Jones Lang LaSalle Inc (JLL) 2007 Q1 法說會逐字稿

Good day and welcome to the first-quarter 2007 earnings release conference call for Jones Lang LaSalle Inc. 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 31, 2006, and in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any forward-looking statement. A transcript of this call will be posted and available on the Company's website 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 all for joining us for this review of our first-quarter 2007 results. With me today in Chicago is Lauralee Martin, our Chief Operating Officer and Chief Financial Officer, and Lauralee will discuss our financial performance in detail in just a moment. But first of all, let me recap on a few highlights from the quarter.

Revenues for the quarter totaled $490 million, a 45% increase from the first quarter a year ago, with all business segments recording significant year-over-year growth. Operating income totaled $36.4 million, a $27.7 million increase over the first quarter of 2006 operating income of $8.7 million.

Net income for the quarter totaled $27.2 million or $0.81 per share compared to $4.6 million or $0.14 per share in the first quarter of 2006. Finally, our Board of Directors have declared a semiannual dividend of $0.35 per share to be paid on June 15, 2007, to shareholders of record on May 15.

Obviously, we are very pleased with these strong results, which reflect solid execution across our global platform, the impact of both investments, which we started to fund in 2005, and continued health in global real estate markets. I will discuss these factors a little later on today, but now, let me first hand over the call to Lauralee to describe our financial results in greater detail.

Thank you and good morning to everyone on the call. As Colin has just highlighted, we're very pleased with the strong start to the year. All reporting segments had strong growth in topline revenue, the result of healthy market conditions and the timing and particularly size of several transactions that closed in the quarter. Also contributing to the growth was the beginning of positive returns from the strategic investments we made in staff over the last two years. I will now review the specific results for our four business segments.

In the Americas, operating income for the first quarter of 2007 was $6.5 million compared with an operating loss of $700,000 a year ago. This performance was driven by very strong revenue growth of 31% compared to the prior year. Momentum and pipelines are good, driven by the significant addition of new staff and clients.

The quarter revenue did benefit from several factors that may not be sustained at this level throughout the year. First, the healthy leasing transaction activity included a number of large transactions. In 2007, we had 12 transactions greater than $1 million compared to six in the first quarter of last year.

Second, in our Markets group, we have rolled out our planned transition to a compensation program for transactors similar to the plan used by Spaulding & Slye, where the variable portion of compensation is paid quarterly. As several transactions accelerated into the first quarter, this may have had an impact on our seasonal patterns. Spaulding & Slye was traditionally less seasonal than our business. However, with only one quarter under this new method, it's too early for us to make any conclusions.

Benefiting from the recent industry consolidation and ownership changes of our competitors, we have made over 60 strategic hires to expand our positions in the key U.S. markets. This additional compensation expense will show up in our operating expenses in the second quarter and balance of the year, but with this staffing investment accomplished so early in the year, we expect to see positive impacts by year end.

In EMEA, revenue increased 71% for the first quarter of 2007 over the prior year, while operating income was $14.7 million compared with an operating loss of $4.9 million last year. The strong quarter revenue was mainly due to the growth in Capital Markets and corporate finance volume across the region. Capital Markets revenue more than doubled in 2007 compared to the first quarter of 2006. The revenue was up a healthy 70%, even adjusting for a very large transaction completed in Germany, where we advised on a $2.9 billion portfolio sale. Colin will cover this in more detail in his comments.

The firm's success in establishing itself as a leading investment banker for the large real estate portfolio transactions and corporate finance activities will add more volatility to our transactional performance as these fees can be large and very significant. Volume in Capital Markets overall is holding in Europe; however, we're starting to see some shifting of transaction levels to Continental Europe, with the UK flattening against its very strong 2006 performance.

Growth in the region was also supported by the addition of over 450 revenue producers compared to this time last year. Leasing and tenant representation volumes also continued to recover and grow, led by the UK. Although our growth is principally organic, EMEA last year made four acquisitions. We are pleased with the acquired company results and integration, which are performing in line with our expectations. We expect to take advantage of the continuing consolidation in the industry again this year, and Colin will shortly discuss two recent additional acquisitions in Europe.

In Asia-Pacific, we have strong revenue growth of 49% year over year. This continued revenue growth substantiates the significant investment we have made in the region over the last several years in expanding our infrastructure and platform, our offices, our research and our technology. We anticipate the growth benefits will start to be seen in March and improve throughout the course of the year.

We are pleased with the results we saw in our Asian growth markets as revenue was up over 100% compared to the prior year. In addition to India and Japan having strong quarters, China also had a 42% increase in revenue year over year. Our Asian core markets, which includes our two largest markets, Australia and Hong Kong, also had robust growth in the quarter, with revenue up over 20%, despite some deals slipping into the second quarter this year in Australia.

LaSalle Investment Management, our very successful global money management business, completed another strong quarter as a result of the three main growth drivers of the business -- investment performance, capital raised and capital investments. Advisory fees, which are LaSalle Investment Management's core revenues that provide a solid annuity, grew over 40% in the first quarter. The continued growth in this business was driven by healthy increases in assets under management, which increased over $10 billion from a year ago to $44.3 billion at the end of the first quarter. Over a third of this growth was driven by the global public securities business and is seen across all regions.

Incentive fees were nearly $22 million for the quarter, primarily driven by a single fund achieving its financial hurdles to trigger incentive fees. This is in line with our disclosure last quarter, when we anticipated that the fund would begin generating incentive fees in the first half of 2007. As you are aware, the amount and the timing of fees are dependent on the contractual timing of the measurement period, the liquidation of funds, as well as the performance of the investments, and as a result will be highly variable by period. We continue to build the portfolio of opportunities for incentive fees to ensure that on an annual basis they contribute strongly to our results.

Colin will shortly provide details of LaSalle's capital raise and investment activity during the quarter. As a result, this concludes my discussion, and let me turn the call back to Colin.

Thank you very much, Lauralee. In my opening comments, I mentioned how the ongoing strength in global economies and real estate markets contributed to our first-quarter performance. The global economy is expected to growth at 3.4% this year, above historical trends, but slightly below the 3.9% growth that we saw in 2006. The difference between these two figures is primarily the result of slowing U.S. economic growth anticipated to be 2 to 2.5 percentage points in 2007, which is being driven in turn by the housing correction and credit tightening related to subprime loans. Corporate profits, however, remain solid in the U.S. and support continued expansion in demand for space.

Asia and Europe are expected to grow at rates similar to last year, and for the first time in several years, Western Europe ended 2006 with robust growth that should continue at a similar pace. In Asia, consumer spending is strong due to wage growth and greater access to credit, although the rapidly expanding economies of China and India are expected to slow slightly as monetary tightening policy is enacted.

Thus far in 2007, capital flows to real estate continue to match last year's record-setting pace. Sales of portfolios of assets, equity level deals and hotels are particularly active sectors. Leasing activity in U.S. office markets covered by Jones Lang LaSalle totaled 5 million square feet during quarter one, up from 4.2 million square feet in the first quarter a year ago. Chicago, Denver, northern New Jersey, New York and Washington D.C. experienced the highest net overall absorption of 5.1 million square feet. Record growth as a result continues in all U.S. markets.

Leasing volumes in office markets across Western Europe, which totaled more than 111 million square feet last year, the highest level of take-up since 2000, are set to strengthen again in 2007. Vacancy rates continue to edge lower, with the average now standing at 8.2% across Europe as a whole. Rents are expected to show further increases on the back of those recorded last year.

Asian office markets continue to see robust demand growth from all industry sectors, and the major cities of Tokyo, Shanghai and Singapore have seen the bulk of leasing demand pushing rentals to new heights.

Against this background, our investments in growth and our focus on improving our ability to execute contributed to our first-quarter results. To put those results into context, here are some examples of the continuing progress we're making on each of our five strategic priorities, and those are, to recall again, strengthening our local and regional service operation; expanding our three global service delivery lines -- Corporate Solutions, Capital Markets and LaSalle Investment Management; and finally, establishing world-standard business operations.

With respect to the first priority, the firm's financial performance depends to a huge extent on the business which we execute in more than 450 markets worldwide. Our collective strength in these markets also determines the effectiveness of our global service capabilities. We have continued to invest heavily in the platform worldwide, both in organic growth and in selected acquisitions.

And here are a few examples of our success in each of our regions. In the Americas, we were awarded a highly sought-after tenant representation mandate when the international law firm Baker & McKenzie hired us to develop a strategic real estate plan for Chicago. In San Francisco, we were hired to lease and manage 1 Market Plaza, a 1.4-million-square-foot office complex. And as Lauralee mentioned in her comments, we have continued to expand our U.S. market presence, attracting 60 new strategic hires recently in key U.S. markets.

Also during the quarter, the U.S. Environmental Protection Agency named Jones Lang LaSalle a 2007 ENERGY STAR Partner of the Year, and CRO Magazine named us to its list of 100 Best Corporate Citizens. Finally, we selected a Chief Diversity Officer for North America, naming Cedric Thurman, who has been with the firm since 2000, to be responsible for advancing diversity and inclusion in both the U.S. and Canada.

Turning now to Europe, The Archon Group awarded us the biggest-ever management assignment in Germany, a mandate of more than 90 buildings totaling some 4.3 million square feet. Across in Russia, Open Investments awarded us the leasing assignment for a 1.4-million-square-feet office and retail scheme in Moscow. And in the UK, we represented [Beacon] Properties in the purchase of 200 [Gracene] Road, a 285,000-square-feet office building in London's Midtown.

In January, we acquired Hargreaves Goswell, one of the city of London's most highly regarded agency practices. Coinciding with Romania's accession to the European Union, we opened an office in Bucharest and we also opened our first office in Istanbul during the quarter following the award of an exclusive management and leasing contract for Turkey's largest shopping center.

More recently, in April, we announced plans to acquire one of The Netherlands' largest and fastest-growing property firms, Troostwijk Makelaars, serving a strong client base in Holland. Troostwijk Makelaars offers office and industrial leasing, capital markets, advisory and research services. And just yesterday, we opened an office in Helsinki, Finland. We're also pleased that the Family Times has named Jones Lang LaSalle as one of the 100 best companies to work for in the UK.

In Asia-Pacific, we were appointed by the owners of [Astronavigation Building] in Chengdu, China, to act as sole agent in the disposal of their interest in the 1.2-million-square-feet office and retail development.

In Australia, we represented The Age, Melbourne's leading newspaper, on the disposal of six buildings totaling 443,000 square feet. The property was sold for approximately $55 million, AUD66 million.

In Singapore, our Capital Markets and Singapore markets teams worked together to represent Standard Chartered Bank on the lease of more than 50,000 square feet at Marina Bay Financial Center, and SCB is the anchor tenant in this landmark development. The transaction represented the single largest private-sector deal ever completed in Singapore.

And in February, we marked the formal opening of our seventh corporate office in India, in Calcutta. Earlier this month in China, we opened an office in Shenzhen to better serve our clients in the Pearl River Delta region. In Australia late last year, we brought in 31 property professionals with the acquisition of the leading Western Australia agency business [NFC Corporate].

All of the above illustrate our continued commitment to investing in expansion in Asia-Pacific.

Moving on to our second strategic priority, which is the global corporate solutions service line, our goal here is to be the service innovator and dominant corporate real estate outsourcing provider for the large relationships we pursue worldwide. Late in the first quarter, we signed a contract with a major U.S.-based pharmaceutical company to manage transactions for its global portfolio of more than 6 million square feet, more than half of which is outside of the U.S.

Finally, in the quarter, the first quarter is also a time for the renewal of many contracts with corporate clients. Win rates for such renewals represent an obvious measure of client satisfaction and of our service capabilities. And in the Americas alone, we are 10 for 10 in the renewals that have come up since the beginning of this year.

Our third growth priority is to be the leading global capital markets platform. Our dedicated international capital group works to harness cross-border capital to serve the international portfolio needs of our clients, and those needs are growing. During the quarter, our German Capital Markets team closed the sale of a German portfolio of 61 properties comprising 9 million square feet of primarily high-quality office space. The portfolio was sold for $2.9 billion to Eurocastle, a U.S.-based fund. This was the last of five [GBRE] portfolios sourced by the international capital group, which was structured and sold in a period of 12 months for a total of over $4.75 billion to four international investors.

In the Americas during the first quarter, our strategy of growing the U.S. Capital Markets business produced an 84% year-over-year revenue increase. Our Chicago Capital Markets team sold 625 North Michigan Avenue, a 350,000-square-foot office property with highly desirable street-level retail space. We were the exclusive advisor to The Netherlands-based [Verven] property group in the deal. This property was sold to the Anglo-Irish Bank for $111 million.

Our Asia Capital Markets team represented Germany pension fund manager SEB in the $348 million acquisition of the former Singapore Airlines building in Singapore, a purchase of more than $1100 per square foot of nettable area to set a new local market record.

During the quarter, Jones Lang LaSalle Hotels represented the International Hotel Group and two Middle Eastern investors on the sale of the Crowne Plaza [Blackfires to Bubustatutu]. The price of $160 million or nearly $800,000 per key represents strong ongoing demand for quality hotel real estate. Our hotels team also provided due diligence and valuation advice to [Land Securities] in their first foray into the hotel sector, with a successful acquisition of 30 UK hotels from the [Archon] Group for $879 million.

Our fourth strategic priority is to support additional growth and maximize value from LaSalle Investment Management, our global money management business. During the quarter, La Salle sustained the momentum it developed throughout 2006, raising $1.4 billion of capital in the first three months with securities accounting for $1.1 billion of that amount. The reception amongst investors to two new funds in Asia has been substantial, with strong initial expressions of interest potentially exceeding original capital-raising targets. Marketing for our first fund in Mexico is also underway and attracting substantial interest among investors.

Total capital invested reached $1.3 billion in the quarter, and investment performance continues to be strong in our private equity business, particularly in our global public equities organization.

Our fifth strategic priority is development of the world-standard business delivery platform in our business by continuing to strengthen our infrastructure while developing our market-leading technology that directly benefits our clients. During the first quarter, we remained on schedule in year two of a three-year program to install uniform global systems for finance, HR and client relationship management systems, all to support our growth and drive efficiencies across our organization. We also further enhanced our client-facing information technology.

So to conclude, we are very pleased with the performance of the first quarter. Thanks to our consistent investment in organic growth and selective acquisitions, we recorded significant revenue growth across all of our business segments. We will continue to invest in our globally diverse business platform and service lines, and with continued healthy real estate markets, we believe we are well positioned for the remainder of 2007.

So now, we would like to open the call to your questions. Operator, perhaps you would please explain the process.

(OPERATOR INSTRUCTIONS). Mike Fox, JPMorgan.

Congratulations on a very, very good quarter. A couple questions. With regard to the margins, I was looking out for the remainder of this year and I was wondering if you can give us -- talk a little bit about the margins by segment. It seems that the EMEA business is doing very well and the margins were very good in this quarter. I know in the past you've talked about kind of a 10% to 12% long-term target. I was wondering, given that that market is so strong right now, if that maybe could happen earlier than later.

Well, we had advised that if the markets continued the performance they did starting at the end of last year that we would expect that our goal in EMEA would be accelerated. We feel very good to the start of the year. We did have the large German portfolio transaction in there, which bumped us up, at least on a quarterly basis, significantly higher than when it gets blended through the year. So again, we expect to see good performance in the margins. But I think we would still expect to be more on the lower end as we move that through than the higher end.

We feel good about the market in Europe, Mike, and we will be continuing to make selective acquisitions, as you have seen in Q1, and continuing to add people through the balance of the year to continue to support the rapid growth we are seeing.

And then, in the Americas, given all the hires that you have made, can you give us some updated comments on what you are expecting on the margins there? Because it seems like some of the hires might have productivity higher than the typical -- usually, it takes 12 to 18 months, and it seems like you said you will start to see an impact in the back half of this year.

We're always aiming -- and the sooner we can get them in the year, the more likely they are going to have an impact that is positive this year. The good news is that they are coming into a high level of activity, with work to be done and clients won and a need for resources to service them. So again, we added a lot of additional and profile people in the first three months of this year. And how that all beds down in complete productivity will still have to play its way out. But we remain very committed. We said that we wanted to be equal or better to our margins even with the addition of people, that we would take advantage of the environment this year.

And then with regard to incentive fees, I know they're very hard to predict, but I was wondering how much visibility you have into second-quarter incentive fees at this point, and then also if you can talk at all to the remainder of this year on what you expect for incentive fees in any terms that are possible.

Well, we did clear the hurdle of that first fund, which is good. We are in the market continuing to sell properties out of that fund. We are about 75% sold. And so clearly, the most profitable for us on our incentive fees is that last 25% since we have cleared the hurdle. Now it will be a question of when they get sold and the timing of that, and that is fairly much a market factor. But it means we are clearly in the momentum of that.

We also advised last quarter that we had a couple of other funds that we thought would be at the end of the year. If markets continue favorable, which they are right now in terms of pricing, we will continue to take advantage of that. And that, if anything, tends to accelerate things earlier rather than later. So we have shown you the portfolio that we have built. We continue to add to it. We think it gives us lots of opportunities that should make us have a solid year.

And then I know you guys don't give guidance, but just when you look at how we analysts have clearly underestimated the earnings power this quarter, I was wondering if you can give us any indication on the second quarter, whether it should be similar to the first quarter, because the first quarter almost seemed like a more typical second quarter. So should we expect sequential increases or flat, or do you think there was some pull-forward from the second quarter that could sequentially be down earnings? I was wondering if you could give us any clarity on that at all.

We don't give guidance, so I'm not going to break that trend. I think that the best comment about the marketplace, and I'm sure you'll hear it from our competitors when they have their earnings call as well, is there's a weight of money in the marketplace. It is eager to get placed. You can see it in the size of the transactions that are being done, because as they want to get their money out, they want to get it out quicker.

So as long as that weight of money is out there, I think it is good for all of us. How that actually plays out I think continues to not just surprise you, it surprises us, because it is a very robust marketplace. So it is hard for us to predict that all the way to the end of the year, but things feel pretty good at the moment.

And just one final one -- can you tell me what the EPS impact of the incentive fee was?

What I would do is just -- no, the answer is not, because it clears in through all the different bonus plans and tax rates. Generally speaking, what we have said is our team shares off of incentive fees from sort of about 25%, and then there's business bonuses that come off of that as well. And you should just apply our global tax rate to anything that you are typically looking at, just because it tends to blend in with the total tax rate.

Jennifer Pinnick, Morgan Stanley.

I was wondering, following up on Mike's question, is there any way you can quantify in this quarter the revenue and margin impact of the accelerated transactions in the Americas and the large transaction in Europe so we can get a sense for the core organic growth in the quarter?

I think the comment on large transactions -- we said that we had 12 in the U.S. that were over $1 million compared to six last year. It just means that relative to our productivity they have a much stronger impact. It isn't necessarily that there's a difference in activity; it's just when that activity comes through, it is much more profitable to us.

Relative to timing of transactions, the only comment I made on really timing was in Australian, where we did have some deal slippage. And in the U.S., we're not sure whether or not we have had timing changes. We just know that relative to the new compensation plan that we've put in place, there is probably more personal encouragement to have things happen earlier rather than later. And I think we'll have to see that play through through the course of the year.

Generally, we see a lot of activity for us in the fourth quarter as everybody wants to get every possible bonus (inaudible) transaction in the year, because they will have to wait a year until that happens again. Now what we have is this happening on a quarterly basis. And whether that means we are stealing from the fourth quarter or whether it means we just continue to move things forward I think is something we are going to have to learn from in regards to this.

Colin noted the higher growth in Asia-Pacific and Europe versus the U.S. for 2007. Are you seeing any divergence in leasing trends or transaction trends in that direction?

No, leasing trends worldwide are strong, Jennifer, and we see healthy growth in leasing markets across the world. Our worldwide average growth in our leasing business was around 30%, of which the U.S. grew at 45% last quarter, and Europe 20%. There is some guidance there. But of course, the mixture there was happening in the market and are gaining share. We don't believe we're losing share anywhere, but we certainly believe we are gaining share in certain markets.

But overall, leasing markets worldwide, Asia-Pacific, Europe and the U.S. are in good shape, and there is robust growth, which is partly reflected in our comments for the year in the sense that we said that the markets remain healthy and we think they will still stay that way for the balance of 2007.

Sure. And then following up on the strength in hotels, it seems to have been running above average for a while. Is there any differentiating trends in this segment versus the entire market?

Differentiating trends in what way, Jennifer?

In hotels.

Well, there is a robust demand in the investment community for hotels as a category. I think a couple of things have been going on. Firstly, hotel businesses as a whole are separating the real estate from their operating organizations. You've seen that in the International Hotel Group, for whom we have done a lot of work, and the recently announced transaction in Japan where ANA have done the same thing. So there has been a trend towards operators separating out their real estate, which has meant that product has been available.

At the same time, hotel occupancy rates worldwide have been very high. So you have seen an asset class which is generating a lot of revenue currently and therefore is attractive to investors. So those are a couple of trends which are specific to the hotel markets. They just reflect health -- hotels is a subset of the overall real estate markets worldwide, which as we said are in very good shape.

Matt Litfin, William Blair.

We have you at a substantial net cash position by year end. Is that where you think your capital structure should be? Or should this Company run with some manageable level of debt to keep your cost of capital down, in your opinion?

We have an articulated balance sheet, that we would like to have debt at 25% of book cap, which would mean that we think that our debt is good, particularly at these favorable rates. We spent about $25 million in the first quarter, cash, for acquisitions. We would like to see a pace of that go throughout the year. We also bought over 220,000 shares of stock in the first quarter, and obviously are paying our dividend. We will use our cash as productively as we can starting first with growth of the business and then second relative to stock.

We also expect over the course of the year that the pace of investment in LaSalle Investment Management relative to the funds that they are putting to work will draw on our core investment capital, which could run $50 to $60 million, net, this year, which again is growth of the business and opportunity for the firm.

So I guess in summary, debt is healthy. We don't have quite as much love of debt as maybe some of our competitors do, but we like to put it to use productively.

Following up on that, when you mentioned acquisitions, if you were going to look at a larger transaction, where do you think is the most attractive region for you, and can you give the reasons behind that?

Well, we have articulated a slightly different approach, which is that we at the moment like small and medium-sized transactions. And as we said, we have completed a number of them already in the first quarter of this year. And we like to do them, to buy them from private owners where we can structure the transaction in a way which keeps the principal parties involved and keeps them incented to continue to perform well.

So that is our stated policy. We sort of are open-minded for broader and larger things. But there's nothing we would care to say to that at the moment. We're certainly not looking at anything of that scale.

Colin, can you just define the difference for you between medium and large so I can get a sense of what you mean by that, maybe in terms of annual revenue or something like that?

Well, small and medium are the sort of tens of millions of dollars of revenue which we have typically done a series of over the last 12 months. And Spaulding & Slye acquisition was up into the medium category, and that is the order of $100 million of revenue.

And then lastly, based on your prepared comments, it sounds like the major investments last year are behind you. So realizing that you will continue to invest in the business across the board, are you now moving into more of a harvest phase from those 2006 investments? Would you characterize it that way?

I would say that is accurate. What we have said is that we want equal to improving margins in the U.S. as there is some opportunity with hires here, that we want expanded margins in Europe and really take advantage of the marketplace that we're in, and improving margins in Asia, because we've put the investment in and we think we're very positioned to take advantage of what is a region that continues to offer very significant growth ahead.

LaSalle Investment Management, we grow the advisory piece on a very regular basis, and that is a wonderful annuity part of our business that all of us can count on through any type of market performance. And then the incentive portfolio continues to get larger and more robust, and we think that is really what will drive the most exciting parts of the margin in that business. But that continues to perform well also.

We continue to invest, as Lauralee said, behind growth. The situation you see is that the returns we're now seeing from those earlier investments are sufficient to more than fund the continued investment in new hires, which is ongoing.

Will Marks, JMP Securities.

I had a question -- one, Lauralee, can you repeat the share repurchases for the first quarter?

Yes, we did just a touch over 220,000 shares.

And at what -- can you give the average price?

Yes, it is just under $100. I don't have it -- it is $98-something.

No, that's fine. And then what is the current availability on your repurchase program?

We still have, I think it's a little less than 400,000 shares. But the Board has always renewed that when we have gone in for a request. We don't see that that would be something that we would stop at this point.

And what is your view on a stock split?

We've researched it extensively and also asked a number of experts, who have advised us that there really is no difference in terms of how a stock performs, whether it is split or it is not split. So at this point in time, we really don't see that it would make a difference to investors. If something were to change in that regard, we would obviously evaluate it. But at the moment, we think we are performing very well for the investors as is.

Great. A few other questions. The CapEx for the year -- can you just discuss that?

In the first quarter, CapEx was just a little over $20 million, with three-quarters of that really being leasehold additions. We did our Chicago headquarters here at the Aon Center. We have moved our offices in London, with 400 of our staff going over to Canary Wharf while we retrofit also our Hanover Square operation. And then we have expanded in several other of our key markets such as our Paris office and some of our Asian markets. So it has been high on the fit-out basis for leaseholds. Because of that, we have said it is probably going to run $80 to probably $90 million this year, with a substantial piece of that again being leaseholds. The balance of it would be technology.

You made a comment at the end of the fourth quarter about hiring this year, and you'd continue, and you've made comments on this call related to that. Are you surprised at the level, at the opportunity that you have had? And maybe you can touch on specifically Trammel Crowe -- how many different locations where you have hired Trammel Crowe people?

Firstly to say we have been very selective about the people we have hired. As someone implied in an earlier question, we are seeing good results from the hiring we have done. I think that is a tribute to the sort of threshold we have set for caliber of people and expected performance. So firstly, we're not about hiring quantity here, we are about hiring quality. We're about hiring people who fit in well culturally into the organization and are traditionally or have historically been strong performers in their previous organizations.

That being said, we have worked very hard in the U.S., Europe and Asia-Pacific, in all of our business areas, to make ourselves an attractive place to work. We have, as Lauralee said, restacked, refitted two of our largest offices in London and in the U.S. and we're doing similar things in Paris and in Asia-Pacific offices as well. So we are working hard on our working environment. We have won awards and accolades from Fortune and from The Times in London as to the attractiveness of our organization to work in. And people find us an attractive organization to come and join. So we are attracting staff because of the work we're doing to make our organization a great place for talented people to come and work.

We are also very pleased with the very low rates of churn, i.e., departures that we have from our organization across the world. So we think that a lot of the improvement in numbers and the improvement in the continued attraction of high-caliber people is about the work that we're doing as an organization to make ourselves a quality place to work.

And maybe comment, if you could, on how -- or what type of structures -- you've been hiring -- I gather it is across the board, but are half commission-based employees? Are some getting up-front guarantees? Can you comment at all on that?

The people we have been hiring have been across the organization, from investment management professionals in our Tokyo office for LaSalle Investment Management through to transactors in Chicago. We have been hiring them from competition. We have been hiring them from outside of the industry. We've brought a number of people in recently from the banking industry in Europe, for example. And we have really been very successful across the board in attracting the talent we need to grow the organization.

And just one final related question -- maybe you can comment on this. I think at the end of the fourth quarter you mentioned headcount increase in terms of percentage from '06, and maybe if you could mention anything to date in '07.

Quarter over quarter, we're up slightly above the mid-20% range year over year.

That is for worldwide?

Worldwide.

Is that revenue-generating headcount or just overall?

No, that would be overall.

Jennifer Pinnick, Morgan Stanley.

One more question for you. In investment management, can you just discuss the challenges of putting to work the committed capital in such a robust environment with the strong valuations?

Yes, it is a challenge. Lauralee mentioned earlier the robustness of just the huge sums of money that are trying to find their way into real estate on a worldwide basis. The real estate markets are becoming increasingly linked worldwide. So there's a tremendous demand for real estate product from institutions, from development companies, from private individuals right across the market. And we are obviously investing through LaSalle Investment Management in competition with those people. So it's a tough market. Put that together with the historically very low cap or yield rates -- i.e., high prices across the market, and you see some very challenging investment hurdles.

What we are doing as an organization generally is working harder, obviously, looking harder, looking for more special and unique situations, and in general, across our funds, moving slightly further out along the risk curve, i.e., more development and perhaps less core investment just taken across the portfolio as a whole.

Richard Wilson, American Express.

It is actually [Fred Needle], but that doesn't matter. Just a question on the UK market, given -- I think I might have seen a few recent transactions over here have happened at less than 3% yield. That is obviously historically very, very low. I'm just wondering what your sense of the sustainability of that. Is it the fact that there is, as you say, this huge weight of money out there that is still waiting to be invested, both in the UK and, obviously, in Europe and globally, or are you getting incrementally more nervous about the UK market?

Well, I did make the comment that our Capital Markets business, which was in Europe, up over double last year, 70% excluding the large German portfolio, but it was really shifting to the continent. The UK last year had tremendous growth. And I would say that for the first quarter, we were flat in Capital Markets activities UK-wise year to year, still at a very profitable and a robust level.

So the market is probably saying how much more can I grow off of that number, given the UK is one of the few markets worldwide that has gone into negative leverage, meaning that the cap rates have gone below the debt rates. And so whether it can stay at that level for a long time, and we would love for it to do that, or whether it will soften a little bit more and shift to the continent, I think needs to be determined.

The positioning of Jones Lang LaSalle has always been a very strong pan-European Capital Markets team so that when there is a shifting of investment capabilities, we are able to move investors around the continent very fluidly. And last year, over 55% of the transactions actually done in that region were cross-border.

And then I guess following on from that, Lauralee, the strength that we saw in Germany this quarter would be endemic of that shift that you're talking about.

Yes.

(OPERATOR INSTRUCTIONS). There are no further questions at this time.

Thank you, operator. With that, then, we will draw the call to a close, and I'd like to thank everyone for participating and for your interest in Jones Lang LaSalle. We, of course, look forward to talking to you again following our second-quarter results. Thank you very much and have a good day, everybody.

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