Earlier this week, we reported on a controversy surrounding Apple’s Grand Central Store, set to open Saturday. Critics are blaming New York City’s mass transit agency for inking a ‘sweetheart’ deal giving the tech giant a huge break on the lease cost. The MTA is now fighting back, telling those wanting an investigation into the Apple store to “bring it on.”
In a letter, MTA spokesman Aaron Donovan criticizes an early New York Post report on the Grand Central lease as “inaccurate.” The complete letter follows:
Reports in the New York Post have been inaccurate, and we want to set the record straight with the information below. 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.”
The real estate community understands that lease agreement with Apple is a great achievement for the MTA. Neighboring tenants at Grand Central are very pleased Apple will be joining them and bringing more foot traffic.
The Facts: MTA’s Lease with Apple at Grand Central Terminal
- The space that will soon house a new Apple retail store is a great location but has major limitations for retail, including very strict historic preservation regulations.
- Until the MTA took action earlier this year, the restaurant Metrazur had a lease through 2019 in this space that paid only $263,000 annually to the MTA. This lease dates back to the restoration of Grand Central Terminal in 1999 and never generated enough revenue to contribute any percentage rent.
- Believing that more revenue could be generated, the MTA put the space out for bid knowing that it would take a unique respondent to pay significant upfront costs: $5 million to buy out the existing lease and more than $2.5 million for infrastructure improvements.
- The deal with Apple is a win-win for the MTA and our customers:
- Quadruples the rent coming to the MTA (from $263,000 to $1.1 million)
- Provides a terrific new amenity at Grand Central Terminal.
- Will drive traffic to all of the retailers at Grand Central, where every 1% in additional sales is worth $500,000 to the MTA.
- Includes permanent infrastructure improvements to Grand Central, including HVAC systems and new egress.
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.