______________________________
____________________________
By Brian Hews
Publisher | Follow X
September 3, 2026
DOWNEY — When Downey officials announced plans for a new Costco warehouse and gas station that would require relocating Downey Nissan, Mayor Claudia Frometa and the City Council trumpeted the project as a major economic victory that “would create hundreds of jobs, generate millions of dollars in new sales tax revenue and strengthen the city’s financial future.”
But buried beneath the promises of jobs and new revenue was a $10 million taxpayer-funded payment to Downey Nissan to cancel its lease.
There’s one catch: Nissan doesn’t own the property.
And after several California Public Records Act requests by Los Cerritos Community News — each increasingly narrow, specific and direct — along with questions to Mayor Frometa, Downey refuses to explain how it determined that terminating Nissan’s leasehold interest was worth $10 million.
Records show that Andrews Rancho Del Norte owns the property. BCH Holdings LLC, the entity associated with Downey Nissan, holds a long-term leasehold interest in the property under a Construction and Lease Agreement [CLA] dating to December 2015.
____________________
Online title records showing Andrews Rancho Del Norte as owner of the future Costco property.
____________________
The same records show a 2025 assessed value of approximately $14.23 million, including $2.62 million attributed to the land and $11.61 million to improvements.
Assessed value is not the same as current market value and does not establish the value of BCH Holdings’ leasehold interest.
The $10 million is being paid to terminate that leasehold interest, allowing Nissan to relocate across Firestone Boulevard and enabling the property to be included in the approximately 13.6-acre Costco development.
The City Council approved the $10.5 million Master Development Funding Agreement in June.
In addition to the $10 million lease cancellation payment, another $500,000 in city funds is designated for environmental review and entitlement work associated with the project.
The money will come from the city’s General Fund Economic Opportunities Reserve.
Costco, meanwhile, has agreed to provide up to $20.8 million toward construction of a replacement Downey Nissan dealership on property across Firestone Boulevard.
in case you’re counting that’s $30 million that Downey Nissan is getting in the deal.
Property owner Andrews Rancho Del Norte is expected to contribute up to approximately $1.6 million in cash, site materials and improvements, along with additional property for parking and efforts to secure other parking rights.
Once Nissan relocates, its existing dealership can be demolished, and Costco can proceed with construction of an approximately 162,000-square-foot warehouse and 40-pump gas station.
A Lease Can Be Worth Millions
The fact that Nissan does not own the land does not mean its interest in the property is worthless.
A long-term commercial lease can itself carry substantial value, particularly if a tenant is paying well below current market rent.
Orange County-based real estate attorney Scott Talkov told LCCN that one way to estimate the value of terminating such a lease is to calculate the difference between the tenant’s contracted rent and current market rent over the remaining term of the lease, then discount those future savings to their present value.
In other words, a tenant paying substantially below-market rent with many years remaining on a lease could be giving up an asset worth millions of dollars by agreeing to leave early.
But determining that value requires information — and Downey is refusing to provide it.
Among the important factors in determining the $10 million payment are the rent Nissan currently pays, the number of years remaining on the lease, scheduled rent increases, renewal options and current market rents for comparable property.
Those are precisely the kinds of details the public cannot evaluate here.
When LCCN requested the CLA, the city responded that it had “no records responsive” to the request and suggested contacting the Los Angeles County Registrar-Recorder/County Clerk.
Then how did they determine the $10 million payment to Nissan?
Without the lease or the financial analysis used by the city, the public cannot independently determine how close — or how far — the $10 million payment is from the economic value of BCH Holdings’ remaining leasehold interest.
City Cites Exemptions
LCCN subsequently requested any appraisals, leasehold valuations, broker opinions, economic analyses, consultant reports, spreadsheets, financial models or calculations supporting the $10 million payment.
The request also sought correspondence concerning the negotiation and justification of the amount and records showing the procedure and assumptions used to determine whether $10 million was reasonable.
Downey did not release those records.
Instead, the city cited Government Code Section 7928.705, a California Public Records Act exemption covering certain real estate appraisals, engineering or feasibility estimates and evaluations while a transaction remains pending.
The city also cited attorney-client privilege.
The only responsive document released was the already-public City Council agenda report concerning the Master Development Funding Agreement.
LCCN followed up with another records request, asking the city to identify each appraisal, valuation, report, or other document being withheld, including its title, author, and date.
The city declined.
“The City is not required to provide an itemized list identifying every specific record being withheld,” the city responded, adding that it had cited the applicable statutory exemptions and legal grounds for nondisclosure.
The reply does not establish that a particular appraisal or leasehold valuation exists.
But it leaves a fundamental question unanswered: What financial analysis, if any, did the City Council rely upon before committing $10 million in public money?
Mayor Asked Directly
LCCN then took the question directly to Mayor Frometa.
The mayor was asked how the $10 million figure was determined, what information the City Council relied upon before approving it, and whether councilmembers received an appraisal, leasehold valuation, or other financial analysis.
Frometa said she consulted the city attorney regarding disclosures involving the project.
“The specific records you are requesting are protected from disclosure by the Public Records Act under an exemption covering real estate documents/records while the respective transaction remains pending,” Frometa wrote, citing Government Code Section 7928.705.
She said the publicly available agenda memorandum and Master Development Funding Agreement were “as detailed as possible for the current stage of the project.”
But LCCN’s questions to Frometa were not limited to requests for additional documents.
The mayor was asked directly how the $10 million was determined and whether the Council had reviewed an appraisal, leasehold valuation or other financial analysis before voting.
Those questions went unanswered.
Leasehold Secured $7.426 Million Loan.
Property records reviewed by LCCN provide another glimpse at the potential value of BCH Holdings’ leasehold interest.
A 2023 recorded leasehold deed of trust shows BCH Holdings LLC, the entity associated with Downey Nissan, borrowed $7.426 million from Wells Fargo, using its leasehold interest in the property as collateral. Andrews Rancho Del Norte is identified in the document as the landlord, not the borrower.
________________
PAID OFF BY CITY? Online records showing the loan Doweny Nissan took out using its lease as collateral.
_________________
The document references the December 2015 CLA between Andrews Rancho Del Norte, as the landlord, and BCH Holdings, as the tenant.
The recorded deed of trust does not disclose how BCH used the loan proceeds, how much remains outstanding, or whether any portion of Downey’s $10 million payment will ultimately be used to satisfy the Wells Fargo obligation.
LCCN found no evidence establishing that the city is paying off that loan.
The document does establish, however, that BCH’s leasehold interest was used as collateral for a multimillion-dollar loan.
The amount also raises an intriguing question. BCH Holdings borrowed $7.426 million from Wells Fargo in 2023 using its leasehold interest as collateral. Hypothetically, if that loan represented 75 percent of the value assigned to the collateral, the implied value would have been approximately $9.9 million — remarkably close to Downey’s $10 million lease-cancellation payment. The loan documents reviewed by LCCN do not disclose Wells Fargo’s loan-to-value ratio or establish that the bank valued BCH’s leasehold at that amount.
Another $5 Million Contemplated
The $10.5 million commitment may not be the end of Downey’s financial participation in the development.
The Master Development Funding Agreement contemplates two future sales-tax-sharing agreements: $3 million associated with Costco, after the warehouse receives its certificate of occupancy, and $2 million associated with Downey Nissan, after the replacement dealership is completed.
Those agreements are expected to return separately to the City Council for approval.
The documents currently available to the public do not specify the percentage of sales tax to be shared, how long the arrangements would remain in effect, or the formulas that would determine the payments.
That matters because Downey officials have repeatedly promoted the Costco development as generating more than $3 million annually in new sales-tax revenue.
Until the future agreements are presented, residents cannot determine from the currently available documents exactly how much of that projected revenue Downey would retain after the contemplated sales-tax-sharing arrangements.
Frometa has called Costco one of Downey’s most significant economic investments in recent years, saying the development would create hundreds of jobs, expand the city’s revenue base and strengthen its long-term finances.
Those benefits may prove substantial, and the $10 million lease termination payment itself may prove economically justified.
But nearly two months after the City Council committed the money, the public still cannot see the calculation that matters most.
Downey has explained what it intends to pay.
It still hasn’t explained how it arrived at $10 million.
Subscribe to get the latest posts sent to your email.
