MTA Proposes New Percentage-Based Rent Agreement for Grand Central Restaurants

With subway and train ridership still seeing major declines from the same time last year, transportation hubs like Grand Central Terminal remain virtually empty, significantly impacting the businesses within them. More than six months into the pandemic, the Metropolitan Transportation Authority is now proposing a new rent agreement for its Grand Central tenants, in the hopes that businesses will be able to stay afloat.

Under this new proposal, the agency will take a percentage of rent from the restaurants and other small businesses in GCT that will be based on gross revenue, according to Janno Lieber, the MTA’s chief development officer and the man overseeing the plan. Lieber declined to say what that percentage will be, but said the agency is in talks with the businesses to settle on a figure.

The new rent agreement would only cover small businesses and not national chains like Starbucks and Apple, according to Lieber. Businesses that don’t have a significant presence outside of NYC will be considered for this new rent agreement, which if approved, could be in place for a couple of years.

That could change if ridership levels pick up significantly though. The proposal will likely include a clause that tenants revert back to the fixed rent agreement if customers and riders return to the terminal at pre-pandemic levels, but the MTA doesn’t anticipate that happening before early 2022, Lieber says.

The proposal still needs the approval of the MTA Board, which is expected to meet on October 28. Still it should come as somewhat of a boost to businesses at the terminal, which have been struggling for months due to lower foot traffic from tourists and commuters, and the fact that indoor dining was prohibited in New York City until September 30.

“This is going to motivate us to do our job and help us survive through this difficult time,” says Nicolas Dutko, the founder of Tartinery, the French cafe mini chain that operates one of its four locations from inside the terminal. The company’s Grand Central location has been closed since the start of the pandemic due to the decline in foot traffic, Dutko says. The percentage rent agreement is the first “realistic plan to survive,” the MTA has presented business owners with in months, Dutko says.

Dutko and other small business owners were on a conference call with the MTA a couple of weeks ago where the agency outlined its proposal. The move comes following backlash from the terminal’s restaurants in March who said the agency was forcing them to pay full rent despite the pandemic-related restrictions on dining at the time. State Senator Brad Hoylman had also been lobbying on behalf of the Terminal’s tenants for some type of relief. In response, the agency agreed to defer rent payments for four months starting in April.

That agreement ended in July, and as of August 1 tenants have once again been expected to pay full rent, despite the ongoing economic downturn. The new proposal would apply retroactively beginning on August 1, meaning that tenants would not be required to pay the full fixed rent for the past two months.

Additionally, tenants on the hook to pay rent from April until the end of July could also see part of their rent forgiven through the new proposal, though the MTA declined to say how much exactly.

The MTA’s percentage rent proposal comes amid news of doomsday budget cuts at the agency without federal aid, and the percentage agreement might generate some amount of revenue for the MTA. The terminal includes top NYC restaurants like the Michelin-starred Nordic spot Agern — which has remained closed since the start of the pandemic — and the Grand Central Oyster Bar, which closed again over the weekend after just two weeks due to the lack of foot traffic.

Other food options at the Terminal include an outpost of Zaro’s Bakery, Great Northern Food Hall, and Grand Central Market, all located on the main level, and the dining concourse on the lower level, which includes outposts of Magnolia Bakery, Shake Shack, and others.

In September, the New York City Hospitality Alliance released a survey of hundreds of local restaurants that showed that nearly 90 percent of businesses weren’t able to pay full rent in the month of August. Restaurants have consistently cited the fact that landlords were unwilling to work with them on new rent agreements as a reason for closure. While some landlords have worked out percentage rent agreements for restaurants and bars across the city, they still constitute a minority.