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New York state investigating Apple's low-cost Grand Central lease

post #1 of 85
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After a story revealed that Apple is paying a lower-than-average rate for its new Grand Central Terminal megastore, a New York state official is now investigating the lease.

New York State Comptroller Thomas DiNapoli told the New York Post that he has launched an investigation into the agreement struck between Apple and New York's Metropolitan Transportation Authority. The store, set to open next Friday, Dec. 9, will cost Apple about $800,000 for the first year, a rate that is said to be well below what other tenants of the station are paying.

"The article in the New York Post about the MTA's contract with Apple in Grand Central Terminal is a cause for concern," DiNapoli said in a statement. "This is a prime property, and I intend to make sure that the MTA hasn't given away the store."

The investigation was spurred by a story published on Wednesday, which characterized the deal between Apple and the MTA as "unique." Apple is said to be paying $60 per square foot for the property, while other tenants such as a Shake Shack restaurant pay more than $200 per square foot.

Apple's apparent "hard bargain" driven with the MTA also means the company will not share any of its sales revenue with the MTA, unlike some other storefronts in the station. The authority said allowing Apple to keep all of its sales is fair, because the new store will "generate significant new traffic" for the 100 other retail tenants of Grand Central Terminal.

The MTA has said that the authority will receive more than quadruple what it was paid previously, when Charlie Palmer's Metrazur restaurant occupied that space. In addition, the MTA also revealed that no companies other than Apple responded to the authority's public request for proposal.

Apple is also bankrolling infrastructure upgrades, including new elevators. And the company also reportedly paid $5 million to the Metrazur so it could take over the space.

But because that $5 million from Apple went to the restaurant, and not to the MTA, the actual rent being paid to the authority is much lower than competing occupants of the terminal.

Thanks to AppleInsider reader "P" for the photo.

The MTA has been under scrutiny from DiNapoli's office before, as last year it found a number of irregularities in the authority's real-estate portfolio. DiNapoli will look into the latest deal the MTA struck with Apple in an attempt to find if the iPhone maker was given any special treatment.

When the retail store officially opens next Friday, it will be one of Apple's largest retail locations in the world. The 23,000-square-foot store will open in time for Christmas, and will sit in a prime location in the terminal, through which an estimated 700,000 people pass every day.
post #2 of 85
What does the comptroller think is suspicious about the deal?

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post #3 of 85
Apple Vs. the big apple!
post #4 of 85
Quote:
Originally Posted by SolipsismX View Post

What does the comptroller think is suspicious about the deal?

It's probably just in response to public outrage after the article was published, politicians trying to look like they're doing their job. I'll bet the investigation will come to a close after the hysteria ends.
post #5 of 85
So you can try and change a lease agreement but you cant stop a bailed out company from paying bonuses ? Cause that would be wrong.


Also the MTA is charging me 12 bucks to take a tunnel so they can build the Freedom tower.I guess this means ill be paying 14 bucks next year so apple can have this store ?
post #6 of 85
Oh no reasonable rent in N.Y. its the crime of the century.
post #7 of 85
Quote:
Originally Posted by SolipsismX View Post

What does the comptroller think is suspicious about the deal?

It's suspicious because the state might not be making as much money as they can out of the deal.

That said, the New York Post is a rag most New Yorkers wouldn't wipe their butts with. The fact that it is the source of the details about the lease AND this investigation makes me question the factualness of either.

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post #8 of 85
I think it's fair to investigate. Personally, I don't believe Apple would stoop to shenanigans. But anytime a government at any level gives a perceived sweetheart deal to any corporation, it should be investigated. The rationalization that this would drive increased traffic to other stores is somewhat questionable.
post #9 of 85
Quote:
Originally Posted by farshad View Post

Also the MTA is charging me 12 bucks to take a tunnel so they can build the Freedom tower.I guess this means ill be paying 14 bucks next year so apple can have this store ?

What the MTA is charging you has zero to do with the amount of rent a leasee is paying. Especially one that will likely bring tons of sales tax income to the state, tons of traffic to the various stores etc.

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post #10 of 85
Quote:
Originally Posted by charlituna View Post

It's suspicious because the state might not be making as much money as they can out of the deal.

That said, the New York Post is a rag most New Yorkers wouldn't wipe their butts with. The fact that it is the source of the details about the lease AND this investigation makes me question the factualness of either.

Curious minds want to know - what newsprint is of sufficient quality for butt-wiping?
post #11 of 85
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Originally Posted by Obama View Post

Apple Vs. the big apple!

Fight!
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post #12 of 85
Quote:
Originally Posted by stelligent View Post

I think it's fair to investigate. Personally, I don't believe Apple would stoop to shenanigans. But anytime a government at any level gives a perceived sweetheart deal to any corporation, it should be investigated. The rationalization that this would drive increased traffic to other stores is somewhat questionable.

But Apple will press for the best deal possible. I expect them to do nothing less.

I am sure they sold various other updates (like the 'vators) as well as substantially higher foot traffic to the area as major selling points.

If the Shake Shack could bring in as many people from a good distance just to eat there, I am sure they could have gotten a better deal as well.
post #13 of 85
Quote:
Originally Posted by charlituna View Post

It's suspicious because the state might not be making as much money as they can out of the deal.

That's such liberal, deluded thinking on the state's part. They apparently didn't see the part where the MTA said it was making 4x as much as it was. It's never enough for these people. We need more revenue! Let's raise taxes to get it! The short-sightedness is unreal.
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post #14 of 85
If no other companies came forward to rent the space, then Apple has every right to drive a hard bargain. Perhaps the rents charged for the other spaces in and around New York are too high and are stifling businesses, and hence job creation.
post #15 of 85
So very, very NYC. Hey, we got a big name player to expand its presence in our city! Now let's see if we can torpedo the deal!
post #16 of 85
Quote:
Originally Posted by stelligent View Post

Curious minds want to know - what newsprint is of sufficient quality for butt-wiping?

Indeed, I'd be far more concerned about the quality of the ink.
post #17 of 85
Quote:
Originally Posted by AppleInsider View Post

After a story revealed that Apple is paying a lower-than-average rate for its new Grand Central Terminal megastore, a New York state official is now investigating the lease.

It is good that he is looking into it. I hope that he doesn't use a lot of resources.

I think that he is going to find that the lease was an excellent deal for Apple, but also a good deal for the transit authority. At least, I hope so.
post #18 of 85
Quote:
Originally Posted by charlituna View Post

What the MTA is charging you has zero to do with the amount of rent a leasee is paying. Especially one that will likely bring tons of sales tax income to the state, tons of traffic to the various stores etc.

Do you really think the presence of that store will increase the overall amount of Apple swag that will be sold and taxed in the state of New York? Or will it just increase the proportion sold at retail as opposed to wholesale by Apple?
post #19 of 85
So, let me see if I understand this.

Apple replaced a restaurant.

They will be footing the bill for some significant remodeling efforts to the store.

The MTA was looking for others to rent the space and nobody replied other than Apple.

And the MTA has said that they will be making more than 4 times what they were before with Apple coming in.

Yeah, this sounds like a terrible deal that definitely needs to be investigated.
post #20 of 85
Glad to see the authorities actually providing oversight for once.

I'm sure they won't find anything. Carrier IQ on the other hand.....
post #21 of 85
Quote:
Originally Posted by SolipsismX View Post

What does the comptroller think is suspicious about the deal?

I suspect it has more to do with the different terms (no profit sharing for Apple) than the rent.
post #22 of 85
To save time, we'll all assume you know nothing.
When private parties make one sided deals, it's their business. When a state agency makes a one sided deal (with the state's money) it's everyone's business. Just because the MTA *says* they'll make 4x as much doesn't mean that assumption is correct.

Dreams of national socialism dressed up as benign capitalism, such as you seem to enjoy, always sounds good on paper, but when the rubber hits the road, Americans always prefer transparent, regulated free-enterprise.

Quote:
Originally Posted by SDW2001 View Post

That's such liberal, deluded thinking on the state's part. They apparently didn't see the part where the MTA said it was making 4x as much as it was. It's never enough for these people. We need more revenue! Let's raise taxes to get it! The short-sightedness is unreal.
post #23 of 85
Quote:
Originally Posted by stelligent View Post

I think it's fair to investigate. Personally, I don't believe Apple would stoop to shenanigans. But anytime a government at any level gives a perceived sweetheart deal to any corporation, it should be investigated. The rationalization that this would drive increased traffic to other stores is somewhat questionable.

+1

I am struggling to see how increased foot traffic would do that much for all the other businesses to make up for reduced rent.

When I go to the Apple Store, it's to get help, browse or buy something. It's not a given that I'll go to any other store in the mall and spend money there. I might or not get something from the food court. So it's a stretch to say that the increase foot traffic lifts all boats.

But there is supply and demand. Obviously if nobody wanted the space, whatever the rationale, Apple was entitled to drive a hard bargain as the only potential lessee.
post #24 of 85
Quote:
Originally Posted by SDW2001 View Post

That's such liberal, deluded thinking on the state's part. They apparently didn't see the part where the MTA said it was making 4x as much as it was. It's never enough for these people. We need more revenue! Let's raise taxes to get it! The short-sightedness is unreal.

How is ensuring that a state owned property gets the maximum rent that it can equal raising taxes?

I don't think Apple's done anything wrong with this deal, other than negotiate really hard. And I don't think anything will come of this investigation.

But if the MTA has signed a bad deal for itself, would you not, as a taxpayer, be concerned that they squandering a publicly owned resource (space at the sation) by effectively subsidizing a private corporation with a sweetheart deal? Isn't accountability of government a good thing?
post #25 of 85
Quote:
Originally Posted by Jetz View Post

+1

I am struggling to see how increased foot traffic would do that much for all the other businesses to make up for reduced rent.

When I go to the Apple Store, it's to get help, browse or buy something. It's not a given that I'll go to any other store in the mall and spend money there. I might or not get something from the food court. So it's a stretch to say that the increase foot traffic lifts all boats.

But there is supply and demand. Obviously if nobody wanted the space, whatever the rationale, Apple was entitled to drive a hard bargain as the only potential lessee.

It would be interesting to ask the other stores / restaurants in the space whether they want Apple there at a reduced rate or no Apple. They are not in direct competition with Apple so its probably to their advantage to make Apple happy.

Who knows - the deal might give them a better bargaining position in the future when they re-negotiate their lease. If their sales improve due to increased traffic they are in a win situation, regardless.
post #26 of 85
Simply put, the MTA gave Apple a good deal to bring in a big name business that'll generate traffic to the area. It was a good trade. When I visited NYC a few years ago, one of the reasons was visit the Fifth Avenue Apple Store plus the two world's largest toy stores. I seriously doubt very few people want to visit NYC just to go to Shake Shack.

Simply put, the Apple Store will generate tourism to the city.
post #27 of 85
Quote:
Originally Posted by Jetz View Post

How is ensuring that a state owned property gets the maximum rent that it can equal raising taxes?

Because it's the same thinking. They are so concerned with "maximum revenue" that they haven't stopped to consider they are making 4x more than before. I'm sure they didn't exactly have companies lined up around the block waiting to pay $800,000 a year for that space. This equates to taxes well, because politicians are always talking about raising revenue...but what they fail to consider is they end up depressing the very economic activity that is generating revenue in the first place.
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post #28 of 85
Quote:
Originally Posted by Steven N. View Post

But Apple will press for the best deal possible. I expect them to do nothing less.

I am sure they sold various other updates (like the 'vators) as well as substantially higher foot traffic to the area as major selling points.

If the Shake Shack could bring in as many people from a good distance just to eat there, I am sure they could have gotten a better deal as well.

At first I had the same thought as you, then I realized this is GCC we're talking about... it brings in the foot traffic all on it's own. This would be akin to Minneapolis giving Apple a rent break on a new store in the middle of MSP. GCC brings in the foot traffic for Apple, not the other way around. If anything, Apple should be paying more for the visibility and accessibility of such a prime, busy location.
post #29 of 85
Quote:
Originally Posted by mknopp View Post

So, let me see if I understand this.

Apple replaced a restaurant.

They will be footing the bill for some significant remodeling efforts to the store.

The MTA was looking for others to rent the space and nobody replied other than Apple.

And the MTA has said that they will be making more than 4 times what they were before with Apple coming in.

Yeah, this sounds like a terrible deal that definitely needs to be investigated.

Didn't the article mention that Apple paid $5 million to the restaurant so Apple could occupy the store? I don't think the MTA was looking- Apple bought the "rights" so to speak is how I interpreted it. But I could be wrong- which happens quite often.

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post #30 of 85
I imagine that Apple isn't the only vendor in New York that has gotten a good deal on retail space. But hey since Apple has become a huge vendor maybe they need to be singled out for now . I bet Steve would have thrown a fit. Just another reason why I don't like New York. Not the people but the attitude that is being portrayed of NY in this story.
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post #31 of 85
how about a little quid pro quo?

mta management is a nightmare. to wit; the world trade center and the hudson yards.

mr dinallo is usually even handed, but if the city of new york thinks that they could get a better tenant then they are delusional.

the last time they had complete control over a great train station, they tore down penn station. an ever lasting tragedy.

lucky jackie kennedy saved grand central.
post #32 of 85
Quote:
Originally Posted by mknopp View Post

So, let me see if I understand this.

Apple replaced a restaurant.

They will be footing the bill for some significant remodeling efforts to the store.

The MTA was looking for others to rent the space and nobody replied other than Apple.

And the MTA has said that they will be making more than 4 times what they were before with Apple coming in.

Yeah, this sounds like a terrible deal that definitely needs to be investigated.

Let me just add that the MTA has revenue share deals with ALL the other retailers in GC. Apple is going to drive a huge increase in traffic and business to these retailers. Grand Central is going to be absolutely mobbed and the MTA will financially benefit enormously

Typical NY dumb ass politicians. Another example of why there such a mass exodus from this state

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post #33 of 85
Quote:
Originally Posted by stelligent View Post

Curious minds want to know - what newsprint is of sufficient quality for butt-wiping?

Depends on how desperate you are.

Quote:
Originally Posted by SDW2001 View Post

That's such liberal, deluded thinking on the state's part. They apparently didn't see the part where the MTA said it was making 4x as much as it was. It's never enough for these people. We need more revenue! Let's raise taxes to get it! The short-sightedness is unreal.

There are also a lot of other factors:
- Apple is paying for significant improvements to the facility
- Apple is expected to bring in a lot of additional traffic - which would lead to greater MTA payments from the other stores
- Apple's bid was the only one they received. So they are receiving 100% more from Apple than from the next highest bidder

I guess the comptroller doesn't realize that the economy is still a little shaky. They don't have the option of choosing from thousands of companies banging on their door trying to rent expensive space.
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post #34 of 85
Quote:
Originally Posted by Cash907 View Post

If anything, Apple should be paying more for the visibility and accessibility of such a prime, busy location.

My guess is that they are paying a lot more for Grand Central Station than they would, for example, in a mall in Paramus NJ.

They reportedly made a payment of $5M to buy out the former tenant, fer chrissakes. They reportedly are paying for infrastructure improvements to an antique, historic property.

The $/sf are only one part of the equation.
post #35 of 85
I would pull the store out of grand central. Screw em. Apple can afford it.
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post #36 of 85
Quote:
Originally Posted by AppleInsider View Post

Apple's apparent "hard bargain" driven with the MTA also means the company will not share any of its sales revenue with the MTA

Apple only likes revenue sharing when it is the one collecting.
post #37 of 85
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post #38 of 85
Quote:
Originally Posted by Haggar View Post

Apple only likes revenue sharing when it is the one collecting.

And, I suppose others - you, for instance - are different?
post #39 of 85
Quote:
Originally Posted by jragosta View Post

Depends on how desperate you are.



There are also a lot of other factors:
- Apple is paying for significant improvements to the facility
- Apple is expected to bring in a lot of additional traffic - which would lead to greater MTA payments from the other stores
- Apple's bid was the only one they received. So they are receiving 100% more from Apple than from the next highest bidder

I guess the comptroller doesn't realize that the economy is still a little shaky. They don't have the option of choosing from thousands of companies banging on their door trying to rent expensive space.

This is exactly what I'm saying. The reason I drew the parallel to taxes is that it's the same kind of thinking. Politicians look at this and scream "HEY! We could be making so much more money here. What are those blithering idiots doing down at the MTA!?" They never stop to consider the points you raise. Apple's presence is enormously beneficial in that area for multiple reasons.
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post #40 of 85
Quote:
Originally Posted by Jetz View Post

How is ensuring that a state owned property gets the maximum rent that it can equal raising taxes?

I don't think Apple's done anything wrong with this deal, other than negotiate really hard. And I don't think anything will come of this investigation.

But if the MTA has signed a bad deal for itself, would you not, as a taxpayer, be concerned that they squandering a publicly owned resource (space at the sation) by effectively subsidizing a private corporation with a sweetheart deal? Isn't accountability of government a good thing?

If the alternative to MAXIMUM RENT is NO RENT then what does it matter? As previously noted Apple is paying 4x as much as the previous tenant and is paying for upgrades to the space it doesn't directly control. Sounds like the MTA made a good deal for itself just as Apple made a good deal for itself, in a down economy. Unless the comptroller does this for every big contract or because there is suspicion of bribery or the like then I don't see why how much the MTA was able to get for the space an issue.

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