DiNapoli: MTA tipped Apple bid on Grand Central space
July 30th, 2012
The Apple store’s arrival in Grand Central Station was greeted with much ballyhoo, its unveiling like something out of a science fiction novel — appearing out of nowhere to stun the masses.
Well, according to State Comptroller Tom DiNapoli, there was something extraordinary about the Apple store’s arrival in Grand Central.
He says Apple had an unfair advantage in the bidding process for the space thanks to help from the Metropolitan Transportation Authority. According an audit by DiNapoli, the MTA worked with Apple for a year before issuing an RFP for the bidding on the space.
“While Apple may turn out to be a good tenant, the MTA set a troubling precedent when it played favorites and gave Apple a competitive edge over others for the Grand Central space,” DiNapoli said. “Apple was directly involved in setting the terms of the lease and given exclusive access to information more than a year before any other vendor knew the Grand Central location was available. The company even signed a $2 million agreement with the current tenant to vacate its space five days before the MTA issued the RFP.”
DiNapoli is recommending changes to the Public Authorities Law to allow for a more transparent bidding process.
The current law only calls for certain contracts to be reviewed by the state Comptroller’s office. DiNapoli’s proposed change would make all contracts over one million dollars eligible for review. DiNapoli’s office was not allow to review the process that led to the Apple lease before it was finalized because it was allegedly a competitive process.
MTA chairman Jay Lhota is a Cuomo ally and DiNapoli has a contentious relationship with the governor.
Cuomo never endorsed DiNapoli in 2010 and DiNapoli has been working with another one of Cuomo’s rumored political rivals Attorney General Eric Schneiderman.
Here is a timeline of events provided by DiNapoli’s office:
A general timeline of how the process unfolded:
· November 2008 – Discussions began between MTA’s RED and Apple
regarding the potential to lease space in GCT.
· April 2009 – MTA approached Metrazur, occupants of the space on the
East Balcony of GCT, about a buy-out for the term of its lease, which
had ten and one half years remaining.
· July 2009 – Metrazur approached Apple about the buy-out. Negotiations
between pairs of parties among the MTA, Apple and Metrazur commenced,
with an eventual $5 million buy-out agreement reached between Apple
and Metrazur. This amount later became the required upfront payment
amount in the RFP process.
· May 18, 2011 – Five days before the RFP was issued, Apple and
Metrazur entered into a separate agreement in which Apple would
advance $2 million of the buy-out amount to spur Metrazur to vacate
the premises early. MTA solicited a letter from Apple stating that
the agreement did not bind them and that the lease would be pursuant
to a competitive RFP.
· May 19, 2011 – MTA signed an agreement with Metrazur to terminate its
lease for $5 million.
· May 23, 2011 – MTA advertised the RFP for the GCT space. Among the
RFP requirements were an upfront payment of $5 million as prepayment
of rent to fund the Metrazur termination agreement. On the same day
that the MTA publicly released its competitive RFP for bidders to
apply, Apple paid $2 million to Metrazur.
· June 27, 2011 – Responses for the RFP were due; only Apple responded.
· August 10, 2011 – MTA and Apple signed a lease for the GCT space and
Apple wired the remaining $3 million to a closing agent.
· March 19, 2012 – The lease provided for Apple to make infrastructure
improvements. MTA indicated these improvements would cost about $2.5
million. However, about $1.6 million of the improvements were not
yet completed and it is uncertain when they will be done. In
addition, by this date, Apple had not yet paid $414,142 for work done
by MTA to enable the infrastructure improvements.By David King on July 30, 2012, 12:30 pm
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