Despite recent reports that the project was in limbo, it got full approval from the New York City Capital Resource Corporation in a board of directors meeting today.

“We are very appreciative of the board’s approval,” said Brian Morris, president of Esmith Legacy Inc., a commercial real estate development and investment management company.

In June, the corporation awarded the Esmith group, headed by Hall of Fame running back Emmitt Smith, close to 20 million dollars, untaxed, in Recovery Zone Facility Bonds to build the project.

The Recovery Zone Bond program, created by Congress as part of the stimulus package, helps jump-start economic activity in neighborhoods hit hard by the recession.

Onsite drilling at West 125th Street and Lenox Avenue for Esmith Legacy's hotel and retail complex. (Photo by Farhod Family)

Esmith’s application for the bonds stated that groundbreaking would take place in October. During the meeting, however, Maureen Babis, a New York City Economic Development Corporation official, stated that construction would begin early next year.

The developer has reached an agreement with the New York Hotel and Motel Trades Council, Babis reported, and is in final negotiations with the construction company, MWB General Construction.

A Capital Resource Corporation cost/benefit analysis states that Esmith’s project will cost close to $81 million. The hotel development costs alone will reach almost $56 million, the document states, including approximately $10 million for land acquisition, $26 million in construction costs, $53.3 million in furnishing and opening costs, and $16.3 million “in fees, soft costs and reserves”. The development’s retail and community uses will cost about $25 million and will be financed privately, according to the document.

Esmith Legacy’s application describes a 100,000 square foot hotel, plus 70,000 square feet of retail space, creating 129 construction and 81 permanent jobs.

“Approval of the bonds is the first step, but they have not been able to close the bonds they were awarded to finalize the deal,” Julie Wood, spokesperson for the New York City Economic Development Corporation, the city’s prime agency for promoting economic growth, said in an interview. “We are in contact with Esmith Legacy and hope they will be able to close the deal soon.”

The deadline to close is December 31. If Emmitt Smith’s group cannot close, then the money goes back to Washington, because the Recovery Zone Bonds will have expired.

“New York City was allocated with close to $121 million in Recovery Zone Bonds. *Roughly one hundred million has already been approved,” said Wood. This figure includes the $19.7 million for Esmith.

*The story originally misquoted Julie Wood saying $100 million has already been spent, and the remaining money was earmarked for Esmith. The $100 million has been approved, not spent, and it includes the money for Esmith.

Representatives at Costco's pre-opening office, near the site at 325 Pleasant Avenue, screen job applicants and offer membership packages. (Photo by Joshua Tapper)

In a neighborhood dotted with tiny Hispanic groceries and 99-cent stores, the opening of a Costco Wholesale superstore might be expected to cut into the income of smaller businesses. But East Harlem shopkeepers and residents are embracing the mid-November arrival of the North American chain despite the traffic and potential competition it will bring.

“It’s a good idea,” said Sammy Sey, who works at El Grocery, a 24-hour bodega on Second Avenue at East 124th Street. If anything, the increase in visitors to East Harlem can mean only more business, said Sey, a Yemenite who has lived in the neighborhood for 20 years.

Costco’s arrival will have “no effect,” said Yusef Zindani, as he wrote down stock items behind the counter of a 99-cent shop on East 125th Street. He is confident Costco poses no threat. “Even if Costco opens across the street, it’ll be fine,” he said. “Even the supermarket doesn’t bother small stores.”

Many local residents can’t afford the wholesale chain, slated to open on Nov. 12, Sey said. “Everyone here is on welfare,” he said. “If you only have two dollars you’re going to come here, not Costco.”

Costco will join a host of big box stores—including Target and Best Buy— opening at the nearly completed East River Plaza off FDR Drive between 116th and 119th Streets. Costco assumed the lease of space that Home Depot had intended to use before it was hit by economic troubles. The East Harlem Costco will be Manhattan’s first.

While Sey and Zindani exuded unbridled enthusiasm, some businessmen, like Francisco Garcia, owner of Mexico Lindo Grocery on Second Avenue and 116th Street, sounded less optimistic. Garcia, who has run his bodega for 19 years, acknowledged he’s going to lose business, but there is “nothing we can do,” he said, adding that if he can’t keep paying his rent, “we have to move out.”

In all likelihood, Costco’s arrival will not be wholly positive or negative, but a “combination of both,” said James Pisacano, president of Pisacano Management Group Inc., a local realty group. “Property value is going to be positively affected” and the store will “bring an influx of new blood via foot traffic,” said Pisacano, whose firm owns 30 properties in East Harlem.

The traffic, however, may be a double-edged sword, Pisacano said. Pollution and noise from supply trucks could pose a problem. Costco has offered noise-reducing double-pane windows to businesses along truck routes, he said. Costco is also offering new air conditioners to businesses that need to keep their windows closed to block noise.

Still, he said, “Costco is a plus. It’s bringing more people into the area.” Pisacano predicted that Costco shoppers from outside the neighborhood will also pop into local stores while they’re in the area.

An increase in traffic into East Harlem is expected from the Willis Avenue and Triborough Bridges, as well as from FDR Drive. Hector Quiroz, owner of Lechonera La Isla, a Puerto Rican restaurant on East 125 Street and Second Avenue, was unfazed by the likely traffic snarls. “It’s New York,” he said.

Ernest Johnson, a senior director at Strive Inc., an East Harlem-based non-profit that assists the chronically unemployed, concurred with storeowners that Costco will have a minimal financial effect on local businesses. “People will still shop at local stores,” and Costco “will allow small area businesses to exist,” he said.

“We intend for them to be our customers,” said Justin Callaghan, Costco’s assistant vice president of human resources, Eastern Division, referring to local businesses. Shopkeepers “are going to recognize immediately that they have been paying too much money for soda and they’re going to recognize they can become business partners.”

Local businesses can buy goods wholesale from Costco. The company has already distributed information booklets to such neighborhood shops as Zindani’s 99-cent store. “If Costco has it, and we can get a deal to sell it, we’ll get it,” Zindani said.

“There’s so much opportunity for small bodegas,” Callaghan said. “They’re going to be able to sell at the same price, but pay a lot less.”

“It’s just great that Costco’s coming to this location,” said Jeffrey Feiner, an adjunct associate professor of marketing, with a specialization in retail, at Columbia Business School. “Costco has prices that will allow people of all income stratums to shop there. I think Costco will be affordable enough for a large percentage of the local population.”

Moreover, Costco understands differential marketing, Feiner said. “They just don’t come into a market and plop down a store, they really study it. Costco is very aware that it has to provide different kinds of merchandise, different kinds of pricing for the different markets it goes into.” When Home Depot first opened stores in the borough, Feiner said, it avoided impractically large products in favor of merchandise a Manhattan apartment-dweller could handle.

“It’s going to be slightly smaller than our other buildings,” said Callaghan, referring to the East Harlem location. “The item selection will have a lot to do with the market we’re in.”

The store—the “most unconventional Costco in the world,” said Courtney Stern, assistant funding manager—will be structured like a supermarket, specializing in fresh food.

A traditional knock against big-box chains is the tendency to consume the market by offering one-stop shopping, capturing as many consumer dollars as possible, said Stacy Mitchell, author of “Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses.”

Mitchell, a senior researcher at the Institute for Local Self-Reliance, a national organization that supports local business ownership, argued that Costco leaves little for a consumer to purchase elsewhere. “People don’t have to venture out of the East River Plaza,” she said. “If you had something integrated on the street, that might be a synergistic relationship.”

The losses will outweigh the gains, Mitchell predicted. While Feiner was confident that Costco’s annual membership costs will be “offset by savings,” Mitchell was “disturbed” by officials’ bringing in a big-box chain. “The resulting closure of small businesses is going to result in long-term vacancies, more job losses than job gains and more tax revenue losses than gains,” she warned.

Nevertheless, East Harlem residents and shop owners are welcoming the store with bulk-sized gratitude. “Costco, when coming to the East River project, wanted to make sure the community was involved,” said Johnson of Strive. “Most people are pretty appreciative.”