According to Scott Brown, a spokesman for the group of local investors that sought to bring HIB, a German eco-wall manufacturer, to the Greensburg Industrial Park, the project will not move forward.
“Not bad news, but sad news. The sad news is that HIB will not be coming to Greensburg,” said Brown. “Our goals were just not the same. It wasn’t going to be as good a deal for the Greensburg investors as we had hoped.”
The ongoing negations between the group and the Meissenheim-based manufacturer ended last week, with both sides unable to reach a consensus on a number of items, most notably the royalty payments, which the investors felt were too high, said Brown.
Just two months ago it seemed a forgone conclusion that the deal would reach fruition.
Brown, in a phone interview at the end of March, said that all that was left was to “dot the I’s and cross the T’s.”
“That was a fair assessment at the time,” said Brown last week. “When we came back [from our trip to Germany] we were excited. We thought that there was a real possibility this thing might work. They came over here and we spent more than a week going over the business plan and site locations and things along those lines. When they left, it looked pretty darn good.”
Brown said he had found nearly $1 million in local investment for an HIB manufacturing plant and U.S. headquarters to be located in the Greensburg Industrial Park. An additional $1 million was pledged by Paul Meyer, a New York-based manufacturer.
The local investors even began looking into office space and struck a deal with Greensburg Greentown to finish the Meadowlark House, a flagship HIB home in Greensburg that has sat unfinished since October of last year (“HIB will pay $100,000 to finish Meadowlark House” Kiowa County Signal, March 21, 2012).
As of Monday evening the HIB website still announced that it would begin manufacturing its product at its U.S. headquarters in Greensburg in 2012.
“Then we started to study the business plan a lot closer. We started running the numbers as to how many actual units we would need to sell to make it work. [Paul Meyer] was very encouraged by it, but also very cautious. He knew more about this [type of product] in his little finger than all of the Greensburg investors put together. At first we were very cautious about having an East Coast New Yorker interested. As it turned out it was possibly one of the best things that could have happened.”
Brown said that the local investors and Meyer had concerns about the royalties to be paid to HIB for products sold. They believed HIB was asking for much higher royalties than similar products.
Page 2 of 3 - “We probably could have got the thing going, but it may not have been very long before we became money strapped,” said Brown. “Yes, if we could sell enough product immediately, it might have worked. But over the years we might have paid out lots and lots of money in royalties. From the get-go we thought it sounded steep. We didn’t know what was typically in that industry. Mr. Meyer knew. It was one of the two or three things that were the major deal breakers.”
Brown said that Meyer and an HIB representative had been in Greensburg for more than a month going over the numbers and doing their due diligence before making any final decisions. “We wanted to double check our figures, we wanted to communicate with HIB to see if there was any way to adjust the royalties. We went the full way.”
According to Brown, the local investors felt the royalties would have hurt the business in the long run.
“We don’t want to seem like we’re bad mouthing them,” said Brown. “Especially not the people and definitely not the product. They have a great product. We hope they can land somewhere in America with some investors who look at the numbers differently than we do, it’s just not going to work for us.”
Brown said that each investor had put up 5 percent of their pledge, about $50,000 total to do research and cover startup expenses. He said they have only spent about half of that, an estimated $27,000 to $28,000 to complete research on HIB.
“We think that probably saved us a million dollars,” he added. “It is more important to us to get something here that would work, than it was to just get something here.”
During their meeting last week, Brown said that the investors discussed other possible investments, namely a number of products discovered while researching HIB.
“The group of investors were disappointed that the HIB deal wasn’t going to happen. But we all thought that if somebody doesn’t keep trying to get action going, it’s not going to happen,” continued Brown. “All of us agreed to spend some of the initial investment to follow these next ideas through.”
The “next” ideas are similar European-based wood fabricated wall products, already established in the U.S. “[These companies] are very interested in visiting and trying to work something out,” said Brown.
Meyer will be back in Greensburg, according to Brown, “to spend a couple of months” working with local investors and the other companies in an attempt to find a match.
“He loves Greensburg. He’s excited. We believe his [$ 1million] investment is still on the table if we find the right vehicle.”
Brown said that communications between local investors and manufacturers have already begun.
Page 3 of 3 - “It isn’t just a fishing expedition. We are hoping that in the next three months these will either come to fruition or they will not. We’re going to give them the time and research them strongly. On the surface they are every bit as exciting as the HIB product, but much more profitable,” said Brown, who also added that none of these products would require the expensive specialized machinery of the HIB product.
Brown did not want to disclose the names of the companies, but noted that they manufacture “green” products.
Brown also took a moment to wax poetic about the tenacity of the local investors.
“These are a group of people who are digging and trying. You’re not talking about grant money to lure businesses in. You’re talking about local people putting up their own money. We don’t have millions of dollars like Wichita or Salina or bigger cities. But how many of those places have individuals putting up money? They are using tax dollars from the government to lure those companies in. This is a little different. We’re talking about people writing checks.”
Multiple attempts to reach HIB representatives by phone and email for comment were unsuccessful.