $5 million a year, with the landlord of the GM building taking an additional $15 million per year out of the $400 million the store generates in sales.

[via 9to5Mac]

  • gareth edwards

    I imagine that if other premium Apple stores are anything to go by then it is a good deal. Apple invests huge amounts of cash into the building itself, much more I would suggest, than many other retailers would even dream of and the upshot of this is that the entire building will benefit from the Apple approach to retail. It’s the halo effect in brick.

  • Al

    Hmmm. I remember a few years back in the UK an entire CASTLE was sold by the council that owned it to a private investor for just £1 (about 60 cents in US money).

    The reason? As part of the sale the new owner was legally bound to upgrade and repair the entire structure, which of course, cost a fortune with it being a listed historical building.

    As regards Apple and Grand Central, perhaps there is a similar situation. Maybe Apple is bound to maintain or otherwise upgrade the very large space they are occupying. Which may likewise be very costly given this is also a historical structure.

    So without knowing all the facts, Apple may not be getting such a good deal as it may first appear. Although considering the extra foot traffic of high-income consumers they can bring to neighbouring retailers, it would not be shocking if Apple one day got a place somewhere for free, never mind a discount!

  • Len Williams

    Where is the story here? Apple negotiated a good contract with the MTA, and by their own statement, the MTA is thrilled that it’s more than QUADRUPLING what it formerly received from other tenants in that same space. If the MTA is happy and making more money than before, then there’s no situation, no problem, no conflict, and everyone wins. The article tries to make this into a problem and slides in the idea that Apple is somehow “getting away with something” or being unethical in some unstated fashion. Please just report the facts: Apple negotiated a great deal with the MTA that both companies are pleased with, and a few other companies are upset because they didn’t negotiate such deal for themselves. Of course, that isn’t very interesting, so this is where the intimations of impropriety come in to make it “news.” Hogwash!

  • djrobsd

    And people wonder why all our government agencies are bankrupt.  One of the worst uses of government assets is the way most agencies handle their real estate transactions… If they were smart they would have put this space out for competitive bid and may the highest bidder win.

    Speaking of which, HOLY SMOKES.  I was speechless when a restaurant paid $3.50 a foot for space in a prime location here in San Diego… But $60?  $200?  HOLY COW.

  • CharliK

    A GOSSIP RAG that makes up half the details in their stories, claims to have gotten ahold of Apple’s lease and everyone just eats it up. 

    Never mind that this info could be completely wrong. Never mind that it might only be for a set period of time. Never mind that Apple might have given them a huge lump sum from the start and/or paid all constructions costs for both inside the store, any rebuilding of the floors, common walls, ceiling and understructure etc needed. Or who knows what else the Post didn’t obtain or didn’t bother to publish. 

    And frankly if this is true, who really cares. Two private companies set up a deal to benefit both companies. It’s the nature of business. So what if Apple got a lower square foot rate. It also have way more square footage. Remember for every space we see there’s that much again in inventory storage, offices etc. And all those other stores that have to pay a cut of their sales only have to do so over a preset amount. So it isn’t first dollar but more like “you give us 10% of all sales over $250k during the quarter”. Which means for many of them they give GCT nothing for 3/4 of the year because they only make bank in sales during the holidays if then. Now with the added traffic there might be sales enough to change that, maybe.

  • CharliK

    You assume the government had anything to do with this. 

    You (and the NY Post) might be surprised to know that Grand Central Terminal is in fact privately owned and it is on a long term lease to the MTA as a concourse for their systems. But the rest is still under said private companies control. And perhaps it was under that control that they leased to all the shops in the building including Apple and neither NYC or MTA gets a vote so long as nothing interferes with their business.

  • Tom Cruize

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About the author

Killian BellKillian Bell is a staff writer based in the U.K. He has an interest in all things tech and also covers Android over at CultofAndroid.com. You can follow him on Twitter via @killianbell.

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