Costco The Landlord? Retailer Building 800-Unit Apartment Complex. Here's The Potential Reason Why.

Retailer Costco Wholesale Corporation (NASDAQ:COST) is best known for offering items in bulk for consumers and its infamous $1.50 hot dog and soda combo.

Costco could soon become known as a landlord or apartment builder as it dives into the world of affordable housing.

What Happened: Costco is continuing to build new stores as it looks to grow sales, with shares at all-time highs.

A new report from the New York Post, however, reveals the extra steps Costco is taking to develop a store in South Los Angeles.

Costco plans to build an 800-unit apartment complex as part of the development of the new store, partnering with Thrive Living and architects AO, according to the report.

Of the 800 apartment units, 184 would be set aside for affordable housing.

Thrive Ling told the Post the project is waiting for permits before construction for the combo retail-housing project can begin.

The new Costco store and apartment complex would be built on a five-acre site that previously housed a hospital. The plans call for a gym, gardens, a rooftop pool and a large parking lot.

There is no announcement yet on whether Costco plans to include a cafeteria offering the $1.50 hot dog and soda combo.

Housing activist Joe Cohen detailed the affordable housing and apartments being included as part of the project to help Costco bypass a lengthy site review process by the city of Los Angeles. Cohen explained that if two-thirds of the plan includes housing, the process is expedited.

The report also noted that the apartments would come as pre-manufactured units that would be loaded off trucks to speed up the project. This may be done in an effort to avoid paying union wages for skilled on-site workers, Cohen said.

Cohen labeled the project as being similar to a prison with a bunch of small units and a recreation center in the middle.

"Why does the ‘Costco Prison’ exist, and why is it designed the way it is? As often is the case, the answer is regulatory arbitrage," Cohen said in a tweet that has since generated nearly three million views.

Cohen said Costco did "what any good Scooby-Doo villain would do."

"They put on a mask that says ‘I'm an apartment building, not a big-box store.'"

Related Link: Costco Q3 Earnings Highlights: Revenue Beat, EPS Beat, No Membership Fee Increase Announced

Why It's Important: The new store will be Costco's first in South Los Angeles and could be crucial for the company’s unit growth and store size expansion in key markets.

While Cohen's post went viral, the housing activist said he's not against the project.

"LA has a massive housing shortage and we need all the new housing we can get," Cohen said.

If the Costco project is built, it will likely serve as a test for the retailer to explore more mixed-use designs that combine retail and housing in the future. This could be particularly attractive if it helps to expedite the building process and navigate around fees and regulations.

Read Next: Costco Hires New CFO, But Don’t Expect $1.50 Hot Dog Combo Price To Change

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