Jones Lang LaSalle Inc (JLL) 2003 Q4 法說會逐字稿

Welcome to the Jones Lang LaSalle Inc. fourth-quarter 2003 earnings release conference call. Today's call is being recorded. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements. Actual results and performances may differ from those included in the forward-looking statements. As a result, the factors discussed in the Company's are filed in our report on Form 10-K for the year ended December 31, 2002 and are in our other reports filed with the SEC.

The Company disclaims any of undertaking to update or revise any forward-looking statements. A transcript of this call will be posted and available on the Company's Website within two days of the call.

At this time I would like to turn the conference ever to Mr. Stuart Scott, Chairman for opening remarks.

Thank you for joining us for this review of our fourth-quarter and full year 2003 financial results. With me on the call today is Lauralee Martin, our CFO. Let me begin by briefly commenting on my role as interim CEO and I will then go on to summarize the headlines for the fourth-quarter.

Many of you will be aware of Chris Peacock's decision at the beginning of January to stand down as our Global CEO in order to commit more time to his family. I and the rest of Chris's colleagues in a firm will miss his talent and respected leadership. I have stepped back into the CEO roll on a full-time basis while our Board conducts a thorough assessment of internal and external candidates for the CEO roll. We expect this process to take about six months.

In the last few weeks I have been pleased at how focused and determined our people have remained in their pursuit of our strategic priorities and objectives across the world. This reflects the strength of our leadership throughout our firm. Early activities suggest a successful 2004 and I am certain that the business will enjoy growth throughout this year as well.

Let me to turn briefly to the headlines for our fourth-quarter and full year. We achieved earnings in excess of market expectations for the quarter in the full year exceeding our 2002 performance in the face of continuing mixed trends across the world. Our U.S. and Asia-Pacific businesses continued to show strong growth in business volume building well on improving economic conditions. Though our European business experienced a very challenging year, particularly in Continental Europe, we saw encouraging performance in the core English business and healthy growth in those markets where we have been investing to build our presence.

LaSalle Investment Management achieved revenue growth in the quarter, helped by increased equity earnings. Our hotels business completed a record year contributing strong results across the world and securing its position as the global leader in this sector. After Lauralee talks about our results I will comment briefly on market conditions and the progress we made in pursuing our strategic goals in 2003. Following that we will be pleased to take your questions.

Let me now hand the call over to Lauralee to talk in detail about our financial performance.

Good morning to everyone on the call. This morning I will star first by covering the results of our individual operating segments and then following that I will discuss the consolidated results of the firm for the fourth-quarter and the full year 2003.

In the Americas we manage our operations as two units; investor services which serves the investor market, and corporate solutions which serves a corporate and occupier market. The leasing and management unit of investor services saw over a 20 percent increase in leasing transaction revenues year-over-year. Leasing activities however, which means the number of transaction completed, was up only a modest one percent and the size of transactions was also up only one present. Revenue increase was instead driven by a change in mix as we experienced almost a 60 percent increase in the more profitable new leases ,while renewals and expansions rose only 6 percent.

Although it is early to draw conclusions on the outlook for 2004 this activity mix feels like an early indicator of an improving tenant confidence. Offsetting this revenue increase, retail leasing and management revenues declined as we continued to focus on clients and transactions that made our target profit hurdles. The benefit of this focus is that although revenues in retail were down about 10 percent operating income increased 6 percent.

In the New York operations which we expanded significantly at the end of 2002, the integration is complete and the enhanced team is being recognized by the marketplace as a leader not just a boutique player. This can be measured by a number of high-profile market wins.

Year-over-year reflective of the decline in the overall marketplace, New York revenues were down despite wide our increased market share. We are confident New York is well-positioned to be a profit growth contributor in 2004.

Corporate solutions, the larger of the Americas operations, at close to 60 percent of their revenues had a strong year. All of it's business lines, tenant representations, project development and facilities management contributed revenue grade. The number of strategic alliances remain roughly in line with 2002 however, the activity line level within many of these alliances was stronger, the results of the focus on the importance of account in relationship management.

The Americas in total reported a 16 percent year-over-year increase in revenues in the fourth-quarter and an eight percent increase for the year. Operating income was up 5.8 million reflecting the continued focus on cost control and profitability trends started in 2002. The Americas operating income margin increased from 11 percent to 12 percent.

Europe continued to experience the challenges of a declining economic environment although the results of our European businesses have started to demonstrate a mix of positive offsetting negatives. I will be discussing all results at comparable currently levels to provide the best flavor and of activity trends. Consequently numbers will differ from those reported in the U.S. dollar results.

Leasing remains the biggest impact factor on European operating results. Year-over-year leasing revenues declined in all of Europe by 15 percent. At this stage in the economic cycle we are protecting our market position meaning there is limited capability to flex cost structures because leasing is a high incremental margin activity for us in stable market periods. At this point most of the revenue declines fall straight to profit margins.

The largest leasing revenue declines were in England, France, the Netherlands and Benelux. Germany, which has experienced an economic challenge now for two years actually had close to flat year-over-year leasing revenues, which may indicate they have reached a floor activity level for that market.

In 2003 capital markets in Europe surpassed leasing and revenue generation. Real estate has remained if not increased as a favorite investment choice, and as a result property market values and activity levels have remained solid. So despite economic conditions, capital markets revenues declined year-over-year only two percent. Although we experienced declined in the more mature markets in England and France, these were offset by strong contributions from the hotel business and also from our growth markets of Spain, Sweden and Central Europe.

Europe is a segment where cost reductions have been more challenging to realize. However we were pleased with the progress in 2003. Compensation and benefits increased only two percent as the restructuring taken at the end of 2002 offset the statutory salary review requirements as well as increased social taxes in several countries.

Operating and administrative costs were reduced by 7 million in constant currency. Overall in Europe for the year revenues decreased 11 percent in U.S. dollars but declined three percent in local currencies. Operating income for the fourth-quarter was down only 1.4 million from the prior year while the total year was down over 26 percent to $13 million.

Asia-Pacific in a fourth-quarter had an operating income of 2.6 million as compared to 1.4 million in the prior year. But this positive was not sufficient to bring the region out of its loss position on an annual basis. The recent displays and mix of revenue offset by high growth. As with Europe I will be discussing activities in equivalent currencies which will differ from the reported U.S. dollar results, but are more reflective of underlying trends.

Our core operations in Australia, Hong Kong and Singapore saw revenues up 5.1 million in the fourth-quarter, but for they year they were up only 4.7 million. This means that we had year-over-year declines until the fourth quarter. In Hong Kong in particular we saw the market strongly snap back from the impact of SARS, as well as reap the benefits of its role in China's strong growth being up 25 percent year-over-year in the fourth quarter. Revenue increases in the core markets were not sufficient to offset cost increases.

In the growth markets of India, China, Japan and Korea revenue increases in the fourth-quarter of 3 million brought the year-to-date trend to 8 million. We have invested strongly in these growth markets as we see significant opportunity, particularly in India to serve the corporate offshoring needs and Japan where we have captured market share. We believe these investments while impacting profit margins negatively short-term will pay back significantly in the future.

The net operating income of these growth markets has not been sufficient to offset the deterioration in the core markets. Although we have said it before, we believe the Asia-Pacific core markets have stabilized and that our investment in the growth markets is positioned to be leveraged. We have a positive outlook for this region in 2004.

LaSalle Investment Management continued to execute against its financial strategy of increasing the annuity revenue category of advisory fees which were up 12 percent for the year. Offsetting the impairment charges to equity earnings taken in the third quarter, the group reported strong equity earnings from co-investments of 8.2 million for the quarter bringing the year-to-date to 8 million. Insensitive fees were down from the prior year for both the quarter and the full year principally from timing of win and incentive calculations are measured. 2002 included a large incentive fee which will not be measured again until 2006.

Expenses for the group are relatively flat for the quarter but up 7 percent for they year as the platform for in investment growth was expanded globally. Operating income was 8.4 million as compared to the prior year of 20 million. The firm overall reported GAAP net income of 36.1 million or 1.12 per share for 2003. This compares to the prior year of 27.1 million or 85 cents per share. In our guidance last year that we would deliver a minimum GAAP, I'm sorry, our guidance last quarter that we would deliver a minimum GAAP earnings of a dollar per share. Our guidance included the onetime charge for property management accounting write-off taken in the second-quarter which negatively impacted earnings by 11 cents.

In the fourth-quarter of 2003, we had three large non-recurring charges. The first was a $3.7 million charge to handle a lease commitment. This lease exposure was disclosed at the end of last year but accounting rules prevented us taking the charge with our 2002 fourth-quarter restructuring. We were able to put this behind us during the fourth-quarter. We also had two non-recurring benefits which offset this charge, both of which resulted from the reversal of previously established reserves; 2.5 million associated with merger-related compensation, and 3 million from a reserve tax benefit from an e-commerce investment write-down. Excluding all non-recurring items for the entire year, our adjusted net income would have been $1.09 per share.

Revenues for they year totaled 950 million an increase of 10 percent in U.S. dollars and three percent in local currencies. Operating expenses excluding non-recurring and restructuring charges were 883 million, up 11 percent in U.S. dollars but only four percent in local currencies.

EBITDA for the year was a 99.1 million which compares to the prior year of 90.7 million. With continued tight controls around capital expenditures, aggressive management of receivables, and strong planning of our global tax position, we continue to generate strong cash flows. As a result, we've paid off our revolving credit facility and ended the year with cash balance the of over $63 million.

Over the past two years we have paid down almost 125 million of debt. We are well positioned to call the 9 percent Eurobonds in June of this year. It is our intent to refinance this debt with our revolving credit facility which is priced at LIBOR for one and seven-eighths (ph) . The call of the bond carries a 4.5 point premium so the payback on this decision is about one year.

Interest expense at 17.9 million was modestly higher than the prior year due to the strength in Euro. This currency strength also increased the book value of the Eurobond by 37.4 million. The effective tax rate on recurring operations continued to improve. Our effective tax rate for 2003 was 28 percent as compared to 34 percent in 2002 and 42 percent in 2001. The tax expense of 8.3 million also benefited from the previously discussed non-recurring credit of 3 million.

During the quarter we repurchased 400,000 shares of our stock under our approved share repurchase program. This repurchase program is used to offset dilution from employee compensation plans.

This concludes my discussion of our 2003 results. Our results continue to have a seasonal character with the first quarter typically a loss and the majority of profits occurring in a second half of the year. As a result consistent with last year, we are expecting a first-quarter loss. Also consistent with last year, we will not be giving full year guidance for 2004. However, we are comfortable with the range of the 2004 estimates of the analysts who follow the firm which reflect an expectation of improving performance and profitability. Their estimates do not include the costs of the Eurobond refinancing which we anticipate to be approximately 25 cents per share.

Let me now turn the call back over to Stuart.

Before we take your questions let me say a view words about market conditions around a world and about a number of highlights in our business during the quarter that demonstrate the success of our global strategy. The U.S. economy continues to show encouraging strength with improving GDP through the second half of 2003, expected to continue into 2004. This seems highly likely to stimulate the job growth needed to drive occupier activity in a real estate markets while low interest rates continue to support high investment levels.

This U.S. economic strength is a key factor and the optimism visible in Asia-Pacific, notably in Hong Kong. The Australian economy continues to perform while China in India's well-documented growth provide significant opportunities for real estate. In Europe, the overall outlook for growth in 2004 is weak, but positive. With France, Germany and the Netherlands continuing to dilute stronger conditions in the UK, Spain and Sweden. Despite rising leasing volumes, average vacancy rates were still increasing in Q4, 2003 indicating a prolonged lag in rental recovery.

More positively growing cross-border investment insured another strong year for Europe's capital markets with institutions increasing their activity in the second half. In this generally improving market place, I am delighted to note the success of our businesses around a world are continuing to enjoy in securing major businesses wins and transactions. I would like to comment briefly on a small number of these to give an insight into our core strategies for growth.

From the Americas, the appointment of our strategic consulting business has global real estate adviser to Shell Oil, again demonstrate our position in the marketplace as the leading provider of broad real estate solutions for major international clients.

In Europe, we grew market share in our capital markets business in 2003, completing transactions involving almost $15 billion worth of assets and consistently leveraging our global platform with over 55 percent of these transactions being cross-border. Notably in the fourth-quarter we saw further growth in Europe's emerging investment markets. In our first Russian institutional real estate investment transaction, we advise Credit Suisse First Boston on a prime office disposal in Central Moscow to an International Investment fund with GE Pensions Trust as a major shareholder.

In Sweden we made two office acquisitions totaling $200 million for investment fund managers owned by German's Commerce Bank. In Budapest we sold for U.S. investor AIT Lincoln a business part portfolio for $170 million, which was the largest transaction in Central and Eastern Europe in 2003.

In Asia-Pacific, our global solutions business continued to drive growth by taking cross-border relationships into key new markets. In the fourth-quarter we signed a memorandum of understanding with Cisco Systems Inc. for a facility management services across 10 countries and were selected by Deutsche Bank to provide corporate residential services for 500 employees in Tokyo.

LaSalle Investment Management achieved a further success in its strategy to build presence in Asia-Pacific with a new separate account mandate committing over 100 million in equity to the region, acting for a large Middle Eastern investor. This includes the first investor commitment to our Japanese logistics fund.

In another important growth area, LaSalle Investment Management has made its first foray into Mexico winning the mandate for acquisition of a $300 million industrial portfolio on behalf of a major pension fund. We expect to close this transaction during the second quarter of 2004. This acquisition will be the result of a great joint effort by our investment and Mexican owner and occupier services people working together to underwrite the transaction.

This small sample of our business successes in the fourth-quarter gives clear evidence that we're position for continued growth in earnings and market share through 2004. As Lauralee has described, we are comfortable with the 2004 estimates of the analysts who follow the firm and are confident that this year will bring further success.

At this point we would like to open the call for your questions. Operator, will you please explain the process?

(OPERATOR INSTRUCTIONS) William Marks and JMP Securities.

I have a few questions here. With your really attractive balance sheet now, I understand some of a money I guess will be used to repay the debt or for the additional $8 million that you will need, who much of the cash -- is it held to be used for bonus payments? If you look at last year, the fourth-quarter transition to one-quarter, the debt balance goes up traditionally, will that not happen this year because of your cash balance?

Because of the significant size of the cash balance if we do call on the revolver at this point, it would be a modest amount.

What about in terms of bonus payments, as I mentioned it looks like typically fourth-quarter that actually increases in the first-quarter because of bonuses?

That is what I was saying, because of the cash balances the ended the year with a 63 million in cash balances and that continues to improve that there will be only modest (multiple speakers) .

I understand. On the tax rate, it looks like, I mean you obviously had a very low tax rate in the fourth quarter, did you expect to have this low of a tax rate?

The answer is that we do tax winning throughout the year but until we are able to realize the benefits of those actions, we cannot adjust the tax rates. We progressed it throughout the year as you are aware and we are able to finalize those plans at the end of a year. We are comfortable that we have a sustainable tax position at the 28 percent and it is still our goal and objective that it could be improved from there.

We should probably use that for '04 about going forward about 28 percent?

That is correct.

Should it be roughly the same seasonal numbers as this year or would you just use it flat 28 percent throughout the year?

I would use the flat 28 percent.

Okay. On the -- this may be difficult on the call, you gave $1.09 adjusted number which wouldn't include -- it looks like it wouldn't include the onetime charges and benefits throughout the year, is that correct?

That is correct.

Do you have those quarters numbers by quarter?

We do have a schedule of the third quarter -- I'm sorry the fourth-quarter and total year and we do provide those numbers each quarter so the answer is yes, we can provide a quarterly number.

I have all of the press releases for the quarter, but would it be the number for example in the fourth-quarter the $1.20 versus the $1.14 that you show in your press release or is that not --?

I understand, the eighth cents --.

If you look at the schedule we provided for both numbers, the three months for the fourth-quarter and for the total year and we do provide that as a schedule every quarter throughout the year.

On guidance for the year, I realize you are giving very limited guidance or I am not sure if you want to even call it guidance -- but how should we looked at the expense lines? We have all come up with our own revenue growth numbers but if you take a look at '03 expenses, the comp and benefits buying grew at a greater rate than the revenues overall. Is that something that -- as did the operating administrative another expenses, how should we look at that going forward?

If you go to the statements what you will find is that the markets such as Europe or Asia-Pacific, Europe because of economic and Asia-Pacific because of investing, those are the drivers of that difference in rate growth between revenue and expenses. Our objective is that Asia-Pacific will now be improving revenues at a greater paid than expenses. Europe will be economically dependent because we think we are limited as to how much more expenses we can take out just on a go forward basis even though we are focused on it, so that will be a question of very modest expense growth and the revenues will be more market-driven.

Okay, but I guess I am a little confused on how I should just think about comp and benefits because the intuitive way of doing it would be as your employees increased the revenues of the company that their bonuses would also increase. If that is the case, would they increase at a slower rate than the total revenues?

If the look at the Americas I think it is a good example of what happens with the focus on expense control and a market improvement. So we wouldn't hesitate that expenses will grow very moderately and that we will be seeing revenue increases at different paces around the world but it is our objective to grow that at a more rapid rate than the expenses.

That is helpful. Thank you. Thanks, Lauralee.

David Gold with Sidoti & Company.

Stuart, would you be able to add a little bit of color just talk about the U.S. maybe you talked a little bit about the 60 percent increase in the new renewals, what do we think is driving that? I guess some of the studies say that a lot of the sublet space at least in the last couple of quarters have come off the market. Is that a factor in that or is it just sort of the general economy, or is that a factor of how you look at it I guess?

The general economy has certainly impacted that modest sign of improvement but historically real estate office statistics have lagged recoveries in the economy and that is going to be the case here as well. We see early signs of stabilization and improvement in what was a fairly soft market for a while, but we expect as the recovery continues we expect a vigorous reaction in office markets in the major cities across the U.S. We see early signs of it but we expect it to pick up sharply during this year.

When you look at that 60 percent number, would sublet space be considered new leasing activity with the way you measure it?

Sure.

Switching to Asia-Pacific for a second.

One thing more on your question that might help a little bit. In the Americas, the profile of our clients tends to be in the financial services sector and the technology sector as we obviously have a broad base of clients, but we have very strong positions in both of the sectors and the financial sector has come back probably first in the marketplace; with technologies starting to see more signs of confidence. I think that is some early indicators but it may not be reflective of the total broad market of all leasing space but definitely a profile of our clients.

Definitely helpful. On Asia-Pacific, for a second, do you think we have made the bulk of the investments we need to make there or do you think there is still some additional investment necessary?

We have lots of client capital earmarked for Asia-Pacific that we need to invest. So there will be significant more investing in Asia-Pacific this year and next.

I meant more specifically by way of your business, and not on the investment management side.

I see.

We have done a pretty good job getting our platforms solid in Asia and India and some of the offshoring markets. There will be continued investments but not at a better profit margin going forward because base investments are now being leveraged so that you see much more of a growth off of that in terms of profit.

That is helpful. Thanks a lot.

Matthew Ostrower for Morgan Stanley.

First, on your effective tax rate, did that include the one-time benefit from the e-commerce.

No, that is nonrecurring so if you actually run the calculation including the credit it would be an absolute percentage lower than that.

And I know you are trying to limited to your 2004 guidance but could you just give us a little color if possible about -- just thinking about my own numbers what we know now would it be safe to assume you expect growth to driven most strongly from the Americas still and then maybe with something more of a rebound in Asia following that?

Yes. That would be accurate.

You gave a little bit of commentary, but just thinking about investment management in 2004, are there any large incentive fees we should be thinking about coming in there or any other big moving parts you can comment on?

We always have incentive fees. The particular one that we had in 2002 will not be remeasured until 2006. I would guess that you're going to continue to see nice equity performance out of that group, as well as continued growth in their asset management fee.

Great. Can you update us on your thoughts for the balance sheet and CAPEX in 2004? You have been clear about bringing down the Eurobond and putting it on your line of credit. Is your plan still to just pay down a line of credit incrementally or will you be think about another bond issuance? Given that you continue to be pretty cash flow positive, if you are not going to do a debt paydown, are you planning on any other major expenditures in '04?

We had CAPEX of just a little over 20 million in 2003 and we would expect close to that number or modest amount over that but nothing unusual. We did have in 2003 actually cash returned to the firm from our coinvestment as we exited a number of transactions which you see in the equity earnings line. We expect because of the activity levels and the mandates that LaSalle Investment Management has that we will be using cash for coinvestments and we are very pleased that that is going to happen. For example the transaction that Stuart mentioned about their recent mandate in Mexico. So we would be using cash for coinvestments, and that could be in a range of probably net 30 to 40 million.

We would probably -- we still have some room left in our share repurchase but that would be a modest amount unless we choose to have that increased with Board approval. But other than that, there is not a significant need for cash so in regards to our decision on the Eurobonds, we would be putting it into our line of credit, protecting ourselves if need be against rate movements with hedging but leaving ourselves flexibility to pay it off if in fact we pay it down if in fact we have excess cash.

Would that ramp up in coinvestments, does that speak to a potential also significant ramp up in revenues or profitability from investment management as well?

It does but there tends to be more of a lag in any immediate year, but it definitely tells you the positive potential for that business over the next two to three years.

I know it is a somewhat sensitive topic, but Stuart, could you just comment on I guess the CEO search process, your willingness to stay on and how the process is going so far?

The process is just under way. We have selected a search firm and have begun the search and so it is off to a good start and it seems to me that if we do the kind of thorough job that we want to do of evaluating insiders and outsiders for this post, it will take approximately six months. And -- but I hope it won't take more than that.

I am expecting to be in earnest full time until the new CEO is in place and then revert back to my Chairman's role at that point. But as I said, we are just under way with the search. We've got the search team in place and we are off to a good early start.

Thank you very much.

Joel Gomberg of William Blair.

Lauralee,. your comments on the investment management business -- my impression was that they were having trouble finding avenues to deploy capital and investments and so maybe you could comment on that given some of the higher prices out there and then any new funds in the offering that you could see for that group?

I think there a couple of ways to answer that. Number one, as you know their strategic differentiation is their research and as a result what they're looking for investors is to find opportunities that are really ahead of the game and unique and we continue to do that. And as a result, with the number of things going on and not all of them can yet be announced, the group is pretty comfortable that they are now going to be able to get their capital out more quickly.

The other thing and it is as dynamic is the marketplace, is that it has been competitive and particularly around portfolio opportunities, the ability to get a transaction to stay still long enough has always been a challenge. The firm's position with its cash and its solid balance sheet gives us more flexibility to make our coinvestment capital work swiftly and at an advantage pace to get ahead of the game on others. We have done that recently and what we found is that it gives us a competitive advantage in a competitive marketplace to win transactions.

At the moment we are feeling that we have done the right things both with strategic research as well as the strength of the balance sheet to put ahead of that game and 2004 is off to a very nice start.

If I can just add -- the market is clearing a bit in the U.S. and so because GAAP rates have come down and yet there is lots of money interested in investing in real estate. So it is a bit difficult to find good investments in the U.S. but that is certainly not true in Asia and certainly not true -- we are just guarding a London office fund, we think there are excellent opportunities there to invest lots of capital. And while we have got to be much more selective in the U.S. at this time. Our guess is that the market is going to clear a bit and there will be broader opportunities by the end of this year in the U.S.

Could you talk about the progress of the P&G deal? Didn't that start at the beginning of this year? How that is coming along and then the pipeline for more corporate outsourcing opportunities?

Our most robust business during 2003 was our corporate solutions business of which that is the most recent and famous example. We are pursuing several other mandates of that kind. We always are and we try to add four or five each year if we can. And that is really one of the growth drivers of our company globally and it is one of the great aspects of our global platform. We wouldn't win business like P&G if we didn't have a global platform.

Someone asked earlier about our investment in Asia and we are investing in Asia for two reasons to make money in Asia but also because we have a competitive advantage by having the ability to deliver consistent service around the world and we wouldn't win the P&G's of this world without that. There is no major outsourcing really that occurs within multinational clients where we are not asked to compete. And so I think our challenge in that business if you have to think of the challenges, making sure that we build our forces and keep our quality and don't grow faster than we should, because we have a unique platform and it is very, very appealing in the outsourcing marketplace.

Thanks.

(OPERATOR INSTRUCTIONS) Rob Maton of Schneider Capital.

Do you know what the total assets under management were for the investment management area? What the change was for the quarter and for the year if you have it?

We ended the year at I think it was 21.5 -- hold on just a second. 21 billion approximately. I would say that is pretty flat and that is because we really sold a lot of assets for our clients because the markets and the prices were good. It is our job not to manage how big that number gets but the returns off of it and that really was our focus. It is relatively flat and as we go into 2004 that is probably a number we will see growth because we have realized a large potential on behalf of our clients that are now back into the investing mode.

Okay. My second question was whether you are seeing any changes in the leasing environment in the way of lease terms whether those are lengthening at all -- I guess both in the Americas and in Europe or whether leases are still pretty short?

They vary greatly. We have a global business and leases in Japan are two years and leases in London tend to, most of them are no longer 25 year upward leases they've come down way from there. But they are still relatively long by our standards, five or ten years. In the U.S. I think that the leasing active we see -- I don't think we've have seen any change in the average length of lease terms being sought. American leases for the most part are kind of three and five-year year for smaller leases and you don't see as many ten-year leases as even on the larger ones as you did five or ten years ago, But there hasn't been much change in the last few years I would say.

Okay, thanks a lot.

Will Marx.

Just a quick question on if you look at the range of EPS estimates for '04, and you applied the 28 percent tax rate it looks like from the posted EBITDA that you had for the year of '03 you are looking at something like 11 to 13 percent growth in '04 and maybe a little better if you don't include the non-recurring charges. Does that seem accurate to you?

Again we're not giving guidance for the total year. What we are saying is that with yours as well as the other analysts who have their estimates out there, we are quite content if you leave them as the are, because we think that is a reflective range of at least how we can see the world for the short-term.

On an EPS basis?

Correct.

All right, thank you.

We have reached the allotted time for questions and answers. I would now like to turn the conference back over for closing remarks.

Since there are no more questions, we will draw this call to a close. Thanks to everyone for participating and I look forward to talking to you again after the first quarter.

This call will be available for replay beginning at noon Eastern time today through midnight on February 19, 2004. The conference ID number for the replay is 503-6406. Once again the conference ID number for the replay is 503-6406. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. This concludes today's conference call. You may now disconnect.