New York State regulators are investigating whether Apple got a ‘sweetheart deal’ when it leased space for its largest store in the city’s Grand Central Station. Reportedly, Apple paid the city’s MTA $60 per square foot for space that normally leases for more than $200. Did Apple throw around its marketing muscle to gain preferential treatment? Politicians are up in arms as Apple preps the the location for a Saturday unveiling.
Following a report that the tech giant paid less than a burger joint for the 23,000 square-foot spot amid the iconic Grand Central site, State Comptroller Thomas DiNapoli announced he plans “to make sure that the MTA hasn’t given away the store.” New York State Senator Tony Avella told local CBS 2 he is calling for an investigation into what he described as a “sweetheart deal.”
Apple also is not required to share any of its store’s profits with the city, something all other Grand Central businesses — except a Chase bank ATM — must do, reports the New York Post, which obtained copies of the leases.
In its defense, an MTA spokesman said Apple had paid $5 million to get restaurant Metrazur to vacate a northeast balcony the Cupertino, Calif. iPhone maker planned for the large retail space. After quadrupling the rent, Apple is “effectively paying $180 per square foot over 10 years of the lease, almost 10 times the previous tenant.”
Apple reportedly makes about $400 million at its 10,000 square-foot 5th Avenue store in New York City, a site that is half the size of the Grand Central store. The company is seen as a ‘must-have’ for malls and other retail complexes. Indeed, the MTA has said the Apple Store at Grand Central will “generate significant new traffic” for neighboring retailers.
The uproar over Apple’s new location has political roots to the past. Struggling with its own budget trouble, the MTA recently increased subway rates. Additionally, DiNapoli took the MTA to task in 2010 over another Grand Central tenant. That tenant was Metrazur, the restaurant Apple paid $5 million to move. Last year, the State Comptroller slammed the MTA for not investigating Metrazur’s lease provision requiring the space be kept at a certain temperature.
While the investigation is likely to gain some headlines and provide fodder for local politicians, the city is unlikely to reject Apple’s lease at this late date and turn down a company now seen as a retail star.