More than 160 retailers throughout New York City’s subway system are now eligible for rent relief from the MTA under a new program approved by the transit board this week.
About a month after the start of the COVID-19 pandemic in the city, the MTA allowed tenants to put off making rent through July. None of that back rent is owed under the new agreement. But beginning retroactively from August, storefront owners will be able to offer 10% of their gross sales or 10% of the original rent — whichever is higher — as annual rent payments.
National retail chains and banks operating inside MTA-owned stations aren’t eligible. The program is intended for small local businesses, like Li-Lac Chocolates in Grand Central Terminal. The business, which has five other locations around the city, has been around for nearly a century (and still uses its original King Kong chocolate mold). But since the start of the COVID-19 pandemic, sales have plummeted, along with their ability to pay rent on the 230 square foot shop, which works out to $19,166 per month.
“Our sales collapsed mid-March and were down about 95%” said co-owner Chris Taylor. “This is a huge relief and we’ll be able to save jobs.”
In the first six months of the pandemic, the storefront operated with only one employee. As business slightly improved, they were able to bring back a second worker, and with the new rent relief, they’ll be able to hire a third, the owner said. But Taylor expects that getting back to pre-pandemic sales levels will take much longer.
“Are we in the clear? No. The train traffic is down significantly and the tourism traffic is virtually non-existent,” he said. With that in mind, the MTA has put the rent reductions in place until 2023 or until ridership is back to 75%. The percentage of gross sales expected for rent payments will increase to 20% in 2021.
The rent relief program will also apply to eligible subway newsstands, according to the MTA. Tenants not in good standing will not qualify for the relief.
The deal comes as the MTA faces a staggering $12 billion budget deficit through next year, with ridership unlikely to rebound until 2023. It also comes as state officials warn of a doomsday scenario without federal relief.
But transit leaders described the rent program as a fiscally smart move.
“This is a net positive for the MTA. Our rent collections for a couple recent months were below 50%. So we were starting to lose revenue and tenants, and replacing a tenant costs a lot of money,” said Janno Lieber, the MTA’s Chief Development Officer.
In the past, the agency’s retail real estate has brought in about $80 million a year, with nearly half that generated at Grand Central Terminal alone, according to the Wall Street Journal. That includes visits to the iconic Grand Central Oyster Bar, which gave up on indoor dining earlier this month, less than two weeks after reopening. Should the bar permanently close, it could hurt the MTA at a time when they have little wiggle room bounce back financially.
The transit authority is the latest in a growing group of commercial landlords to base tenants’ rent on their ability to pay, for fear of losing them altogether.
“The MTA seems like it is coming to grips with the fact that it needs to keep its commercial tenants viable for its operation, which is correct,” assessed Elliot Sclar, a professor emeritus at the Columbia University Graduate School of Architecture, Planning and Preservation. “Since the beginning, the operation has never been able to pay for itself at the fare box.”
The MTA had been investing in its retail sector before the pandemic by trying to optimize and modernize the spaces where storefronts, like newsstands, had been struggling regardless of foot traffic. Last year, the agency began piloting vending machines in areas where the stands selling candy and the local paper had failed.
For now, the MTA’s long-time tenants are welcoming the rent relief, while hoping for more ridership.
“You can say a lot about the bureaucracy of the MTA, but our Grand Central location is our best one,” said Taylor, before correcting himself: “was our best one.”