Normally when Apple announces a new store, no legal trouble is involved, but the Grand Central Terminal deal seems to be causing some trouble for the Metropolitan Transportation Authority (MTA) and Apple. Why? Because Apple scored a unique deal with the Metropolitan Transportation Authority (MTA). This deal goes to show how much retail power Apple actually has. Just yesterday, Apple revealed that the company’s new store in Manhattan’s Grand Central Terminal will be opening on December 9th. In addition, it was reported that the State of New York was investigating the deal.
Today, The Metropolitan Transportation Authority (MTA), which is in charge of leasing Grand Central Terminal’s retail space has issued a courageous statement. The press release issued welcomes the investigation and expresses confidence that it received the best possible deal for a difficult space that had previously been doing poorly.
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 MTA also reveals that the space is difficult for retailers to deal with given the limitations due to the historic preservation regulations for the open balcony space. In fact, Apple’s tenancy also required a $5 million buyout of Metrazur’s lease, which ran through 2019, and more than $2.5 million in improvements to the building infrastructure, including a new elevator, HVAC systems and other changes. Holy moly! Apple has a lot of money in the bank. While “competitors” are trying to play catchup with Apple, they are working on expanding their retail presence.
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.
Apple’s store in Grand Central Terminal is supposed to occupy 23,000 feet and is expected to generate half-a-billion in sales a year.