Reports of the Grand Central Apple Store Probe Are a Little Exaggerated
The world's largest Apple Store is scheduled to open in Grand Central on December 9, and despite what you read in the New York Post, the state's "investigation" into the shady lease negotiations is standard procedure.
The world's largest Apple Store is scheduled to open in Grand Central on December 9, and despite what you read in the New York Post, the state's "investigation" into the shady lease negotiations is standard procedure. New York State Comptroller Thomas P. DiNapoli does say that the Post's reporting on the Metropolitan Transit Authority agreeing to uniquely generous lease terms for Apple is "cause for concern," we're told that the probe into the matter is business as usual and shouldn't keep anyone from buying iPads on the way home to Westchester.
So far details on the Grand Central Apple Store itself are pretty vague. We recently took a field trip over to the Main Concourse, where a giant black box and old school train schedule-style ticker conceal the prime real estate, where Apple's been building their flagship, but we weren't able to peek inside. From afar it looks like the store will stretch all the way up to the top of Grand Central's 125-foot-tall celestial-themed ceiling, providing breathtaking views of the cavernous marbled waiting area. According to the Post, Apple is paying paying the MTA a premium rent price for the privilege, however unlike every other retail outlet in Grand Central, Apple does not have to share a percentage of its expected $100 million in annual sales. This detail irked In the Post's words, "State watchdogs are probing Apple's sweet deal for a new store in Grand Central Terminal."
The office of said watchdog, DiNapoli, told us that the Post's coverage exaggerates the facts a bit. There is an on-going MTA probe, but it's not specific to the Apple Store. "The reality is that 'investigation' is a Post word," Eric Sumberg, the Comptroller's New York City press secretary, told The Atlantic Wire. "It's an audit, a follow-up to the one we did into the MTA's real estate practices in July [of last year]. It's common practice to do follow up audits with agencies in a period of time to ensure compliance and ensure our recommendations are being followed." That July 2010 report, by the way, found that the MTA was not maximizing the potential of its real estate holdings (PDF), and this Apple Store arrangement -- even Apple fans are calling it a "sweetheart deal" -- certainly doesn't look good for the cash-strapped organization.
This doesn't mean that the Comptroller is in love with the terms of the Apple Store lease. "While it is common to check back with agencies my office has audited to determine if progress has been made based on our recommendations, 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 MTA has so far defended the deal. A spokesman told the Post on Thursday that the organization had "moved proactively to maximize revenue and quadrupled the rent we receive for this unique space," a plan that was "consistent with the Comptroller's recommendations." The Post adds:
The MTA noted that Apple is shelling out for infrastructure upgrades to the space, which will include a bank of elevators to hoist i-Pad-hungry shoppers to the balcony level. In addition, Donovan noted that Apple paid $5 million up front to the northeast balcony’s previous occupant, the restaurant Metrazur, in exchange for clearing out. "They are effectively paying $180 per square foot over the 10 years of the lease, almost 10 times the previous tenant," Donovan argued, figuring Apple's payoff of Metrazur into that calculation.
No matter how you cut it, this sounds like a lot of money. However, given that Apple could afford to buy Goldman Sachs with extra cash to spare, they can afford it.
Check out the MTA's renderings of the Grand Central Apple Store (via CBS New York's Tony Aiello):