Summary of Our Findings – American Industrial Brands

Phased Investment

AIB is offering its EB-5 investors a phased investment opportunity, enabling them to initially contribute $480,000 and pay the remaining $400,000 within 6 months. This unique EB-5 investment structure reduces the financial burden on EB-5 investors by allowing the payments to be made in installments.

I-526E Denial Refund

There will be an “I-526E Denial Refund” in place to safeguard EB-5 investors in case of a denial. This refund policy mandates that if an EB-5 investor’s I-526E petition or the Project’s I-956F application is denied, the NCE will return the EB-5 investor’s capital contribution. The “I-526E Denial Refund” serves as a distinctive feature of this offering, ensuring an additional layer of security for EB-5 investors and their capital.

Visa Set Aside

The Project is eligible as a high-unemployment targeted employment area (TEA) Project. The Reform & Integrity Act of 2022 (RIA 2022) introduced substantial benefits for investors in TEA Projects. Investments in high-unemployment TEAs are entitled to a 10% set-aside of all EB-5 visas and may provide EB-5 investors, including those from countries facing visa backlog (China, India, and Vietnam), with an immediately available visa upon approval of their petition. This provision eliminates the need for these EB-5 investors to wait for several years to obtain an available visa.

Secured Contracts

The JCE has successfully secured contracts with prominent and well-established customers, including Briggs, Menard’s, and Clayton Homes, as well as a national wholesaler for the production of private-label brands. Notably, a significant portion of the facility’s production capacity, specifically 50%, has already been pre-sold to the aforementioned companies. These signed contracts and the resulting demand are essential in achieving the projected production levels outlined in the financial projections. Additionally, the secured contracts offer assurance regarding the production volume and sales that the JCE is expected to realize.

American-Made

The JCE’s manufactured products possess a competitive advantage by proudly bearing the label “Made in the USA.” Presently, a significant 80% of bathroom fixtures sold in the U.S. are manufactured overseas. The industry is experiencing growing demand for domestically produced products, and U.S. government contracts often prioritize and, in some cases, require American suppliers. This scenario presents a distinct advantage for the JCE, as they are among only a handful of domestic manufacturers in this industry capable of meeting such demands.

Modernized Manufacturing

The manufacturing process and production flow have been meticulously organized and developed to achieve an efficient and increased production capacity. The entire facility is equipped with automated robotic systems that handle all tasks and processes, eliminating the necessity for human labor in both production and final assembly stages. Advanced injection molding techniques, combined with automated manufacturing processes and on-site assembly machines, enable large-scale production. The utilization of state-of-the-art robotics and modern machinery allows for the creation of finished products in substantial quantities, with fast turnaround times, exceptional quality, uniformity, and relatively low labor and material costs.

Brand Names

The JCE sells its products under the “Coast” brand, as well as other private label brands, to wholesale and retail customers both domestically and internationally. The Coast brand has a rich history spanning over 70 years and holds numerous registered trademarks and patents. American Industrial Brands acquired Coast’s intellectual property and tooling in 2008, and it was subsequently licensed to the JCE in 2021. Apart from the Coast brand, the JCE offers a white labeling program, enabling retailers and bathroom fixture wholesalers to have their own brand name embossed on the products. Management anticipates that this program will eventually become one of the primary revenue drivers for the business. Additionally, AIB holds licenses for five legacy product brand names in the kitchen and bath categories.

Government Support

The Project is utilizing funds from the New Markets Tax Credit Program (NMTC). The NMTC Program offers tax credits as an incentive for private investment in distressed communities, promoting community development and economic growth. In 2018, the NMTC was utilized as part of the purchase of the original facility. With the additional investment required for the final phase of production, the Project meets the criteria to access these incentives, which can provide up to $7.2 million in funding. This funding option proves to be affordable for the Project.

Strong Demand

There is a strong demand for high-quality bathroom and sanitary fixtures, primarily driven by the recovery of the real estate industry, the preference of real estate developers for premium brand name products in their projects, and the need to replace older and less efficient fixtures. The JCE, benefiting from its strong brand names, is well-positioned to leverage this trend. The bathroom fixtures and sanitary ware industry is mature, characterized by consistent demand and an annual growth rate of 2.6%.

Management Experience

Due to the offshoring of the majority of bathroom fixtures manufacturing, there is a scarcity of expertise in the U.S. domestic market when it comes to designing and installing production lines and equipment for such facilities. As a result, the JCE possesses a competitive advantage in the U.S. market due to their expertise in designing and installing production lines and equipment. This expertise allows them to produce high-quality and affordable products domestically.

Strategic Location

This location reduces shipping costs and distribution timelines as it can reach over 80% of the U.S. population within one day of freight delivery. The Project’s location in Indiana offers the advantage of lower shipping costs compared to foreign competitors when targeting U.S. markets.

Risks