Jones Lang LaSalle Inc (JLL) 2005 Q4 法說會逐字稿

Good day and welcome to the fourth quarter 2005 earnings release conference call for Jones Lang LaSalle Incorporated. 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 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, 2004 and in our other reports filed with the SEC.

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

At this time, I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir.

Thank you, Operator.

Good morning, ladies and gentlemen, and thank you for joining us for this review of our fourth quarter and full year 2005 financial results.

With me on today’s call is Lauralee Martin, our Chief Operating and Financial Officer, and Lauralee will discuss our financial performance in detail in just a moment.

But, first, let me review some of the headlines of our 2005 financial performance. Our revenues increased by 19% for the year to $1.39 billion with growth generated by all of our business segments.

Operating income increased by 47% to $132 million, driven primarily by LaSalle Investment Management, our money management business, and by our Asia Pacific region.

We reported net income of $104 million, a 61% increase over 2004, and 2005 EPS were $3.12, up from $1.96 per share a year previously.

I would also like to note that in January Jones Lang LaSalle was named to the Forbes 400 Platinum list. The Platinum 400 recognizes strong financial performance and excellence in corporate governance. And we are the only real estate money management and services firm to be named to the list.

Now, later in today’s call I’ll comment on market conditions around the world and summarize the progress we made last year on each of our five major strategic priorities.

But, first, let me hand the call over to Lauralee Martin to describe our financial results in more detail.

Thank you, Colin, and good morning to everyone on the call.

As Colin has just highlighted, we had a very successful year with record performance for the Firm. All reporting segments had double-digit growth on the top line for both the fourth quarter and the full year, and with the exception of the Americas had YOY improvement in operating income, as well. I will now review the specific results for our four business segments.

In the Americas we reported revenues of 164 million for the fourth quarter, an increase of 15% over 2004. For the full year revenues were 435 million, an increase of 17%. The most significant growth was in management services revenues where revenues for the fourth quarter increased to 73 million, an increase of 27% and at $224 million for the full year, up 23%.

Contributing to this performance was project and development services, with revenues up 18 and 25%, respectively, for the quarter and year, as well as from performance fees from several large corporate accounts. Implementation service revenues were 88 million for the fourth quarter, and 201 million for the full year, an increase of 6% and 11%, respectively.

Within this revenue category capital markets, benefiting from a robust market as well as from the investments we’ve made in people this year, increased revenues for the total year more than 65%.

The Americas Hotels Group has strong results for both the fourth quarter and the full year compared to the prior year, benefiting from its leadership position in a strong market, as well as from the Select Service acquisition completed earlier in the year.

Strong performance also was delivered by our Public Institutions Group with revenues up over 85 and 50% for the quarter and YTD. Partially offsetting these increases was our Tenant Representation Group where we continued to experience lower activity from existing clients. We have a very strong alliance practice where clients sign us as an exclusive or preferred provider for all of their transaction activities. The Tenant Representation Group signed nine new alliances during the year, a significant number of new wins, which will add to revenues in 2006.

The existing alliance activities, however, were impacted by two market factors. One of which was increased mergers and acquisitions. In most cases we have been the beneficiary, being the service providers to the acquiring firm which will, again, play out over the longer term. However, in the short term merger integration slowed or even halted planned activities as the management teams work with us to assess their combined real estate portfolio requirements.

A second factor is the continuing trend of corporates to seek to lower their total real estate costs. A means to achieving lower costs can be accomplished through alternative workplace systems, where we have a leading market consulting practice. The client benefit of this work is the need, however, for less space for employees.

Another cost reduction means is to shift real estate out of the U.S. to lower costs of the world. Supporting these efforts the Corporate Solutions Group successfully expanded nine of their top 60 clients into multi-regional accounts. These service expanses have and will produce revenues and profits in the other geographic segments of the Firm.

Anticipating these corporate trends in the U.S. to continue the Americas completed an organizational change in the fourth quarter focused on aggressive account management to maximize the clients’ total product and geographic service needs while also creating more line of site teams in local markets to better capture the one-off local market business. The organization change replicates much of the proven success of our New York team and is now being implemented in our other major market locations.

And, lastly, as announced in early January, the Americas closed on its merger with Spaulding & Slye. Colin will be discussing this in more detail shortly.

In Europe revenue and local currencies grew by 28% for the fourth quarter and 13% for the full year. In U.S. dollars revenue in the fourth quarter and full year increased by 17% and 11%, respectively. The growth was driven by strong performance in capital markets, agency leasing, and advisory primarily in Germany, the United Kingdom, and Russia. Germany had significant revenue growth in U.S. dollars compared to 2004, up 75% for the quarter and up over 50% for the year, which resulted from the improving investment market that is increasingly attracting international capital.

The growth in our English business, our largest operation in Europe, was driven by our capital markets business. And our Pan European Capital Markets Team also had a very strong year with approximately 75% of transactions being cross-border. We have increased our investment in people who are dedicating to capturing global capital markets flows, and we believe we are competitively positioned with our strong global platform and client base to be the leader in this space.

In 2005 the United Kingdom Corporate Finance Group focused on developing structured financing activities and private investor products which led to significant growth over 2004.

In the developing European markets, Eastern Europe and Russia, revenues increased almost 50% for the full year as a result of increased capital markets activities and strategic consulting assignments. Offsetting some of the increase in revenues for Europe was the French business which had modest declines from the prior year as several large transactions were closed in 2004.

With the significant markets of Continental Europe starting to recover, Europe’s operating income increased 31% or $5.7 million. The operating income margin increased from 4.1% to 4.9%, although still significantly below our target for this business. We expect to continue this improvement in 2006.

Our Asia Pacific region had a very strong year in terms of both revenue and operating income. Revenue for the quarter was up 26% in U.S. dollars and up 29% in local currency. Revenue for the full year was up 23% in U.S. dollars and up 21% in local currencies.

Revenue from our growth markets of China and Japan increased over 60% in U.S. dollars for the full year, while our core markets of Hong Kong, Singapore, and Australia increased 15% across all business lines.

The Hotels business in Asia Pacific continued its growth trend from earlier in the year with revenues up almost 50% in U.S. dollars for the full year, principally from our leadership position in Australia.

Asia Pacific operating income more than doubled from 8.8 million to 21.3 million, and the operating income margin increased from 4% to 7.8%, getting closer to our target for the region.

LaSalle Investment Management, our global money management business, had extraordinary performance for both the fourth quarter and full year. Revenues increased 34% and 35% for the quarter and full year, respectively, and incentive fees contributed a significant amount to this growth, the result of strong performance for our clients’ investments, as well as the continued growth of our annuity based business.

Operating income reached 50.2 million, up 58% for the year.

Incentive fees for the fourth quarter of 2005 were 26 million, an increase of $11 million or almost 70% from the prior year. For the full year incentive fees were 43 million, an increase of 23 million or over 100% from 2004.

As we’ve previously advised incentive fees vary from period to period due to both the performance of the underlying fund investments and the contractual timing of the measurement period with different clients. To demonstrate this lumpiness, we earned incentive fees of over $2 million from eight different clients in 2005, but from only four clients in 2004. Several of these fees were for client account measurement periods of three and four years, and some related to the liquidation activities of two of our private equity funds.

A financial objective of the business is to build a portfolio that can produce a more consistent flow and growth in incentive fee revenues by managing both timing of client measurement periods and maturity of private equity funds.

The business continued its focus on growth in advisory fees which provided an annuity revenue stream resulting in a growth of 29% for the fourth quarter and 26% for the full year. Despite the growth in incentive fees advisory fees still accounted for almost two-thirds of the total revenue. Assets under management increased to approximately 30 billion as a result of 6 billion being invested in 2005 on behalf of clients.

For the total Firm consolidated operating expenses increased from last year primarily due to the strategic investments we have made to strengthen our positions in key markets and expand our global service lines, as well as from increased incentive compensation costs related to the Firm’s strong performance.

Interest expense was significantly less than 2004 as our level of borrowings was lower and at more favorable rates. In addition, 2004 included interest expense of almost $12 million for the redemption of our 9% senior notes.

In summary, in the Americas we have made organization changes, as well as completed a significant acquisition, both of which have the objective to capture more revenue growth and to return the business margins to our target level. Both Europe and Asia Pacific operations continue to track favorably with strong revenue growth and margin improvement, moving towards our target margin levels.

LaSalle Investment Management’s assets under management growth will continue to increase the base business performance and the capital [rate] achieved in 2005 which will drive further investment in 2006 and beyond promises this growth will continue.

The portfolio management approach to incentive fees and equity gains is expected to continue the successful business performance into 2006.

In summary, we are proud of our year but are now focused on continuing our growth and performance going forward. This concludes my discussion of the fourth quarter and the full year 2005 results. Let me turn the call back to Colin.

Thank you, Lauralee.

First, let me offer a few comments about market conditions around the world. The global economic outlook remains encouraging with healthy GDP growth predicted in the U.S. and strong growth in key Asian economies in 2006. Growth is also expected to improve in Europe following a sluggish 2005.

Real estate remains an attractive investment class globally. Capital flows are very strong with real estate transaction volumes exceeding $280 billion in the U.S., $165 billion in Europe in 2005. This record setting pace is expected to continue this year as interest in real estate remains high among a diverse range of investors and as borrowing rates remain low from a historical perspective.

These three markets are generally strengthening in the U.S. office sector. Vacancy rates are moving downward. And the national vacancy rate is now at around 13.8%. European vacancy rates which remain close to historic highs in a number of cities should start to come down as supply continues to fall and economic performance improves.

The thriving Asian economies will support demand for prime office space in 2006, and that demand coupled with a dearth of new quality supply in the region should produce continued low levels of vacancy rates and help support robust rents. Rental rates are also growing again in many of the largest U.S. and European markets.

These positive market conditions across all three regions in which our business operates contributed to the strong results, which Lauralee described. To put those results into context, I would like to discuss the progress we’ve made as we continue to fuel growth across our operations by focusing on five key strategic priorities.

Firstly, strengthening our local and regional service operations, expanding our three global service delivery lines which are corporate solutions, capital markets, and LaSalle Investment Management. And, finally, establishing world standard business operations.

Firstly, our local and regional service operations. Our strength in local and regional markets collectively determines the strength of our global service capabilities. Our financial performance depends, also depends substantially on the business resource and executed locally in more than 100 markets around the world.

Here are some recent examples of success from each of our regions. In the Americas HSBC selected us to deliver transaction management, facilities management, and product management services for the leading financial service providers, 14 million s.f. portfolio of office and retail space across the United States.

As Lauralee mentioned, our merger with Spaulding & Slye was officially completed in January. Combining forces with this market leader has added immediate scale in Boston and in the greater New England area and has measurably strengthened the depth of our resources in the Washington, D.C. market. Our combined Firm also has leadership positions and deeper resources in several key industry sectors. For example, federal services and public institutions, higher education, law firm services, and life sciences.

Turning to Asia Pacific, in Singapore we represented Goldman Sachs in the $400 million disposition of [DBS Tower I and II]. In Chengdu in China SEA Holdings Limited, a Hong Kong based company, appointed Jones Lang LaSalle the sole agent for Plaza Central. This is a 38-story office building and it’s the first single owner Class A office project to be developed in Chengdu, a rapidly growing Chinese market. We will provide fit-out, leasing, and property management services for the building.

In Europe, our Italian and Pan European retail capital markets teams collaborated on behalf of [inaudible] Asset Management on the cross-border acquisition of the Le Befane Shopping Center in Rimini, Italy. This was Italy’s largest single asset retail transaction in 2005.

In London Stocklands area, acting on behalf of Songbird Estates PLC our English Capital Markets City Investment Team sold 25 North Colonnade to Evans Randall, a privately held investment bank. The 363,000 s.f. office building was sold for more than $340 million.

Our second strategic priority is building a truly global corporate solutions service line. And it’s prompted by the dual trends of globalization and global outsourcing. Our goal here is to be the dominant corporate real estate outsourcing provider on the large relationships which we choose to pursue. We secured 15 of these multi-region contractual client relationships in 2005, and we won 65% of the assignments which we pursued and which clients awarded during the year.

That momentum has continued into this year, and just recently Sun Microsystems named Jones Lang LaSalle as its exclusive worldwide real estate service provider. This is building on a relationship that already included transaction management, lease administration, and project management, but now also covers for this global technology leader facilities management, occupancy planning, energy management and real estate financial advisory services in every country in which Sun operates. Consolidating the work of 14 different service providers Sun has entrusted us with a 17.3 million s.f. portfolio of office and data storage facilities in 44 countries around the world.

We also expanded our relationship with Proctor & Gamble, for whom we’ve provided facilities management services around the world since 2003. Following P&G’s acquisition of Wella AG and the Gillette Company we now have added facilities and project management services for an additional 147 sites in 55 countries. In total, we deliver facilities and project management services for nearly 274 P&G properties totaling 19.7 million s.f. in more than 78 countries.

Proctor & Gamble, indeed, honored us with its ‘External Business Partner of the Year Award.’ The award is presented annually to the firm that best demonstrates sustained and significant value creation for Proctor & Gamble.

The third priority is global capital markets, and in 2005 we also made significant progress towards achieving this third priority, building a global capital market service line. Our International Capital Group, which was created last year, is dedicated to harnessing cross-border capital flows globally to serve the international portfolio needs of our clients, working with and extending the reach of our existing Capital Markets Team, the International Capital Group participated in over 70 large transactions pursuits during the year. More than half of those opportunities remain live to date, providing a healthy pipeline for the global capital markets business into 2006.

Examples of completed transactions in which the International Capital Group played central role include the acquisition on behalf of a Canadian client of a 45% interest in St. Catherine’s House which is a 183,000 s.f. landmark office building in Central London. This group was also involved in the $153 million sale of 1425 New York, which is 277,000 s.f. Class A office property located one-half block from the White House in Washington, D.C.

Another important component of our global capital markets business is Jones Lang LaSalle Hotels, which had a very successful 2005, products of which include representing Starwood Hotels in the $200 million sale of the prestigious Hotel Danieli in Venice.

Our fourth strategic priority is to maximize the potential of LaSalle Investment Management, our global money management business. LaSalle set new records in 2005, as Lauralee just mentioned, for both total capital raised and invested, raising over $3 billion and investing $6 billion worldwide. LaSalle’s assets under management increased to approximately $30 billion. We launched six new private equity products during the year, we secured two new private equity separate account relationships, and we secured nine new global mandates for our public equity business. In terms of 2005 investment performance we outperformed the relevant benchmarks for all public and private liquidity products.

Our fifth strategic priority is to develop the world’s standard business delivery platform in our industry. To gain maximum benefit from our other priorities we simply must have secure operating and support procedures and processes to serve our clients and support our people.

During the year we focused on two priorities, continuing to strengthen our infrastructure whilst also developing market leading technology that directly benefits our clients. Our internally focused activities are designed to improve the efficiency of our operations globally and introduce robust controls in all areas of our organization and support superior corporate governance for the Firm.

One example of differentiated client basing technology, which we developed last year, was a proprietary technology for our facilities management clients. It helps these clients lower the costs of the outsource services we provide them to well below levels tangible through existing tactics, such as vendor consolidation programs. This technology is the first of its kind in the real estate industry.

So, to summarize 2005, we benefited from both favorable market conditions and from our ability to take advantage of growing cross-border capital flows into real estate. Our corporate clients continue to outsource real estate services and to rely on our advice and execution to manage their global real estate needs.

LaSalle Investment Management leveraged its outstanding track record and research based approach to bring superior results to its clients. These favorable trends for our businesses and the overall environment for commercial real estate are expected to continue into 2006.

Finally, I want to conclude my remarks by acknowledging and congratulating our people around the world. They are responsible for the achievements Lauralee and I have discussed on these calls, and we want to thank them for their contributions and for their remarkable commitment to our clients.

So, with that, we will open up the call to questions. Operator, would you please explain the process?

[CALLER INSTRUCTIONS.]

Your first question comes from Joel Gomberg with William Blair.

Good morning. Congratulations on the year.

Thank you.

Lauralee, perhaps you can talk about the margins within the different segments in terms of your target and the outlook in ’06 and long term? You know, looking at it, it looks like you still have some potential upside within Europe and Asia. Perhaps LaSalle Investment Management, you know, 25%? I don’t know if you can do much better than that? And then perhaps Americas is more of a work-in-process, given the restructuring and acquisitions? So, maybe you can walk through the four segments and where you think margins are going?

I’ll be happy to do that. And we have articulated long-term margins on each of those businesses, and have been making some really pretty significant progress.

For example, in Asia in 2003, as you will recall, we were actually in a negative position and now have that just under our long-term target which we have articulated as 8 to 10%, so we’re getting to nice scale in that part of the world and we continue to balance the margin against the opportunity for revenue growth because with people expenses and expanding offices it will keep the margin down slightly but it will accelerate the revenue growth so that’s more profit produced.

Europe has gone from 3.7% in 2003 to just under 5 in 2005. I think we’ve done a number of things this year. We’ve done some restructurings as we’ve talked about earlier in Germany. We’ve said that Germany is one of the key factors for turning the business back to its historical margins, which we’ve articulated our long-term targets are 10 to 12%. We’ve also invested in the higher margin businesses and the leasing markets are starting to recover. So, we’re expecting continued improvement in Europe, both with revenue growth, as well as a margin expansion.

In the Americas Spaulding & Slye was a targeted opportunity for us because its margins are very attractive to what we’re doing, and so we think that will definitely be a contributor. And although we’ve talked about the decline that principally was driven by the lower activities in our tenant representation group, we think that those are temporary.

As I talked about, most, because of some of the stalling in their activities, but the wins for new alliances and then, again, focusing on what we call the ‘more local market business,’ which may fall in between some of the areas that we might get through the alliance clients will bring that back in sight.

And LaSalle Investment Management is operating now at margins that, you know, they feel pretty good about. So, what they have going for them is a very strong growth in the underlying business base which is their assets under management.

Thank you.

Your next question comes from David Gold with Sidoti & Company.

Hi, good morning. Lauralee, just a question for you on investment plans in the business for the year. I think on the last call the comment was for ’05 you thought it would be 12 million that you’d close out the year, and ‘06 would be at least that.

So, a couple of questions there. Number one, can you give us a little bit more on the thinking, if that’s been budgeted just now? And, two, if you can, a little bit of a report card from your perspective, did you spend the 12 million and are you pretty happy with where things have gone?

Well, let me take the 2005 first. We ended up spending just a little over $10 million, and really the biggest difference between the 10 and the 12 is we were originally going to organically grow the Select Hotels opportunity and instead were able to translate that into an investment opportunity. So, net net in terms of what we were strategically targeting, we achieved that. We are also very happy with the accomplishments and the positionings that came out of that. So, we would consider all of that a very high level of success.

One of the biggest of that, that Colin talked about, is our International Global Capital Markets Team and their impact is being felt definitely by our Capital Markets Teams worldwide and our opportunity to bring the best sources of money to the largest profile activity and visa-versa, helping those largest source of money to find the investment opportunities they’re looking for globally. So, the potential of that feels very good.

I might ask Colin to talk a little bit about future, but what I can tell you is in terms of our investments planned for 2006 we plan to do at least that level and potentially more. We will be watching the market, making sure that we continue to get good potential out of everything that we do. But in most cases the momentum is with us and we feel it’s an opportune time to take advantage of that.

That’s correct. We will be raising our target from 12 million, which was last year’s number, to something above $20 million this year of investment, and that’s largely revenue investment, obviously, given the nature of our business. It will be spread across, broadly across our business lines, but significant sums will go into our east European business and our Asian business.

Okay. And sort of on that note can you also talk about CapEx thinking for this year?

Yes. We spent just a little over $40 million on CapEx this year with 75% of that in technology and telecom. A lot of that is proprietary software but it’s also expansion of offices in Asia, such that we now have 20 locations in China, for example, expanded locations in India. And those all take more investment in technology.

I would guess we would be relatively close to that number again in 2006. That’s still being refined, but I think that’s a pretty good number.

Okay. And then just one last one. Without having the full cash flow it’s a little hard to see, but clearly from a working capital standpoint you’re more a user than, you know, say a year ago, and was curious if you can just talk about what, sort of the biggest [there] was or if there were a couple there?

I put it in two places. One is compensation, and it’s tough when you compare year-to-year because what you’re really seeing is 2004 looking really like we’re very efficient with working capital, but what we had is a turnaround in the business and, therefore, accrued bonuses and not quite as reflective as the efficient use of cash that we’ve been doing it. So, you know, bonus levels were up this year but not in a contrast from ’03 to ’04.

And then the other one is receivables, and we clearly had a very strong fourth quarter again with a robust generation of receivables. If we look at the revenues in the fourth quarter and the receivables in the fourth quarter year-to-year we sort of went from 81% to 84%, so, you know, a 3% increase of the receivable balance relative to our fourth quarter revenues. But it was just because of the strong performance, and, in fact, our 60 days receivable outstanding which is what we really watch, we were down 1%. We went from 5% to 4%.

So, we can work with you, David, but we actually -- although it looks a little strange, we were actually more efficient with capital usage in 2005. It’s really the way the numbers get compared.

Got you. Thanks so much for all of your help.

Your next question comes from Jennifer Pinnick with Morgan Stanley.

Good morning.

Good morning.

Back to the Americas’ operating margin, if you could tell us how much was from a mix shift and how much was from investment spending? And given the acquisition of Spaulding & Slye are you adjusting your operating margin target for that geography?

Well, first of all, the margin of the Spaulding & Slye matches the margin of our leasing and management business, as well as our capital markets businesses. So, no, we would not be adjusting, it would just be an accelerated growth in those capacities.

In regards to the margin, you know, I think there’s a couple things. And the U.S. had about a third of our investments, so a little bit over $3 million. Also, we don’t pull it out as extraordinary but between Spaulding & Slye transition and our reorganization we spent a little bit under $2 million in the fourth quarter, so that has some impact. But, again, we feel that that really is, you know, an operating expense that we shouldn’t highlight as something that is going to be a long-term issue. As a matter of fact, it should position us going forward.

So, we’re not changing the targets, and feel that the business, particularly when the Tenant Representation Group delivered really back from the core clients as well as the new clients kick in that the targeted margins are not in any way an issue, and we would hope to achieve them in 2006.

Thank you. Also, in investment management, of the $6 billion in growth in assets under management how much was booked in Q4 and how much was in the recurring management fees in Q4?

The capital raised and, indeed, the capital spending were spread fairly evenly through the year, and of the six bonds we raised which we started during the course of the year, they were timed at a fairly even pace throughout the year.

The question on the management fees is a detailed one which I think we’ll get back to you on.

Okay. Thank you.

Your next question comes from Will Marks with JMP Securities.

Thank you. Good morning, Colin and Lauralee. Can you just clarify the 10 million is that net investment spending?

It’s spending which was largely towards hiring new people and funding the costs of those new people through their first and less productive phase with the business. There’s some expansion of new offices but it’s largely around people costs.

I guess I was confused on what that figure even meant. So, the 10 million, that’s a capitalized cost?

No, it’s the – Lauralee mentioned the $40 million…

Right, I understand that.

And that’s a capital expenditure.

Okay.

That’s capitalized and depreciated. These costs, the 10 million we referred to and the number this year which we’re trying to double is revenue spending and that comes from the EPS target.

Oh, okay, all right, all right. I was…

Well, just to clarify, when we talk about net if there are revenues produced by those people we will take that out of the costs, so it’s really the net impact to the bottom line EBITDA or P&L.

Okay.

And to Colin’s point, you know, you’re going to have things like hiring fees, many times some producers, we’re going to have to do some type of guaranteed bonus for a period of time till they get into our system and can transition. So, it’s those upfront costs. But our definition of net is if there are revenues produced by them we take that out of the total impact to the P&L.

Got it, okay. That’s fair. I guess I hadn’t used that term much before. So, the – on a totally unrelated note, real estate investments in ’05, can you tell me what those were?

I’m sorry, could you clarify?

Sure, I guess I just mean what – how much did you co-invest in your funds?

Oh, I’m sorry.

Gross amount and maybe net amount?

Oh, I’m sorry. I didn’t understand the question.

No, that’s all right.

Co-investment capital we increased from just under 74 million to 89 million. What we had was dollars out of almost $30 million and then capital coming back. And then in some cases we have the earnings, as well on those that flow through. But the net increase is going from 74 to 89.

All right. Okay. And then on your, on the share count, I noticed in the balance sheet there are 35.2 million shares issued. Should we be expecting the share count to go up significantly absent share repurchases? I mean is there bonus related figure?

There’s a couple of things. First of all, going back in the Firm’s history, there were options that used to be given, particularly at the time of the merger and thereafter, we no longer give options. But because of the stock price performance those have now come into the share count with the methodologies that go with that.

We have a block of options that this year, ’06, will be expiring so those will be exercised by our employees because they need to. And then after that it’s just restricted stock.

What we’ve articulated, and restricted stock grants and, as you know, we have a portion of our top 700 people have a part of their bonus paid to them in restricted stock with an uplift.

Right.

We have been on a program that with share repurchases that the combination of restricted stock and the bonus portion of restricted stock is not dilutive to the Company. So, the real dilution has come from historic activity, so we’re not anticipating that there would be a significant increase in share count.

Okay. And then taking that a step further, I know when you announced Spaulding & Slye you said I think you had a 2 million share repurchase program in place and it looks like you may have repurchased 600,000 shares in the fourth quarter? Or just any update on that? I don’t want to put words in your mouth.

Yes, we did repurchase 600,000 shares in the fourth quarter, touch over. We still have capacity on our share repurchase, I think it’s 1.4 million shares still that we can do, so we would anticipate continuing our share repurchase program throughout 2006.

Okay, that’s it. Thank you very much.

Your next question comes from Michael Fox with JP Morgan.

Hi. I just had a couple of quick questions. I wondered if you could give your organic growth rate for the quarter? And then, also, if you could remind us what it was in the third quarter, that’d be great, thanks?

I’m not sure that I understand the question?

I was looking for your revenue growth rate excluding the acquisition?

Oh, I’m sorry. There is no revenue from Spaulding & Slye in any of our numbers. Spaulding & Slye closed January 3rd, so all their results of that acquisition will be in 2006. We had a small acquisition in our Select Hotels Group which would have some revenues but not material to the results.

Okay. And is that the case for the third quarter, also?

That’s correct.

Thanks a lot.

Your next question comes from [Rob Macomb] with Schneider Capital.

Good morning.

Good morning.

I just had a couple of questions. One thing that was announced in the quarter, I guess it hasn’t closed yet, but this acquisition of CenterPoint by your venture with CalPERS? I’m just wondering if you could talk about how we should think of that? Is that basically just kind of a new separate account or growth in separate accounts that will occur when that closes?

That’s correct. It will be assets under management for LaSalle Investment Management as part of their separate account through the CalEast REIT that they manage for CalPERS.

So, that’s likely to be net growth? It’s not like they’re planning to sell a lot of stuff to fund the acquisition?

No, they’re planning to manage it as a portfolio.

Okay. And a couple on Spaulding & Slye. I can’t remember if you’ve given any ballpark figures before, but can you give us a rough idea maybe for full year ’05 what the revenues were for Spaulding & Slye?

We have not disclosed that, nor will we be doing that. Spaulding & Slye was a private entity. What we have said is that the acquisition will be neutral to modestly accretive for us in ’06 principally due to the financing costs which are about $0.15 a share for the year, as well as there is some transition costs that will be netted against their EBITDA contribution. So, going into 2006 with the Firm strong ongoing cash generation we should be able to see most of that financing cost come back to us in 2007.

What we have said about the business is that it has margins, again, similar to ours, and a leadership position in the New England corridor. So, I’m sorry we’ve not disclosed revenue.

Okay. And one other kind of accounting question on Spaulding & Slye. I understand you have some intangibles that will be amortized related to that. Can you give us a rough idea in ’06 of what the amortization expense will be?

We have not yet finalized that. We’re still working through the accounting on that. I’m not sure the date that will get finalized. There’s probably going to be some disclosure in the K when we get closer to that point, so if I could hold-off on that question? It’s not a significant number is probably the best way I can answer it for you.

Okay. And then, lastly, just kind of a bigger picture question for either of you. There’s been -- I’m not sure exactly what the status is but I’ve read several things about the likely implementation of REITS in the UK in ’06, and I was just wondering if you could talk about what kind of an impact you would expect that to have on your various businesses?

Yes, the REIT at the moment is spreading further into European markets. And we have been watching the legislation, certainly, in Britain now seems to be clarifying. And what we are seeing in the markets are a number of organizations, many of them financially driven as opposed to real estate based organizations, beginning to look to assemble portfolios of assets to form REITS.

The likely effect of that is to be more pressure on the availability of product in the market. It’s likely to support the already fairly robust asset prices in the British market. And from our perspective it’s providing us with opportunities for more business as these REIT portfolios come together.

Okay. Thanks a lot.

Once again, ladies and gentlemen, if you would like to ask a question please press star, then the number one on your telephone keypad now.

There are no further questions at this time.

Well, thank you, Operator.

And thank you to everyone for participating today and for your interest in Jones Lang LaSalle. We look forward to talking to you again at the end of the first quarter. Good-bye.

This concludes today’s conference call. You may now disconnect.