Escondido approves ground lease for Costco
Council clears a key hurdle for the retailer’s planned takeover of the former Sears site, with city leaders projecting millions in annual sales tax revenue and hundreds of new jobs
ESCONDIDO — A ground lease between the city and Costco was unanimously approved Wednesday by the City Council.
The popular retailer appears ready to demolish the former Sears building at the North County Mall at 272 E. Via Rancho Pkwy east of Interstate 15. Costco and the current leaseholder, Transformco Operating Stores LLC, appear to have a deal to move forward so Costco can lease the parcel, which is owned by the city.
In 2022, the city approved similar lease documents, but Costco and Transformco could not agree on terms to transfer or terminate Transformco’s lease, according to the staff report.
However, the council’s action does not pre-approve the Costco project, grant construction rights, or bind future Planning Commission or City Council decisions to the development application.
The new lease would provide Costco with a fixed term of 20 years at an annual rent of $100,000. The lease also has extension rights with seven five-year options for a potential total of 55 years.
The staff report noted all major stores pay about $98,000 per year in rent.
“We received a question about why we would start with the lease?” Escondido Deputy City Manager Chris McKinney told the council. “It’s a legitimate question. For anyone to apply or to submit, they need an interest in the property. They need to have some right to that property, and the lease would give them that right.”
Escondido is projecting at least $2 million per year in sales tax revenue and more than 300 jobs. The city owns seven of the eight parcels. Macy’s owns the eighth parcel at the mall.
