Benjamin Kabak

Controversy over the Apple Store show how intricacies of historic preservation are lost on our elected officials.

Last night, I took a quick look at the burgeoning brouhaha over Apple’s Grand Central lease. According to some source dug up by The Post, a few real estate folk believed the MTA didn’t get as good a deal as it might have for a space that’s tough to lease. Today, the story has exploded, and I am reminded once again how difficult it is to find comprehensive coverage of actual transit issues in the New York media.

As we join this story already in progress, as The Post report spread yesterday, everyone grew agitated. In the evening hours, Assemblymember Linda B. Rosenthal’s office sent out a press release. The Manhattan representative is outraged — OUTRAGED! — by the lease. She wants a hearing.

“It is totally unacceptable that the MTA would essentially give away some of the City’s most coveted and expensive retail space in Grand Central Terminal to this new Apple store. The cash-strapped MTA has the potential to receive millions of dollars in revenue, which would help to reduce the burden on beleaguered straphangers who have seen fares increase and services decrease over the last several years,” Assemblymember Rosenthal said. “Given the potential infusion of capital, I cannot fathom that the MTA would allow the Apple store to take such a large bite out of the Big Apples’ coffers.”

Rosenthal didn’t stop there. She had even more to add. “The State has a vested interest in the MTA’s revenue streams,” she said. “As a member of the New York State Assembly Corporations, Authorities, and Commissions Committee, I call upon the committee to hold a hearing to investigate any impropriety that may be involved with this deal. If the MTA passed on an opportunity to make much-needed capital in a year when they have a projected $6 billion budget shortfall, the State and the public have a right to know.”

Who votes for these people anyway? Of course, she’s not the only one making a mockery of the process. New York State Comptroller Thomas DiNapoli expressed similar sentiments and pledged yet another investigation. “This is a prime property and I intend to make sure that the MTA hasn’t given away the store,” he said in a statement.

It would probably pain DiNapoli and Rosenthal to look into this before opening their mouths, but this is a ridiculous situation over which these two should not get bent out of shape. In economic terms, the MTA doubled the revenue they’re getting from the Grand Central balcony space. Metrazur’s lease, which ran until 2019, called for $250,000 in rent. Apple paid $5 million to the restaurant and is paying $2.5 million for structural accessibility improvements and at least $1 million a year for the next ten years.

Meanwhile, the space itself is hardly “prime property,” and it certainly isn’t the city’s “most coveted and expensive retail space.” Since it is in Grand Central, it is subject to stringent historic preservation regulations. Thus, it is ideal only for a restaurant or a retail space such as an Apple Store that requires minimal work or branding above the sightlines. That is, after all, why the MTA received just one bid for the space during the RFP process. Considering the up-front costs of buying out the lease and the need to spend on infrastructure, no one else would have been willing to front the dough while paying the rent.

It sure would have been nice to secure a percentage deal on the space, but the MTA wasn’t earning revenue from Metrazur in such a fashion either. When all is said and done, the authority anticipates drawing in $180 per usable square foot from Apple while much of the space will sit idle due to the space and preservation limitations. If only our politicians could understand that.

Still, reality has never interfered with Albany. As the state siphons off transit funds and refuses to address a capital budget gap, Rosenthal and her colleagues are content with cheap shots and faulty inferences. “At a time when the MTA is cutting service, rolling back the maintenance of its subway stations and worst of all predicting a new fare hike, it is outrageous that they did not make the most of this opportunity,” Rosenthal said yesterday.

Earning more money from a new lease — albeit less than many would prefer — has nothing to do with rolling back maintenance or pre-planned fare hikes that are designed to track cost-of-living and inflation increases. The MTA made a lot out of a tough situation. Nothing that happened in Grand Central is as outrageous as Rosenthal claims, and if she spent as much effort and spilled as much ink worrying about the city’s true transit problems instead of this farce of an issue, straphangers would be better off for it.

The Apple Store is courting controversy even before the plywood comes down.

The Apple Store in Grand Central is still a week or so away from its grand opening, but already, its mere presence and the lease Apple has signed is generating controversy. One State Senator may even take the extraordinarily bold step of holding a hearing to protest the lease.

Here’s the story, as first reported by The Post: Apparently, Apple negotiated a deal in which it pays $60 per square foot for the space and doesn’t have to pay the MTA, its landlord, a percentage of profits. It will be the only retailer in Grand Central with such a sweetheart deal, and the rent itself, while four times higher than what Metrazur was paying, pales in comparison with the $200 per square foot Shake Shack will soon be paying. Uh oh.

The MTA itself was a bit defensive of the deal. “We set out to maximize the rent we receive for this space, and we’re thrilled that we were able to more than quadruple what we had been receiving previously,” Authority spokesman Aaron Donovan said to The Post. No one else, the MTA has noted multiple times, even bit a bid in for the space when the authority issued a request for proposals earlier this year.

Still, those watching the proceedings and those dismayed at the state of the MTA’s finances were none too pleased. “I am surprised they didn’t get some kind of percentage,” Robin Abrams, an executive with Lansco, said. “You’d think if they were going to do, say, $50 million in sales, the MTA would at least get some percentage of anything over that.”

The MTA has repeatedly said that the Apple Store and the traffic it generates will make up for the lease terms favorable to the Cupertino computer giant. The authority anticipates that the Apple Store will “generate significant new traffic” for the other retail establishments, and as The Post reports, every one percent increase in non-Apple Grand Central sales results in an additional $500,000 for the MTA.

Throughout the city, reaction to this development has not been kind. Gizmodo slams both the MTA and Apple. The computer retailer is “screwing over one of its partners” and “might be hard-lining you right out of your ride to work.” That’s a bit of hyperbole as even a percentage-based lease wouldn’t generate the kind of dollars the MTA needs to close long-term spending gaps.

One State Senator though isn’t too impressed. “There needs to be an investigation of who negotiated this deal. The taxpayers of this state are being ripped off that Apple is getting this sweetheart deal,” Tony Avella said to WCBS.

So what to do? The MTA had no leverage in the negotiations, and Apple knew it. It’s getting more money than it used to get and could reap ancillary benefits in the form of increased traffic through Grand Central. On the other hand, Apple is paying a percentage at 59th and 5th that has amounted to around $15 million per year. That’s real money the MTA won’t see because they weren’t in a position to ask for and get it. It is another day in the life of this crazy city.