Jones Lang LaSalle Inc (JLL) 2002 Q1 法說會逐字稿

Good day, and welcome to the Jones Lang LaSalle first quarter 2002 earnings release conference call. Today's call is being recorded. Any statements made about future results and performance and plans, expectations and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the company's annual report on form 10-K for the year ended December 31st 2001. And in other reports filed with the SEC The company disclaims any undertaking to update or revise any forward-looking statements. At this time, for opening remarks and introduction, I would like to turn the call over to Mr. Chris Peacock, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us for this review of our 1st quarter 2002 financial results. With me today are Peter Roberts, our Chief Operating Officer and Lauralee Martin, our CFO. I'll begin the call with highlights for the quarter ending the 31st of March. Then Lauralee will review our financial results in greater detail. And Peter will talk about our current economic conditions and recent wins in business segments. And finally, of course, we will take your questions. To start, let me briefly review our results. In the first quarter, and consistent with the historically seasonal nature of our business, we recorded an adjusted net loss of $4.9 million or adjusted 16 cents per diluted share. This figure meets our expectations and reflects lower revenues generated in an uncertain global economy. [INAUDIBLE] we continue to hold to our target of earnings of fully diluted share in the range of $1.65 to $1.70. Lauralee will discuss our earnings guidance in greater details in her remarks. The state of the world economy remains unclear. Although there are some early signals of recovery from recession, as we have noted in the past, real estate tends to be a lagging indicator. Benefiting from recovery sometime after the general economy rebounds. So while we are anticipate improving real estate markets during the second half of this year, the full effects of the recovery are not likely to be reflected in our business until 2003. In this environment, we believe that the strength of our business backlog, plus the quality and number of new assignments, like those Peter will describe in a few minutes, will allow us to achieve our target for the year. Just this week, for example, following a hotly contested competition, Deutsche Banks selected out as it's real estate services partner for Europe, the Middle East, and Africa. Initially, we will assume transaction responsibilities for Europe's largest bank. Also, this week, in an extension of our strategic alliance relationship with Bank of America, we made significant progress with our assignment to relocate the bank's European headquarters to Canary Wharf from the city of London. We've completed the negotiations for a lease for 275,000 square feet of office space. That's 5 [INAUDIBLE] square. And have been instructed to fill out the facility. In addition, we will manage the entire 500,000-square foot building. I hope that you've had a chance to look at our recently published 2001 annual review. In it, we discuss two areas where we're investing significant resources and considerable senior management and attention. Our strategy? An affirm-wide initiative we call Total Performance Management. Our vision for laying this out is simple and bold. It is to be the chosen real estate expert and strategic advisor to the leading owners, occupiers, and investors around the world. We have articulated five over-arching strategies to help and secure this vision that relate to our three key stakeholders, our plant, our people and our shareholders. These strategies are to exceed current expectations, to deliver a recognized and differentiated brand. To develop a high-performance team culture, to achieve sustainable, profitable growth, and to improve operational efficiency. To measure our progress, we have established a series of quantifiable, three-year objectives that we are using to benchmark our performance. For each objective we have defined sets of long-term actions to be implemented within 3 years and short-term priorities that we expect to complete by the end of 2002. We're currently making good progress on both fronts. To help us achieve and maintain our vision in 2001, we introduced Total Performance Management -- or TPM, as we call it -- which defines the principles that we think it must embody to unlock the full potential of Jones Lang LaSalle. One of our first TPM priorities was to create a set of non-negotiable, minimum standards of behavior for our people. These are now part of our culture. To continually improve our client service capabilities, we have put new client relationship management systems in place. For our people, we are introducing new skills training programs and individual career management planning procedures. Typical performance management is a practical and continually evolving approach to better managing our firm. It sets the standards for the way we do business at Jones Lang LaSalle. Supported and guided by programs like TPM, we are optimistic about the future while remaining realistic about the challenges we face this year. Developed economies around the world are headed for recovery, even in the midst of instability in the Middle East. Western Europe and North America are leading the way out of global recession. And in Asia-Pacific the economies of Australia and Korea are also strengthening. Our recent restructuring has positioned us strategically to take advantage of the recovery once its effects begin to be felt in global real estate markets. Our cost containment initiatives make us a much leaner and more efficient organization than we were a year ago. Our people, who are revealed in all their diversity throughout the pages of our annual review, are the most talented and experienced in our industry. The combination makes us confident that we will achieve our 2002 business and financial goals while we prepare to take advantage of substantially improved conditions in 2003. Now I would like to turn the call over to Lauralee Martin for a more detailed review of our financial results.

Thank you. As covered by Chris, we recorded a net loss in the first quarter of $4.9 million or 16 cents per share as compared to the prior year loss of $2.9 million or 10 cents a share. These results were in line with our expectations and slightly better than consensus estimates. Driving our performance were expense reductions. Reductions principally achieved from the actions taken by management last year to right-size the organization in anticipation of an uncertain global economy. Expenses were down significantly. $33 million or 17%. As promised, when the restructure charge was taken in the fourth quarter, savings and ongoing operating expenses have been achieved, specifically of the $33 million, almost 15 million relates to savings in ongoing operating costs of which $11 million is salaries and benefits. FAS-142 contributed $2.4 million that a receivable performance contributed $3.5. And additionally interest with 900,000 less, due to lower debt levels. 12 million of the expense decrease is temporary as relates to the timing of bonus recognition. The bonus amount will catch up later in the year as accruals are booked relative to performance, which tends to be back-end weighted. The organization's right-sizing actions taken last year were in response to both a slower economy in the latter part of 2001, but also in anticipation that investor and corporate real estate activities would remain significantly slower than last year through at least the first two quarters of this year. Revenues were down 18%, firm wide, from last year, confirming our assumptions and re-enforcing the proactiveness of our decision. The America's revenues were down 14%. Revenues declined in both implementation and management fees. On the positive side in implementation fees, we saw year-over-year increases in capital markets and tenant representation, which may be an early read on a more positive turn to the U.S. economy. Disappointing, although expected, management fees saw a decline in project and development fees, which had benefited from several large telecom projects in the first quarter of last year. The Americas' revenue decline was more than offset with cost saving, as well as improved performance and receivables, which last year included a large telecom writeoff. The Americas is our most cyclical region in terms of revenue activities being strongest toward year end. So we were very pleased with their improved operating performance in the first quarter, delivering an operating loss of only $2.1 million as compared to the prior year of a $10.7 million loss. Is it is our view that the U.S. will lead the world on the economic slowdown. So the America's performance in the next quarter will be a critical checkpoint in our outlook for the year. The firm's largest revenue decline came in Europe, down $21 million or 25%, with the majority of the dollar decline in England and France. Although the comparison to last year [INAUDIBLE] first quarter, the decline was more than we had expected. The majority of the decline was in implementation fees as transaction levels fell significantly. Though modest exchange rates impacted revenues negatively by $2 million. Europe, like the Americas, had strong cost savings, but not sufficient to make up the revenue shortfall. Operating income was $300,000 compared to 8.6 million in the prior year. Continued market share and clients wins such as with Deutsche Bank provides the offset to the slower European economy. Asia-Pacific revenues were down a modest 6% with country performance quite mixed. Declines in Australia, Hong Kong, and Singapore were offset by increases in Japan, China, and Korea. Given our expansion into these opportunity areas, we have a positive outlook for their contribution to the region this year. As with the other segments, most of the revenue decline was offset with expense savings, resulting in a $3 million operating loss as compared with the prior loss of $2.6 million. LaSalle Investment Management revenues were down 5.4 million, the majority of which was due to a 2001 benefit from a $3.8 million disposition gain for LaSalle Hotel Properties. Revenues were lower than we had originally expected, due to the timing of two fund closings slipping to the second quarter. We expect to recapture revenues in the second quarter as well as later in the year, as these closings occur. Expenses were essentially flat as staffing to support new fund activity offset the restructure benefits achieved elsewhere in the business. Looking at revenues on a global basis as expected, we experience the bulk of our revenue decline, some 26 million and implementation fees as corporates and investors cut back on transaction activity. Our management fee base was relatively stable. Experienced a small reduction of previously discussed in a project and development business in the Americas. Change in equity earnings performance was due to the $2 million gain on the LaSalle Hotels Properties disposition in the first quarter of last year, with no similar gain this year. On a GAAP basis, we reported a net loss of $4 million, or 13 cents a share, versus a net loss of 3.5 million or 12 cents a share in the first quarter of 2001. The GAAP loss for 2002 included a benefit of $846,000, some three cents a share, that related to the write-back of the income statement of negative good will recorded in an earlier acquisition. This one-time credit was the result of the adoption of FAS-142. The GAAP loss for 2001 includes a $1.1 million write-down of a broadband investment. EBITDA for the quarter was 5.3 million down 7.2 million from the prior year. We continue to focus on strong cash management and building strength in the balance sheet. Receivables were down 55 million. This reduction was in part of function of reduced revenues. But it also represents tangible evidence of our focus on strengthening working capital management at the global, regional, and local business levels. Our capital focus can be seen in a dramatically reduced debt level over the past 3 years. At quarter one, debt was down to 241 million, as compared to 307 million at the end of the first quarter of '01. And 376 million at the end of the first quarter of 2000. A total reduction of $132 million in two years. As a result of the lower debt level, interest expense declined 900,000. Recognizing our focus on delivering financial performance, and our strengthening balance sheet, Moody Investor Services upgraded our debt rating to a BA-1. Besides the recognition of our financial fundamentals, we feel this rating action, together with our investment grade rating from Standard & Poor's, continues to separate us from our competition. These ratings provide confidence to our clients as they evaluate whom to build long-term relationships with and who to rely on to deliver services. Our ratings also provide confidence to our equity investors, the financial disciplines of the firm, as well as our corporate governance. Finally, I want to update you briefly on the adoption of FAS-142, which relates to the accounting for good will. As I noted earlier, we adopted FAS form 42, effective January 1. As a result of this adoption, we were required to book as accumulative effect of change and accounting principals, a one-time credit of 846,000, relating to the write-back of certain historic negative good will we were carrying on our balance sheet. We also stopped amortizing our general good will, which reduced first quarter amortization expense by $2.4 million. This was consistent with our earlier guidance of a $10 million reduction, 25 cents a share for 2002, which is factored into our full-year guidance. As part of the adoption of FAS-142, we are required to complete an impairment evaluation of our good will assets of $306 million by June 30th. This evaluation, complicated because of the geographic scope of our business and our history of acquisitions is in process. At this point, however, we do not believe that there will be any significant impairment charge against good will. Any impairment charge would be part of the cumulative effective in the accounting principal. This completes my comments on the first quarter. Our guidance comments for the second quarter and year, reflect our caution for the economy and its impact on revenues. As such, we are giving fairly wide guidance for the second quarter of an EPS of 5 to 15 cents. We still see the total year range of $1.65 to $1.70 to be reasonable, although towards the lower end of the range if a recovery is extensively delayed. I'd now like to turn the call over to Peter Roberts to discuss our business segments.

Thank you, Lauralee. For the next few minutes, I'll discuss current conditions in our businesses around the world and touch on a few recent new wins for each of our major business segments to give you a sense of activity levels. Let's begin with the Americas. The good news is that the U.S. economy appears to be back in a growth mode. Low core inflation should reduce pressure for higher interest rates and give the recovery a chance to gain momentum. If the current pace of recovery continues, we expect that it will take from 6 to 9 months from the beginning of the recovery before business investment picks up significantly and before job growth begins to have a marked impact on real estate markets. In light of the current economy, it is all the more encouraging to note the progress our people have been able to make in the first quarter. For example, in our corporate solutions business, we announced in the first quarter the signing of a five-year strategic alliance with Motorola. [INAUDIBLE] us 12.5 million square feet of communication company's U.S. facilities. Our mandate is to generate significant savings from Motorola while improving service delivery across the portfolio. Building on our successful partnership with Mead Corporation and following Mead's merger with Westvaco, we more than doubled the scope of our relationship. We now provide integrated transaction, facility management, and project management services for 30 million square feet of Mead-Westvaco facilities throughout the United States. We also expanded our relationship with Whirlpool, for whom we have completed numerous capital market and transactions assignments in the past. We have be named to provided facilities management services for the appliance manufacturer's headquarters and other U.S. facilities. General Motors also named us as a preferred provider for tenant representation and lease administration services in Mexico, South America, and in Asia. We want strategic alliance relationships to provide transaction services for ADP, the payroll and benefits administration provider, for IMG, the international athletes' representatives and for Westco International, the global distributor of electrical products. Turning to our investor services business, our capital markets and office teams worked together to win the assignment for MetLife for the sale of Center Square, a 1.85 million square foot office building in Philadelphia. This represents an important enhancement of our relationship with MetLife. In addition, our capital markets team completed the sale of Daiichi Life's 75% limited partnership interest in [INAUDIBLE] Power, a 1.4 million square foot office building in downtown Los Angeles. Our office and retail teams combined to win the leasing and management assignments for [INAUDIBLE] Shopping Center in Daly City, California. We were also awarded leasing and management for the Mall of Orange, an 822,000 square foot shopping center in Orange, California. And we picked up three new shopping center assignments in New York, West Virginia and Florida from Goldman Sachs during the first quarter. On the office side, TIAA/CREF awarded us the leasing and management assignment for 1300 I Street, a [INAUDIBLE] office building in Washington D.C. All in all, new business generation in the Americas remains active as we build our backlog, moving into the second quarter. In Europe, we believe that the fourth quarter of 2001 marks the bottom of the economic cycle. All signs indicate the growth has begun to return to the region for the first quarter of this year. Among the larger economies, we expect growth in 2002 to be highest in Spain and the UK and lowest in Germany. It will take time, however, for the recovery to reach the real estate sector, as we saw in our first quarter, European revenues. But even in the tough climate, our people were able to achieve a range of impressive business successes. You heard Chris mention a couple of them in his comments about Deutsche Bank. In addition, in the UK, our corporate finance team completed the sale of Lang Property Development Limited, a mandate we secured in competition with three leading investment banks. The development portfolio consists of 21 office and industrial assets, a shopping center development and five additional properties. A long-standing involvement with the landmark Broadgate Development in the city of London, we reached a new milestone when we concluded the largest rent review ever in the city. Acting on behalf of British Land, our city landlord and tenant teams reached agreement on a new annual rental of nearly 19 million pounds sterling for 360,000 square feet of space at 175 Bishop's Gate, an office property in the 4 1/2 million-square foot Broadgate Development. Baxter International signed a 2 year preferred provider agreement with us to supply tenant representation, consulting, and project management services in support of the company's operations in Europe, the Middle East, and Africa. We expect that our main activities with this client will be concentrated in England, Germany, Italy, Switzerland, and Spain. In a record-breaking transaction for the Netherlands investment market, we concluded the sale of a major office portfolio, valued at 320 million euros, for the Shell pension fund. The portfolio was sold to the Dutch Metal Workers pension fund. In Germany, our retail capital markets team sold a major development site in Frankfurt's prime shopping area on behalf of a joint venture between Morgan Stanley and Corpus. The site has received planning consent for 1.1 million square feet of mixed retail, office, hotel, leisure and residential space. In Spain, we represented [INAUDIBLE], Germany's largest, open-ended fund manager. And one of our firm's core capital markets client. And the acquisition of the landmark L-Triangle Shopping Center, an office complex in Barcelona. Our capital markets teams in the UK and Spain work together to complete this transaction. While the real estate markets in Europe struggle to shake off the effects of the economy, our corporate solutions and investor services businesses continue to achieve ground-breaking accomplishments. Turning next to Asia-Pacific, we find increasing consensus with the regions major economies with the notable exception of Japan, [INAUDIBLE] for stronger growth in 2002 and 2003. Conditions in Korea, Singapore and Taiwan appear to be improving significantly within the past 3 months. In Taiwan, we have been confirmed as the lead agent for Taipei Financial Center. This $593 million development will comprise 2.1 million square feet of office space in a tower rising 101 stories, which will be the tallest structure in 2003. In Australia, we negotiated a joint venture between IMG Real Estate Development Australia and Grocon Property, Limited, one of Australia's largest construction groups, to develop a 1.1 million square foot multi-use complex on the Queen Victoria Hospital site in Melbourne. We have also have been retained to secure development equity for the project. Following a four-month RFP competition, Standard Chartered Bank selected Jones Lang LaSalle as it's preferred provider for facility management, transaction and project management services in Singapore, Thailand, and Malaysia. In Bangalore, India, the capital markets group secured an agreement for the sale of Phase 2 of a 400,000 square foot office property, whose tenants include SUN Microsystems, Cisco Systems, and Ernst & Young. Final closing on the sale was set for early May. In Hong Kong, we have been appointed sole marketing agent for [INAUDIBLE] House, Hong Kong Land's new flagship property at the heart of the city's central business district. The project, which comprises 435,000 square feet, was the only major property to be completed in central Hong Kong this year. JP Morgan-Chase will assume a substantial presence in the building. We continue to be pleased with the realignment of our business to better serve our clients and we are optimistic about the opportunities in Asia, particularly in the Northern sector of the region. Finally, let's look at first quarter activity in our investment management business. The beginning of recovery from the first truly go-over session in over 30 years is certainly welcome news. Even as the strength of the recovery remains as an open question. We anticipate that returns on real estate investments will be well below the levels investors grew accustomed to in the 90s. But, relative to other investment options, real estate still looks to be fairly priced and able to provide higher yieldings, stable income streams, than other asset classes. We completed several fund closings during the quarter with total commitments sufficient to support new investments approaching half a billion dollars. In addition, we expanded our client base, securing commitments from eight new clients. Highlights include completing the first quote of our incoming growth refund. Completing the second close of our medical office fund and completing the second close of LaSalle Euro Growth 2, with investments from 4 new investors. Pension funds in Denmark and the Netherlands and major insurance providers in Germany and Norway. Also during the quarter we made our first three investments, valued at just over $140 million, for the [INAUDIBLE] recovery fund, acquiring an office building, and an apartment complex in Tokyo. Plus an office property in the central business district in Seoul, Korea. We also launched our first global securities mandate on behalf of the Dutch corporate pension fund during first quarter, investing $40 million in securities across the U.S., Europe, and Asia. That's a quick look at recent wins and current conditions in our major business segment. Now, I would like to open the call for your questions. Operator, would you please explain the process for questions.

Thank you very much. Yes, I will. At this time, we would like to begin today's question-and-answer session. If you would like to ask a question, please press the star key followed by the 1 on your telephone. Once again, that is star 1 to ask ask a question. We will take as many questions as time permits, and we will take them in the order that we receive them. We will pause a moment to assemble our roster. Our first question comes from Matthew Ostrower with Morgan Stanley.

Good morning. Just wanted to -- a couple questions, more on the detailed front here. Europe, the management services also, the revenues there also came down some. Was the explanation for that being as it was in the U.S., Lauralee?

Yes. Though, not nearly of significance.

You mean, in terms of magnitude.

Right.

Okay. And then in terms of your guidance and what they imply, first question on that is on the second quarter guidance, what -- what's the rationale for the wide guidance there versus, you know, the more narrow guidance for the rest of the year?

It's really a question of timing of revenues. We feel like we're in sort of a transition period. Our view still is we're going to have a slow couple of quarters, and then we'll come out of it and all indications continue to be that. The question is when is that turn exactly going to happen? And so just a wider guidance on revenue is really the real driver.

Are there a couple of specific transactions or something that is causing that? Or is it just in general you're talking about business activity as a whole?

I would say it's general caution.

Let's see. Oh, the other question I had on guidance was can you give us a little bit of sense -- maybe -- I don't know if you can quantify it. I know Peter, you gave a little guidance on this. But revenue growth rates for the various regions. What -- has there been any change in those revenue growth assumptions in terms of its driving the annual estimate? And can you sort of spell out a little bit, you know, is America going to be flat or up revenue wise, that kind of stuff?

Matt, I would say we're still pretty much in line with our plans for the year. We see no reason to view any part of the world differently at this point.

Okay. And can you quantify a little bit what kind of growth rates you're talking about for the various regions? Do you look at it that way?

No. Because I would say, we said we would be flat on revenues, and generally speaking, it's our view that they will all be relatively flat and if we miss up or down on each other, they're not enough that they won't offset.

Okay. Great. I think that's it for now. I might have some follow-up questions. Thank you.

Thank you. Moving on, we will hear from [INAUDIBLE] with Fairlon Capital.

Hi. Good morning. Just a few questions, the first one, could you sort of update us on the efforts you have been making in capital markets area, in particular, corporate finance, as well as providing capital market services to -- not to investors but to owner occupiers. I know that's an area of growth that the company is sort of focused on. Could you sort of update us on the -- on any progress there?

Yes. Ashish, it's Chris Peacock here. We have already very much established a strong investor service [INAUDIBLE] in Europe. And what we've signaled is that we are investing in growing a similar business, particularly in the States. And we have this here established, an investor services group there. We have brought new people into our business. And you're right, that we do see this as one of the growth drivers, frankly, across the world. As we get further into taking on the investment banks in their own backyards and capital markets, transactions, through corporate finance issues.

Could you -- it seems to me that two growth drivers in this division. One, obviously to sort of try to go after the providing investor services in the United States, where you don't have much market share compared to your market share in Europe. The other opportunity seems to be providing these services, such as sale and lease backs to owners of buildings, which might not be investors, but might be corporates who are looking to sort of free up capital from real estate. And all the [INAUDIBLE] in real estate. What is happening towards development of services for owners of building as separate from investors, which is likely to be more probably a more profitable market?

Well, it's -- we have been operating in that market all along. Our corporate solutions as against investor services, you know, is an all-around service to corporates and does include, obviously, sale and lease back. If you look particularly at the growth prospects of that in Europe, by comparison to America, there's a very much higher percentage of owner-occupied premises by Britain and Europe. And we see the prospect of those corporates who are releasing capital to put into their core businesses as it gets into the premises side as being another key growth area. So corporate finance as it's called in America is very much developing. But it's part and parts of our business at the moment.

You started to add, I guess, 10 more strategic alliances this year. How is that tracking?

It's tracking on pace, Ashish, in my comments earlier. We've added in the first quarter, ADP, IMG, and Westco, as well as the tenant rep component of Motorola. So we appear to be, I would say, at least on track, relative to that goal for the year.

Okay. Could you sort of highlight why, you know, facilities management has obviously been sort of a growth driver for all the real estate services firms as they increase outsourcing? What's happening -- have you seen a slacking of growth there this first quarter? Has the trend slowed down in any meaningful manner? Obviously it's kind of difficult to -- you don't break out revenues by that activity. I just wanted to get a sense of what's going on there.

Nothing in our experience has noted any flagging of the trend. And in fact, again, if you note comments, we've had facility management wins in the first quarter or expansions from Mead, Westvaco and Whirlpool. So from our standpoint, corporations continue to be focused on their core activities and outsourcing non-core activities to focus on both decreasing costs and increasing service quality across the portfolios. So our anecdotal evidence, as well as our backlog building evidence would at least suggest that nothing is flagging in that trend.

Okay. Last question, the -- you know, sort of one interesting aspect of facilities management, as well as the strategic alliances that you all have been driving is that the potential for receiving transaction-based businesses from those clients, as in when the economy turns around is going to be, you know, much better than if you were just competing on specific transactions. And that's a far more profitable business, I guess. Is that trend being confirmed? Are you seeing gaining larger market shares of transaction businesses with client services where you might be providing other services, other management services?

Ashish, sorry. To be honest with you, it's very rare that we'll take on a facility management role purely and simply in its own right without agreeing to take on further service provisions at the same time. For example, tenant representation or indeed, project and development services groups. So we do like obviously glance that we multi-sell service into, and a full single service too. So I would say that that benefit that you've rightly pointed out is something that we seek from the right at the beginning of the relationship.

Thank you.

Thank you. As a reminder, that is star 1 to ask a question. Joel Gomberg with William Blair & Co. has our next question.

Good morning. Or good afternoon there. Could you flush out a little bit more of your comment in the Americas about you're seeing some early signs of pickup in, you know, the transaction-type businesses and capital markets and tenant rep, and I know vacancy rates keep going up. And are you seeing more interest in buying and selling of properties? What exactly are you seeing, the early signs there, if you could flush it out a little more.

Joel, this is Peter. I think the signs we're seeing is essentially quarter on quarter, we are seeing higher activity and increased revenues in those two areas from Q1 of 2001. And as Lauralee said, those might be indicators of coming out early from the recession and the transaction business. So the indications and what we're seeing is higher than we had expected. And some of it may be due to timing, which is why Lauralee said they may be indicators, or they may not. But we are seeing in the first quarter, higher than expected transaction activities in those two key businesses in the Americas.

Uh-huh.

So I don't think it's, you know, necessarily overall activities that respond to the second part of your question. Overall activity level. I would say is kind of on a par in the Americas with what we expected. And Lauralee highlighted kind of demand side of the equation, both on the investors side and the tenant rep side, again being higher than our internal expectations for the first quarter and therefore potential harbingers of [INAUDIBLE] recover.

And then could you may be talk about resource allocation, given you've, you know, cut back? You know, staff, et cetera? Where you're allocating your resources, your people, cutbacks also in the customer service areas? And, you know just give me some sense on where you stand on expense reductions.

On the cutbacks, Joel, that took place last year, this has led to us, I think, being more efficient in the way we are servicing our clients. And we do not believe it has led to a reduction of the quality of those services. I think one of the challenges that businesses like ours face under these circumstances are when there is clearly a reduction in the level of transactions taking place, but nevertheless, a service that is very much required by clients throughout that period is the desire not to reduce one's on the ground capability, maintaining your best quality transactional people, even in those circumstances. And I think we've particularly seen that applying here in Europe in some of the figures that we were reporting here in the first quarter. We believe that the result of keeping our team strong here is that we will be winning the kind of quality business that we've referred to here this morning. And so that is, I think, supports the actions we've taken on that footing. Now, that was only, I think, part of your question. I'm just trying to think back as to the other part of the question, that I haven't really answered, Joel.

Well, do you feel like you're at run rate that you want to be at for now for the I overall expense levels?

For the cost levels, yes, we're comfortable with where we stand. Quite frankly, we anticipated the situation we're in with regard to revenue levels and we are pleased that we took, of course, the action that we did last year to put us into this position. And now we feel comfortable with it.

I would also add to Chris's comments in terms of what we talked about and planned when we anticipated what was coming down the economy. One of the growth areas of our business is in investment management, and given all the fun vehicles and activities we are rolling out around the world, we have planned to invest resources toward that business.

Uh-huh.

Joel, I would also add that -- just a reminder that our bonus levels will increase throughout the year from where they are in the first quarter.

Okay. Last question is for Lauralee. Can you help me out on the 9% senior note? You know, you're generating real good cash flow here. Is there ability to -- does -- can you turn that out? Or how is that structured and given your good cash flow and paying back debt levels? How do you anticipate? Is that going to be on books the full term or...

We have abilities to do something with that in 2004. We have looked at it, if the cash flows continue to remain very strong, if there's any secondary market activity that we can do. But quite honestly, we're told that anybody who has one of our bonds plans to keep it.

So there's a call provision in 2004?

Correct. With a premium.

Okay. Thank you very much.

Thank you.

Moving on, we will hear from Claire Campbell with [INAUDIBLE].

You mentioned you've seen improvements with your market share in Europe. Could you give us a bit more detail in terms of the various regions how your market share has been changing?

I think that's quite a difficult one to answer off the cuff, to be honest. I haven't got it in front of me, supporting evidence that at this moment, Claire. I don't want to make up figures for you. I'd rather come back to you and answer that off line when I've done a little bit of research for you, if I may.

NaN CLAIRE CAMPBELL: That's fine. You're continuing to see the same competitors [INAUDIBLE] situation?

Indeed, but we are -- our competitors, I think you know, range from, of course, the traditional other real estate service companies, but also the major consulting houses and indeed, the investment banks. You heard Peter talk about the Lang instruction that we successfully dealt with and we won that in competition with three investment banks.

Okay.

So we believe that this is the time that there is a so-called flight to quality. We do believe it's the time to build up market share and we do believe that we're achieving that.

Okay. And secondly, in terms of spending on these funds, are these -- is there any money towards XT and some of the later in the quarter?

Per investment, you mean?

Yes.

Yes, we had about $7 million invested in the quarter.

Okay. Did you have any other sort of Cap-X [INAUDIBLE] expenditure in the quarter?

Modest. We spent just a little under 3 million, which, the majority of that is in technology.

That's great. Thanks.

Would you like me to come back to you on that question, Claire?

That would be great. Or I can just send an e-mail to your investor relations if that would be easier.

Fine, do that. Thank you.

Thank you. Carolyn Brown with Goldman Sachs has our next question.

Good afternoon, or good morning. Just a quick question on your guidance for the full year. Could you translate that into EBITDA guidance at all and give us sense for what you might be expecting on the EBITDA line?

We've given guidance of about $150 million.

Right, and that's unchanged?

That's not changed.

Okay, fine. Thank you. And just coming back to the cost savings. Again, you mentioned reduced costs in the quarter of 33 million. I take it it's not all related to the cost savings program because it would require a higher run rate than you entire cost savings program. Could you sort of break that down into a little bit into how much of that 33 million was due just to the volume and how much of it would have been due to the cost savings program, per se?

Well, the $12 million differential and bonus comparing to last year would probably be a good place to start.

Okay. Fine Okay, great. Thank you.

Thank you. As a final reminder, that is star 1 to ask a question. And we do have a follow-up question from Ashish [INAUDIBLE] with Fairlon Capital.

Just what are the sort of cost improvement opportunities, as I understand, was the sort of duplication of overheads or client service overheads as you tried to roll out and integrate service models to service -- particularly global clients and large clients. And the idea was that as that model sort of, you know, sort of sunk in, you would be able to, you know, sort of remove any duplication of delivery -- of delivery infrastructure. What's going on there? And should we expect sort of general and administrative expenses over a period of time, to be rated as that plays out?

Ashish, I guess what I would say is we have very targeted cost takeouts with the restructure. Duplications, and I think what you're referencing is similar to what happened in Asia where we focused much more on business lines verses country. That there's an ability for us to make sure that dollars spent are in real value added, relative to the customers and clients. That's a deeper analysis that needs to be done very carefully. And I'd say we're not, at this point in time, giving any guidance of additional cost takeouts for that.

Okay. So the cost takeouts as for this program are the ones that you've talked about?

Correct.

Okay. Thank you.

Thank you. And it does appear that there are no further questions at this time. I would like to remind our audience that a replay of today's conference call is available starting today, May 2nd, 2002, at 11a.m., Central Time,

NaN [AUDIO ENDED] and ending on May 11th, at 11p.m., Central Time. If you would like to dial in and join, you may by calling 719-457-0820. And also 888-203-1112. And reference confirmation code 768907. And I would now like to turn the conference back over to Mr. Chris Peacock for any additional or closing remarks.

Thank you, operator. And as there are no more questions, we will draw this call to a close. Thank you, everyone, for participating today. We look forward to talking to you again after the second quarter. Thank you.

And that does conclude today's conference call. Thank you very much for your participation and have a great day.