The Real Deal New York

Times Square McDonald’s asked to pay rent for its own sign

The fast-food chain’s new landlord is a joint venture tied to Jeff Sutton

October 05, 2014 10:00AM

McDonald's in Times Square

McDonald’s in Times Square

The landlord of the Times Square McDonald’s is trying to force the fast-food chain’s to pay to advertise outside its own restaurant.

McDonald’s told landlord, 1522 Broadway Retail Owner LLC, that it hoped to renew its lease for another decade. But it wasn’t able to negotiate a fair deal for the two-story space at 1560 Broadway near West 46th Street that it has called home for the past 30 years, according to court papers cited by the New York Post.

The problem was that the new landlord — a joint venture that includes Jeff Sutton of Wharton Properties — demanded that McDonald’s pay extra for its golden arches in an amount “equivalent to the revenue [the] landlord could receive if it were permitted to install and sublet a large LED billboard on the exterior of its building.”

Average rents in the area recently reached $2,283 per square foot, according to real estate firm Cushman & Wakefield.

In response, McDonald’s is asking a judge to forbid any future negotiators from charging extra rent for its sign. [NYP] – Christopher Cameron

  • free cameos in movies, right?

    Does this older article help to defend against rent controlling retail lease hikes or is it a fait accompli like everthing else anti-landlord?

    http://therealdeal.com/blog/2012/12/26/signage-beats-out-tenants-for-revenue-in-times-square/

    http://commercialobserver.com/2014/09/real-estate-industry-opposes-commercial-lease-bill/

    • Bullied and Damaged by Rent Re

      When will we know if the commercial lease bill becomes law? It affects what I do because I can’t handle something so precious in a rent regulated situation which basically is an opportunity to be abused by someone making money off of the space but claiming they are cash poor and struggling (how can you prove otherwise) and it will just be a nightmare.

      • Bullied and Damaged by Rent Re

        The “greedy landlord” complained about in this article does not cover the fact that certain groups sign leases, renovate and then turn over stores to fellow immigrants for immense key money and that will be facilitated rather than prevented by the passing of the Small Business Jobs Survival Act which he claims is badly needed:

        http://thevillager.com/2014/09/11/theres-only-one-way-to-save-our-small-businesses/

        My dad was asked to give up his apartment and he did it and the person who asked was not a violent criminal but they both understood that it was rude to refuse because the person who owns the building has the right to do with his space what he wanted. But other family members were asked to give up an apartment by scary people in a nearby building specifically sent to intimidate and they got what they wanted.

        There is no way that the City Council can pass a law that will prevent landlord abuse by the really dangerous and there is no interest anyway on the part of the City Council to prevent empowerment of the real bad guys which is what Small Business Jobs Survival Act will do i.e. shift interest by predators to holding store leases instead of entire buildings and then using their special methods to make sure they get paid.

        It’s basically stealing from the landlord to gift a retail condo to a tenant exactly like rent regulating apartments are essentially gifting condos with really low carrying charges but it doesn’t prevent SRO profiteering from happening that result in a vacate order

        http://therealdeal.com/blog/2014/01/21/city-orders-dozens-out-of-illegal-chinatown-sro/

        and it definitely does not mean that the real market rent will not find its way into the real world via subleasing and selling of the corporations that hold leases ad infinitum because corporations have no expiration date.

        Leases will become the new commodity easily transferred since most businesses hold leases as corporations so how do you prevent someone from selling shares to new officers? A corporation is eternal so the rent controlled lease won’t die with the founder of the company or an annhilation of all descendants.

        Passing the Small Business Jobs Survival Act is not justified by claiming that landlords enjoy going “eight years” with a vacant store so they can claim a loss of income deduction – do the math. The government doesn’t tax 101% of your income so that is a blatant lie but frighteningly no one points out the inappropriateness of that argument – not even the landlord representatives.

        This indicates that this is the will of the Powers that Be and that means no private landlord will feel safe because there is negative interest in lowering real estate taxes while SCRIE is being expanded, rent regulations are being expanded against owners, etc. That bill can become law at any time. It doesn’t have to be in this administration’s lifetime.

        Maybe we will still see more Williamsburgs – which lead to suddenly attractive Crown Heights and Bushwick where someone can charge $5 for a coffee and still complain that he doesn’t want developers into HIS neighborhood.

        Maybe we will still see Chelseas, Meat Markets, and Nolitas because it honestly looks like developers created those areas to protect the city’s economy and changing and definitely improving Harlem retail looks like good deeds not exploitation but any future vacancies will have to make the landlord charge market rent instead of trying to rent for longevity and serenity.

        Basically, the City is telling us that the developers created the real estate in this City to be a lifeboat for all. It’s up to the small private owners to understand that it’s blind eyes, deaf ears to the unequal carrying of its costs.

        • Bullied and Damaged by Rent Re

          Articles on this website about retail condos indicate that the value of ground floor spaces are usually equivalent to the total value of everything above it i.e. the ground floor commercial space is worth half the value of the building and probably in Sunset Park where it’s basically houses with stores downstairs, those stores are worth the entire value.

          Chinese people were elated to find that they could buy something at a modest price and have Sunset Park commerce become booming and many of them run the stores that are in their own buildings but not all.

          I’m happy for them. I think it’s lovely that they got in on a boom and I don’t have a cart in the race when I make this suggestion – let the rent control start on the next vacancy and not on any existing leases that haven’t ended yet.

          I think a lot of owners will get hurt otherwise because just like the ever expanding changes to residential rent regulation – no one told them the deal would change on them when they made their decisions (not me – I may even benefit if this passes on current leases).

          There are going to be a lot of harmless nonevil leaseholders who will get a gift from Santa with this passing into law but there are also going to be a lot of bullies who are greedy above all.

          Too bad the City Council can’t perform a greed test or a venality test.

          • Bullied and Damaged by Rent Re

            I really think no landlord wants a prolonged vacancy and will be smart and offer acceptable terms so they get a tenant in ASAP. There have been numerous articles on dnainfo about long term tenants like pizzerias and dry cleaners losing their leases but signing with nearby landlords.

            There have also been articles about people who did not blame their landlords for closing but honestly admitted it was time to go, the market changed, they weren’t good at it. But there are also places with bad Yelp reviews who tell reporters and use signs on their closed doors that they “Lost their lease” or the landlord was mean to them and the blogs run with it.

  • Marc

    Jeff Sutton, ahead of everyone else

    • moneytalks

      That guy is a legend. He owns NYC retail.

  • mousepaws

    “Average rents in the area recently reached $2,283 per square foot” A month? A year? That location is like 2800 sqft. It can’t cost almost $6.4million per month to rent that. 48 W 48th St, steps from 30 Rock, is going for the “low low” price of $60k/mo. Something’s wrong with this. Please let me know if I’m not getting something.

    Average
    rents in the area recently reached $2,283 per square foot – See more
    at:
    http://therealdeal.com/blog/2014/10/05/times-square-mcdonalds-asked-to-pay-rent-for-its-own-sign/#sthash.xrfde8Zs.dpuf
    erage
    rents in the area recently reached $2,283 per square foot – See more
    at:
    http://therealdeal.com/blog/2014/10/05/times-square-mcdonalds-asked-to-pay-rent-for-its-own-sign/#sthash.xrfde8Zs.dpuf
    erage
    rents in the area recently reached $2,283 per square foot – See more
    at:
    http://therealdeal.com/blog/2014/10/05/times-square-mcdonalds-asked-to-pay-rent-for-its-own-sign/#sthash.xrfde8Zs.dpuf

    • Rob Suslo

      It’s per year, and considering the neighborhood it makes alot of sense.

      • mousepaws

        Thanks for the clarification @robsuslo:disqus . The article wasn’t clear on that. So, $534k a month. Crazy but not impossible. After all, it’s.. the #1 spot in the world to be in.

        • Rob Suslo

          Yes indeed, it sure is.

    • Bullied and Damaged by Rent Re

      I was told that it was good advertising to have a Times Square location for a large company and that the opportunity to appear in movies, tv shows and DAILY on national and local NYC news is priceless. It’s product placement for FREE.

      How much is the advertising budget for these companies? How much is a one-time Super Bowl spot?

  • New Yorker

    Two points.

    This McDonald’s is the highest grossing McDonald’s in the world.
    Why shouldn’t they have to pay for the value of the signage?

    • Bullied and Damaged by Rent Re

      But what if a retailer does not make that much money in the area but is a big rich company that sells most of its product in supermarkets and wants the cachet of a Times Square address?

      What if there is a big difference between having your brand with an official Little Italy address when frankly, the block is really Chinese and one block away from Chinatown? Or vice versa and you want to be reported in the international press as speaking from your Chinatown headquarters in New York City?

      Shouldn’t they pay for actual value of the location? What if someone else is willing to pay for that signage opportunity by renting two stories? Is the judge supposed to pity the tenant for their “greedy landlord” when McDonald’s isn’t even paying a living wage to its employees?

      My family doesn’t make a living wage so we know what a big difference that would make to those workers who don’t get a tip jar but have a much tougher job than a Starbucks barista.

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