Exactly one day after the terms of Apple's rental deal for its new Grand Central Terminal retail store became public, New York State investigators are looking into whether the Metropolitan Transit Authority gave "overly generous terms" to Apple for the space. The New York Post reports that the state comptroller is investigating the terms of Apple's lease and other facets of the MTA's business dealings
"The article in the New York Post about the MTA's contract with Apple in Grand Central Terminal is a cause for concern," comptroller Thomas DiNapoli said. "This is a prime property, and I intend to make sure that the MTA hasn't given away the store."
Apple did indeed receive quite generous terms for its lease; alone among all businesses in Grand Central Terminal, Apple will not have to share a percentage of its sales with MTA, and its rent for the space is much lower than most other tenants. However, Apple also paid the previous tenant US$5 million to clear out early, and Apple is paying for infrastructure improvements to the space out of its own pocket.
MTA expects its generous rental terms to pay off in the long run; it predicts the presence of an Apple Store will increase traffic in Grand Central Terminal and thereby increase revenues in surrounding businesses which do yield a proportion of their sales to MTA. However, our own back-of-the-envelope calculations show that in order for MTA to receive a similar return on investment from Apple compared to the landlord of Apple's 5th Avenue space, other Grand Central Terminal businesses will need to increase sales by (a perhaps unrealistic) 7.5 percent.
Apple's Grand Central Terminal retail store will open on December 9.