The finance committee of New York's Metropolitan Transportation Authority on Monday unanimously approved a 16,000-square-foot restaurant, cafe and bakery/market at Grand Central Terminal that Danish restaurateur and cookbook author Claus Meyer would operate.
The Metro-North Railroad committee discussed the proposal for the western half of Vanderbilt Hall earlier in the day at the authority's Midtown Manhattan headquarters. The full board is expected to vote on it Wednesday.
This initiative marks the latest effort by the MTA to bolster its real estate revenue. According to authority documents, gross and net retail revenue performance at the 100-year-old complex rose to $32.3 million and $22 million, respectively, in 2013 from $26.4 million and $18.8 million in 2011.
Randall Fleischer, senior director for business development, said the MTA wants to maximize Vanderbilt Hall, which is home to the annual Holiday Fair but is used only about half the year.
"This is a legacy project to further build on the Grand Central brand," he said.
According to MTA officials, the Meyer group's proposal offered the highest bid in a request-for-proposals process that began with a design charette in October 2011 that New York preservation and design leaders attended.
In response, 12 operators offered 15 proposals for the space. Meyer, said MTA officials, is working with an investor group represented by Hugo Uys, who orchestrated the deal with support from Heyer Performance Inc.
Nancy Marshall, real estate director for Grand Central Terminal Development, said the eatery could open "in March 2016 or close to that date."
She told board member Charles Moerdler that the restaurant group will "reduce its footprint" to accommodate the Holiday Fair. The hall's eastern half would continue to host that and other special events.
The authority, which operates Grand Central and is one of the largest issuers in the mutual marketplace with $32 billion in debt, will receive nearly $1.8 million in rent for the space in the first year. The compensation escalates each year with pre-determined rent increases and collection of a perception of business sales.
Minimum rent will rise to $2.06 million in the second year and $2.82 million after 10 years, said MTA real estate director Jeffrey Rosen. It would rise to $3.27 million after 15 years if both parties agree after 10 years to exercise an optional five-year contract renewal.
Jonathan Ballan, who represents Westchester County on the MTA board, asked about project contingencies. "What if there's a delay? What if there are financial difficulties? What if March 2016 becomes 2017 or 2018,?" he said.
MTA officials say the value of real estate in Grand Central has soared fourfold since the 100-year-old's major renovations were completed 17 years ago. High-profile tenants that have moved in the past include the Apple Store, Shake Shack, Café Grumpy and Jacques Torres Chocolate.
"At Penn Station, all we have are doughnuts," said Mitchell Pally, who represents Long Island on the board.
Moerdler added: "You don't even have clean doughnuts."
Moody's Investors Service assigns an A2 rating to the MTA's primary credit, transportation revenue bonds. Standard & Poor's last week raised its rating to AA-minus, while Fitch Ratings rates them A.
The finance committee also approved an additional $20 to the 2010-2014 capital program for leak mitigation at South Ferry station as part if the Hurricane Sandy recovery project, and a further $35 million to add help-point signs at 70 New York City transit stations, increasing the total of signs to 222.
Help points are intercom devices enabling customers to speak directly to transit employees for emergency assistance and travel information.
