ESCONDIDO — The city has agreed to amend ground leases for four parcels at North County Mall as negotiations continue to replace the former Sears store with a Costco.
Located in southern Escondido off Interstate 15 at Via Rancho Parkway, the 83-acre mall site consists of eight parcels. The city owns all but Parcel 6, which is owned by Macy’s Inc.
Mershops, the mall’s current operator, leases Parcels 2, 5, 7 and 8. Other retailers lease Parcels 3 and 4.
Costco would occupy Parcel 1 if its current lessee, Transformco, agrees to terminate its lease, which is set to expire after 2040.
The City Council voted 3-1 on Nov. 4 to approve the amendments, which would extend the four ground leases by 28 years, from June 30, 2053, to June 30, 2081, to coincide with the end of the proposed Costco lease. The lessees of Parcels 3 and 4 would receive similar extensions.
Mershops’ rent would increase annually by 2.5% or the percentage change in the local Consumer Price Index, whichever is lower.
All mall lessees and one property owner are parties to a reciprocal easement agreement that governs site use, particularly for parking. Costco would need their approval to lease the former Sears site.
Mershops agreed to approve Costco’s lease on the condition that the ground lease amendments take effect.
Mershops would also be responsible for several capital improvements at the mall, including upgrading elevators and escalators, replacing all heating, ventilation and air conditioning units, repairing parking lot pavement, replacing lighting, doing roof work, refurbishing public restrooms and completing the paseo between the proposed Costco and the mall.
City staff said the elevator and escalator upgrades and the replacement of the heating and cooling equipment are the top priorities.
The ground lease amendments are nearly identical to those the council approved four years ago, with the addition of the capital improvements.
Westfield previously operated the mall and sold its interests to Mershops in 2023. The year before, the City Council authorized amendments to the ground leases for the same four parcels Mershops now leases, but the agreement with Costco was never finalized.
Deputy City Manager Chris McKinney said the ground lease amendments give Mershops and Costco what they need to finish negotiating with Transformco over terminating its lease.
“Transformco has not yet committed to doing that, but optimistically, once that happens, the mayor can execute all these amendments,” McKinney said.
Councilmember Consuelo Martinez cast the only dissenting vote. She said she was uncomfortable extending the leases through 2081 so soon after the election, before incoming council members could weigh in.
“I do think our council is going to look different in a couple of weeks — there could be two to three new people — and this is a really big project, a really big decision,” she said. “I really would love to see Costco come, but I respect there could be different opinions on the new council.”
Mayor Dane White was absent from the meeting.
Escondido election update
Martinez did not seek reelection this year.
In the race to succeed her in District 1, Vanessa Valenzuela led Tanner Horsley with 67% of the vote as of Nov. 9.
In District 2, Anthony DiMartino led incumbent Deputy Mayor Joe Garcia by 600 votes.
In the mayoral race, Elias Velazquez overtook White on Monday and led by 240 votes.
