Rea & Associates and Overmyer Hall Associates presented the "Construction Forum & Outlook" seminar on January 23, 2020, t the Ohio State University's Fawcett Center. The presentation provided attendees with an economic outlook as well as insight into security and risk. Take a look at the slideshow presentation to learn more.

2. Economic Outlook &
Financing Market Conditions
Doug Houser, CPA, MBA, CEPA
director of construction & real estate services

3. Columbus MSA Construction Jobs Forecast: Strong through ‘26
Projected Change
in Employment
Description Percent through '26
TOTAL 9.1%
Health Care and Social Assistance 25.2%
Education and Health Services 20.6%
Educational Services 12.2%
Construction 11.9%
Professional and Business Services 11.0%
Administrative and Waste Services 11.0%
Self Employed and Unpaid Family Workers 10.6%
Service Providing 10.0%
Finance and Insurance 8.8%
Financial Activities 8.6%
Local Government 8.4%
Arts, Entertainment, and Recreation 7.6%
Real Estate and Rental and Leasing 7.4%
Professional, Scientific, and Technical Services 6.2%
Leisure and Hospitality 5.1%
Trade, Transportation, and Utilities 4.9%
Accommodation and Food Services 4.7%
Other Services 4.4%
Federal Government 2.9%
Government 2.7%
Retail Trade 2.4%
Goods Producing 1.4%
Wholesale Trade 0.5%
Natural Resources and Mining ‐0.4%
Manufacturing ‐3.5%
State Government ‐5.3%
Source: Ohio Department of Job & Family Services, Bureau of Labor Market Information

4. Population Growth Forecast
Columbus MSA projected to
add 1 million over 25 years
(Mid-Ohio Regional Planning Comm., BIA)
Shaded counties are growing

5. Central OH 2010-2019

6. Housing Supply is Lacking
Columbus MSA needs 14k units
per year to meet projected growth
(Mid-Ohio Regional Planning Comm.)
Single Family Down 11.6% YoY
Multi-Family Up 8.6% YoY

7. Commercial RE Trends: Cap Rates Stable; Be Wary of Student Housing
Source: Real Capital Analytics, CBRE
Strong returns given current rate environment
1.3 million sf office in downtown Col thru ’21
OSU - $2.3 billion in projects next 5 yrs
Value plays available in NE OH?
Peak prices and declining
Student population screams
‘Be Wary’
U.S. Cleveland Columbus
Metro Office 6.05% 8.38% 8.00%
Suburban Office 7.11% 8.50% 7.50%
Industrial 5.00% 6.75% 5.38%
Retail 7.16% 8.62% 7.87%
Multi‐Family Infill 4.69% 5.87% 5.50%
Multi‐Family Suburban 4.99% 5.75% 5.75%
Hotels 7.75% 8.25% 8.25%
Commercial Real Estate Cap Rates 3rd Q '19
Class A Properties

8. Interest Rate Forecast
Source: The Economy Forecast Agency
LIBOR Forecast By
Month
Year Mo Close
2019 Sep 2.146
2019 Oct 2.154
2019 Nov 2.046
2019 Dec 1.998
2020 Jan 1.898
2020 Feb 1.844
2020 Mar 1.827
2020 Apr 1.816
2020 May 1.735
2020 Jun 1.698
2020 Jul 1.736
2020 Aug 1.823
2020 Sep 1.914
2020 Oct 1.978
2020 Nov 1.955
2020 Dec 1.966
30 Year Mortgage Rate
Forecast
Month Low-High Close
September '19 3.39-3.75 3.49
October '19 3.30-3.50 3.4
November '19 3.20-3.40 3.3
December '19 3.24-3.44 3.34
January '20 3.18-3.38 3.28
February '20 3.25-3.45 3.35
March '20 3.17-3.37 3.27
April '20 3.09-3.29 3.19
May '20 3.05-3.23 3.14
June '20 2.98-3.16 3.07
July '20 2.91-3.09 3
August '20 2.96-3.14 3.05
September '20 2.95-3.13 3.04
October '20 3.03-3.21 3.12
November '20 3.12-3.34 3.24
December '20 3.10-3.30 3.2
Short term rates
decline before
bumping up
early ‘21
Mortgage rates
bump up slightly
mid/late ‘20
Year Mo Close
2020 Jan 1.896
2020 Feb 1.884
2020 Mar 1.887
2020 Apr 1.89
2020 May 1.796
2020 Jun 1.752
2020 Jul 1.664
2020 Aug 1.625
2020 Sep 1.544
2020 Oct 1.5
2020 Nov 1.486
2020 Dec 1.477
2021 Jan 1.411
2021 Feb 1.381
2021 Mar 1.412
2021 Apr 1.483
LIBOR Forecast By
Month Month Low -High Close
January 3.61-3.83 3.72
February 3.59-3.81 3.7
March 3.63-3.85 3.74
April 3.62-3.84 3.73
May 3.73-3.98 3.86
June 3.75-3.99 3.87
July 3.72-3.94 3.83
August 3.78-4.02 3.9
September 3.75-3.99 3.87
October 3.82-4.06 3.94
November 3.86-4.10 3.98
December 3.98-4.24 4.12
January 4.08-4.34 4.21
February 3.99-4.23 4.11
March 3.94-4.18 4.06
April 4.01-4.25 4.13
30 Year Mortgage Rate
Forecast

9. Commercial Loan Volume: Solid+

10. Real Estate Loan Volume: Stronger Still

11. Commercial/Multi-Family Mortgage Bankers Origination Index
Mortgage Bankers
Association survey
predicts 9% growth
in 2020

12. Bank: It’s All About the Relationship
Industry expertise
Decision making
 Where; how many layers
Technology
 Treasury management & cyber-risk
Ability to evolve
Regulatory
 Bank Pressure Points - loan review & segment ‘buckets’
 Address the loss of LIBOR in loan docs
 Understand impact of new accounting standards
• When are covenants measured (GAAP reporting)

13. Best Financial Indicators of a Healthy Contractor
Tangible working capital of at least 7.5% of annual revenues.
 Consider impact of soft assets such as under-billings,
prepaids, stale retainage, and receivables.
Tangible equity greater than 10% of annual revenues.
Line of credit availability of at least 80% of net worth.
Permanent job borrow of at 10-15% of backlog gross profit ≈
permanent working capital.
Backlog gross profit in excess of 50% of S,G&A.
Contract fade of less than 1% of annual revenues (2% for certain
high margin specialty trades).
10% of the largest single contract is less than 25% of equity.
Cash to overbilling ratio of at least 1.5x.

14. Best Practice:
Communicate and coordinate your
CPA, surety, insurance, bank, and
legal relationship!

15. Questions/Comments
Contact info – 614.314.5937
doug.houser@reacpa.com

16. • Commercial Insurance • Surety • Home & Auto Insurance
Surety Outlook
2020
January 23, 2020
Presented By:
David Catanese, AFSB
Jack Kehl, AFSB

17. Agenda
• 2019 Review
• Outlook for Construction 2020
• Potential Impacts
• Outlook for Surety 2020

18. What Happened in 2019?

19. What Happened in 2019?

21. Construction 2020
• Momentum is strong
• Public and Private Work
• Labor will continue to be a factor
• Economic uncertainty, creating some caution

25. Potential Impacts in 2020
• Trade Deal with China
• Elimination of tariffs
• Federal infrastructure plan
• Fed keeps accommodating
• Labor
• Inflation
• Global Events
• November Election

28. Large Jobs in Central Ohio

29. Surety Market
Surety results have been positive
But….
• Sureties and Banks are becoming more cautious
How long can the good times last?
• Underwriting loosened from 2013 to 2019
Signs of tightening
• Defaults on larger jobs are rising

31. What should Construction Exec’s do now?

32. Key Takeaways
• Construction spending and activity will remain to be robust
through at least 2020 and into 2021.
• The construction industry has had a great run, but it’s not too early
to plan for the next cycle.
• Develop/Maintain your relationships with your team of
professionals.

33. Overmyer Hall Associates – Bond Guys
• Experience
• Expertise
• Professionalism
Questions?

34. Insurance,
Risk, and
Risk Management
Presented By:
Joseph Urquhart, CPCU, CRIS
Vice President
• Commercial Insurance • Surety • Home & Auto Insurance

35. “Are we in a Hard Market???”

36. Agenda
•2020 Rate Outlook
•Insurance Tips and Best Practices
•Risk Management Issues

37. 2020 Rate Outlook
• Property – 10% to 20%
• High Risk, Coastal – 25% plus
• Contractors Equipment – Flat to 10%
• General Liability – 5% to +15%
• Auto - +5% to +20% (depending on fleet size and losses)
• Heavy Fleets, Trucks, Losses – increases higher
• Builders Risk – Flat to 5%
• Builders Risk – Frame – 10% to 20%
• Rates are up/Controls, Capacity
• Umbrella/Excess – 10% to 20%
• Some premium is up due to revenue, auto premium, Capacity issues
• Professional – Flat to +10%
• Revenues are up

38. Insurance Tips and Best Practices
• Auto
• Implement and practice a formal Fleet Safety Program
• Written Distracted Driving Policy
• Be Proactive with MVRs – new hires, current drivers
• Drivers eligibility guidelines
• Respond and implement recommendations from Insurance
Company

39. Insurance Tips and Best Practices
• General Liability for Contractors
• Update your subcontract agreement – insurance requirements and
indemnity
• Contractual Risk Transfer Program – Contracts, Certificates
• Subcontractor pre-qualification
• Implement a QC/QA program
• “Occurrence” redefined endorsement

40. 2020 Risk Management Issues
• ONU vs Charles Construction Supreme Court Decision (10/9/2018) – what
does it mean to you?
• Contractual Risk Transfer – Owner, GC
• Review what you are signing upstream
• Update your subcontractor insurance requirements
• “Occurrence” redefined endorsement
• Auto – Fleet Safety Program and Policy
• Cyber Liability/Crime – Risk Assessment and Training *
• Workplace Violence/Active shooter
• Employment Practices Liability – #MeToo
• Drones
• Wrap-ups/OCIP/CCIP *

42. Risk Management Issues
• Cyber Liability and Crime
• Computer Fraud
• Funds Transfer Fraud
• Social Engineering (Wire Transfer Fraud)
• Privacy and Security
• Breach Notification
• Extortion
• Business Interruption

43. OCIPs, CCIPs, Wrap-ups
• Ask for the Wrap-up manual
• Read and Review the manual
• Send to your Insurance Advisor
• Understand the responsibilities of all parties

44. More Questions?
Joseph Urquhart, Vice President
Overmyer Hall Associates
jurquhart@oh-ins.com
614.453.4410