As part of the Cottage Industries project, the developer, Cottage Industries, LLC, had leased the following five vacant properties from the City and the Housing Authority in 2016.

The leases were terms of 15 years (through 2031) and granted Cottage Industries a right of first refusal to purchase the properties at fair market value.  In December 2022, Cottage Industries exercised the right to acquire the five properties for their appraised values for a combined total of $1,230,000.  Cottage Industries paid a down payment of $25,000 and executed promissory notes for the balance pursuant to the attached Purchase and Sale Agreement, Promissory Notes and Deeds of Trusts.  The promissory notes require the payment of interest for a term of one year with a balloon payment on or before December 29, 2023. 

Cottage Industries has requested amendments to the promissory notes and deeds of trusts to extend the maturity date of the loans for six years to December 30, 2029.  Cottage Industries further requests that the notes be written separately for each property with their respective deed of trust.  Cottage Industries is current with their interest payments and will continue making interest payments for the extended term of the loans. 

Cottage Industries has made significant progress in moving their project forward in light of challenges brought on by the COVID-19 pandemic, supply chain disruptions, utility installation lead time delays, financial markets and economy. The first phase of Cottage Industries known as the Farm Block is comprised of an adaptive reuse approach and tenant improvements to seven (7) buildings. The developer has secured signed leases with several artisans and eateries including: Smoke Queen Barbeque, Blue Scoop Creamery, and Eco Now (sustainable lifestyle) . The Farm Block will also incorporate retail pop-ups that will tenant the SheShed with active discussions in process with a local bake shop.  A key element of the Cottage Industries project is to create a sense of community at the Farm Block for locals, families and visitors to enjoy an active community garden, amphitheater, kids play area, outdoor seating area and family friendly communal areas. Incorporation of local community art will provide for Cottage Industries to implement complementary mural walls throughout the Farm Block and an oversized adirondack chair. 

The level of creative placemaking and imagination for the project will cultivate an image for Garden Grove that is currently aspirational.  Having the new police facility and Civic Center campus anchored on one end by Main Street and SteelCraft and Cottage Industries on the other will create a true community living room for Garden Grove residents and visitors.  Cottage Industries is comprised of multiple parcels; some adjacent to each other and some separated by privately owned parcels.  The project is being developed in phases with some parcels completely encumbered by parking.  As a result, a request for City support in extending the developer’s repayment obligations and separating the promissory notes and deeds of trust will enable each parcel to be underwritten separately and support additional debt.  Impacts of the COVID-19 pandemic, current economy, delayed revenue stream, and the anticipation of making payments on the notes has proven to be challenging.  The request for the extension of the notes will assist the developer in continuing to invest in a high caliber project at the current creative and high standards.

Approval of the six-year extensions to the Promissory Notes will have limited impact to the City and Housing Authority. The future principal and interest payments will be deposited into their respective funds when received.

It is recommended that the City Council/Housing Authority:

• Approve the amendments to the Promissory Notes secured by Deeds of Trust; and 

• Authorize the City Manager/Executive Director to approve any pertinent documents on behalf of the City/Housing Authority, and authorize the City Manager/Executive Director to approve modifications as appropriate.