Jones Lang LaSalle Inc (JLL) 2007 Q3 法說會逐字稿

Good day. And welcome to the third quarter 2007 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 Forms 10-K for the year ended December 31, 2006 and in our 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 website within two business days of this call.

At this time, I would now 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, everybody. And thank you for joining us for this review of our 2007 third quarter and YTD results. Joining me in Chicago today is Lauralee Martin, our Chief Financial and Operating Officer.

To frame today's discussion, I'm going to start with some highlights for the quarter and for the first nine months of 2007. Revenues reached $624 million during the quarter, up 35% from the third quarter of 2006. YTD revenues totaled $1.8 million, up 37% from last year. And income totaled $46.5 million for the quarter, or $1.38 per diluted share of common stock.

Net income for quarter three 2006 was $24.7 million, or $0.73 per share. Net income YTD reached $151.7 million, or $4.50 per share, up from $95 million, or $2.85 per share in the first nine months of 2006.

And finally, we are very pleased that our board of directors has declared a semiannual cash dividend of $0.50 per share of common stock. This is a 43% increase, or $0.15 per share above the amount of our last semiannual dividend, and is our second increase since we initiated the dividend two years ago.

To sum up, we continued to record very healthy growth in the third quarter. We are witnessing the effects of tighter credit markets, but these pressures are being offset by our diverse product and service offerings, by the breadth of our global platform, and by the targeted growth investments which we continue to make across the business.

Before turning the call over to Lauralee to discuss our results, I want to start by spending a little more time than usual discussing current market conditions.

Going first to the investment sales markets. In the U.S. capital markets, total third quarter transaction volume is expected to be in line with the third quarter of 2006, with transaction volume slowing in the fourth quarter.

Our own book of business is stronger than it was at the same time last year. However, we have gained market share since then. Our U.S. capital markets business now represents around 3% of our total firm revenues.

Credit availability and the increase in real estate's borrowing spreads is affecting U.S. real estate pricing. Estimates are that prices are falling anywhere from zero to 10% from the peak earlier this year. This translates to an increase in cap rates, or yields of approximately 25 basis points on average.

The smallest declines, however, have been in the sector in which we are most active, central business district, Class A office space, particularly in coastal cities. Declines have been more significant in D grade and suburban property types.

Turning to capital markets in EMEA, our transaction volumes were up 3% in the third quarter and up 6% YTD, compared to 2006. Third quarter capital markets transaction volumes for European market as a whole were 11% lower than in the third quarter a year ago, while YTD volumes were flat compared to 2006. This data indicates that we have continued to take market share from competitors in more hesitant markets.

In many investment sales markets across Europe, they're having a record year with volumes in Belgium, France, Germany, and the Netherlands on target to surpass last year's total. However, increased investor caution is leading to a wider bid ask spread between buyers and sellers in some markets, for example, in Spain and the U.K. The U.K. capital markets business represents around 4% of our total Jones Lang LaSalle revenues.

Nearly two-thirds of the European office markets which we monitor have shown an outward movement in prime yields, led by the U.K. markets of West London, which has moved up 50 basis points to around 4% initial yields, and the city of London, where the equivalent numbers are 50 basis points to 4.75%. The yield shift has been much more modest across continental Europe, registering 10 to 25 basis points, depending on markets.

Capital markets in Asia Pacific have been relatively unaffected. Asian investors have traditionally relied more on bank financing and on providers of securitized credit, and Asian banks are still ready to provide balance sheet financing.

Liquidity in the region's property markets generally remains high as a result. In addition, both local and foreign investors have maintained their allocations to real estate, and continue to be active participants in the region.

Price and transaction levels have held up with pressures evident in some markets, Japan is an example. Direct commercial real estate investment in Asia Pacific accelerated to $54 billion in the first half of 2007, 14% above 2006 levels.

Cross-border investment activity accounted for a significantly greater share of the total, increasing to 52% total volumes in the first half, from 29% a year ago.

Looking ahead across capital markets worldwide, we continued to see large amounts of money seeking investment in real estate. And as we observed in our recent research report, Global Real Estate Capital, patient, prudent, and well-funded investors are well placed to take advantage of opportunities offered by the current market uncertainty and to prosper.

Turning now to leasing markets worldwide. In the U.S. markets in which we have a significant presence, YTD gross absorption for Class A and B buildings was down approximately 4% from a year ago. As Lauralee will discuss in a moment, our own leasing revenues in the region were up for both the quarter and YTD.

Nationwide in the U.S., rents grew 3% in the third quarter, year-on-year. In Europe, preliminary YTD figures, office takeup reached 9.8 million square meters, a 7% increase compared to a year ago. Third quarter uptake totaled 3.2 million square meters, 9% higher than a year ago.

European rental rates were up between 9% and 30% in our larger markets, which represents about 50% of our targeted markets in the region. Vacancy rates have continued to fall in most markets, with the Western European average vacancy at 7.9% in the second quarter, compared to 8.8% a year earlier.

Asia Pacific's office sector exhibits continued strength, characterized by record low vacancies and rising rental rates. Rentals across the major cities, including Tokyo and Singapore, reported healthy increases during the quarter.

To conclude then, in this environment, commercial real estate demand, as measured by leasing takeup and rental rate growth, is expected to remain positive globally, but at levels below 2006 in mature markets. Demand in emerging markets and Asia continues to grow rapidly.

So with that background, let me now turn the discussion over to Lauralee.

Thank you, Colin. And good morning to everyone on the call. As Colin has highlighted, the momentum of the business has continued into the third quarter as we saw both top and bottom line growth across all segments. Colin has also covered in some detail the state of the capital and real estate markets, particularly in the U.S. and EMEA. So I will focus my comments on segment performance and some of the highlights in the fast-growing Asia Pacific and LaSalle Investment Management segments.

In the Americas, capital markets activity has remained strong through the end of the third quarter of this year, reflective of our staff additions and increase in market share. Capital markets revenue increased over 40% in the quarter and nearly 60% YTD.

Americas leasing revenues were up 11% for the quarter and 26% YTD. The gains reflect the continued investment in top talent we're making in the major central business district where we're gaining market share and recording improved performance in the tenant representation space.

Operating income in the Americas in the third quarter was $20.2 million, with a margin of nearly 11%. This was in line with the same quarter last year, despite the significant addition of revenue producers who are not yet at full productivity.

Supporting our growth objectives, these investments are delivering operating income significantly higher on a YTD basis compared to 2006.

For EMEA, with the combination of higher rental rates and our increased volume, leasing revenue was up 55% for the third quarter and 38% YTD.

In EMEA capital markets, our increase in transaction volume this year has led to the region's revenue increasing 11% for the quarter and 46% YTD. Transaction volume within the European market as a whole has decreased, clearly indicating an increase in our market share of the total activity.

EMEA's operating income for the third quarter was $14.2 million, slightly ahead of last year but with a lower margin, principally due to the impact of the accounting for our acquisition activity.

The acquisitions we've completed this year in EMEA, the larger ones being in the Netherlands and England, both of which were completed in the second quarter of this year, have benefited our top line. Although the contribution to the bottom line has been minimal to date due to integration costs and amortization of intangibles for purchase accounting. These acquisitions will be contributing to operating income in 2008.

In Asia Pacific, all markets experienced robust growth over 2006. Our revenue for the quarter increased over 70%, and operating income increased to $6.9 million from a loss of $1.9 million in 2006. Our transactional revenue growth continued across the region, as capital markets revenue more than doubled during the quarter and leasing revenue grew nearly 50%.

In addition to the strong performance of the region, we are very pleased with the financial performance and the operational integration of Jones Lang LaSalle Meghraj. We've merged our businesses in India operationally, and will increase to full ownership over the next five years.

LaSalle Investment Management's operating income increased to $28.2 million with a margin of 34% in the quarter. We've raised new capital of nearly $4 billion for new funds in Asia and Mexico, markets that continue to demonstrate strong growth and investor appeal. This capital raise will give us almost $18 billion of buying power.

The growth in our annuity revenue was 40% in the quarter and 35% YTD. The new fund, Asia Opportunity 3, and Japan Logistics 2 in Asia, generate fees on the committed amounts effective on their capital close. The third quarter results include fee contributions from these funds.

Our global securities business has grown as well, with a net increase in assets under management of $1.8 billion for the year. Capital commitments to the real estate sector continue to be robust.

LaSalle has invested $7.3 billion of capital on behalf of clients so far this year. We are very comfortable with the asset acquisition activity we've made over the past 18 months in the recovering German and French markets, in the fast-growing Asia market, and in our focused activity in North America, including Canada and Mexico.

Our investment activity in the U.K. has been principally on behalf of separate accounts who are nonleveraged investors, and as a result, we have not competed with the highly leveraged capital money. We have a very diverse portfolio of investments across all three regions and a number of different accounts and funds, including different investment types such as retail, office, industrial, hospitality, development, and residential.

Our investors generally desire moderate to low levels of debt, which has helped us against the market volatility. Our research-driven approach has resulted in growth of assets under management in the healthier markets and asset classes.

The continued commitment to real estate by our clients means that we will be well positioned to invest our clients' money capital in a more conservatively priced marketplace. One could say we've been lucky on our capital raise timing, and very good in our investment approach. And quite honestly, we'll take both, as this ensures continued performance.

Incentive fees were lower in the quarter compared with last year consistent with expectations, as the first half of this year included over $50 million of incentive fees. We continue to exceed benchmarks and focus on building a portfolio of opportunities for our clients that will generate a healthy level of incentive fees for the firm in both the fourth quarter and future years.

In terms of our cash flows and our balance sheet, we generated $82 million of EBITDA during the quarter and $257 million YTD. Our primary uses of cash during the quarter included repurchases of 425,000 shares at a cost of $45 million, $26 million for CapEx for office expansions and technology, and $20 million for acquisitions, bringing our YTD acquisition spending to nearly $90 million. Our balance sheet remains very healthy as we go into the fourth quarter.

This concludes my discussion, and let me now turn the call back to Colin.

Thank you, Lauralee. One of the reasons that we've made so many targeted growth investments in recent years has been to diversify our operations to offset and take advantage of changing conditions such as those which we're seeing today.

As we've been saying on these calls, we focused our investments into five areas. Firstly, strengthening our local and regional service operations. Then expanding our three global service delivery lines, global corporate solutions, global capital markets, and LaSalle Investment Management. Finally, establishing the world standard infrastructure for client service delivery.

Since we have already discussed our global capital markets and LaSalle Investment Management businesses, I won't comment further on them. But I will talk about our other priorities, beginning with our local and regional service operations.

Our overall financial performance is based on the business we execute in more than 450 markets worldwide. Our collective strength across these markets also determines the effectiveness of our global service capabilities.

So some examples of our performance in our local and regional service operations. In the Americas, we represented IBM in its lease of 490,000 square feet at the Littleton Corporate Center. In North Virginia, Colony Realty Partners named us leasing manager for its 1 million square foot office and industrial portfolio.

Our retail management portfolio grew by more than 25% during the quarter, increasing nearly 12 million square feet and more than 55 million square feet in total. We acquired Los Angeles-based Zietsman Realty Partners, a real estate investment banking firm in August. Our new colleagues contributed to a major win when we were retained by Heinz to market the landmark Union Bank Plaza building in downtown L.A.

Early in October, we acquired Corporate Realty Advisors, a leading corporate advisory and tenant representation firm in North Carolina. And strengthening our position in the industrial segment, we recently announced the acquisition of Klatskin Associates, the leading industrial real estate firm in New Jersey, which is the fourth largest industrial market in the U.S.

In EMEA, less than a year after we expanded into the Middle East with the acquisition of RSP Group, our Dubai team on the first major leasing assignment in the history of the Emirates. So in the history of the Emirates' rapidly expanding real estate market, and that was a 2.3 million square foot Dubai World Trade Center district.

Our Spanish capital markets team advised Casa Madrid, Spain's second largest savings bank, on the $815 million euro acquisition of a Madrid office tower, Spain's largest ever single asset transaction.

To continue to build our position in Germany, in September we acquired Camilli Veiel, a highly regarded specialist in leasing and commercial investment in Stuttgart and its surrounding area. To date this year, we have completed six strategic acquisitions in Europe out of a total of 11 worldwide.

Finally, a few European accolades. The German real estate journal, Immobilien Manager, recently ranked our firm as the leading capital markets advisor and proxy manager in Germany. In the U.K., we were awarded the Estate Gazette's Best Overall Real Estate Advisor title. And we are the only real estate company to be named to the Times list of 50 Companies Where Women Want to Work in the U.K. And that's the second year in a row that we've joined this prestigious list.

In Asia Pacific, we have invested heavily in the past two years to expand our market reach and service capabilities. The impressive third quarter results turned in by our colleagues in the region demonstrate the best of that strategy.

In Australia, QIC, the Queen's government-owned investment corporation, named us as advisor and joined Exclusive Agent for the divestment of Central Plaza 1, 2, and 3 in Brisbane. This 84,000 square meter portfolio has an estimated combined sale value in excess of $800 billion Australian dollars.

In India, Jones Lang LaSalle Meghraj, a mergered entity we created in June, won the mandate to deliver integrated facilities management services at Shell Technology India in Bangalore. Our transaction management team was also hired by Shell to complete the transaction for 24,000 square feet of temporary space plus an additional 200,000 square feet of [spegot] space requirements for the client's shared service center in Chennai.

Earlier this year, one of our Hong Kong international directors relocated to New York to serve as head of international business for the region. That recently culminated in our being named preferred real estate provider of the Interpublic's Group's Asia portfolio. We took the business from a competitor and will handle transactions for a 1 million square foot portfolio of Class A space located primarily in Hong Kong, Singapore, and Tokyo.

And finally, on September 1st we opened a new corporate office in [Hokkaido], and today we opened our new office in [Qingdao], a major seaport in China's Shandong province.

Turning to our second priority, which is global corporate solutions, we are continuing to build this global business line. Pfizer, the world's largest pharmaceutical company, hired us as a strategic partner to manage its office and R&D facilities in the U.S. and the U.K. The assignment includes integrated facilities management, energy management, and project management for 14.1 million square feet of space.

Affiliated Computer Services, the global business processing outsourcing and IT solutions provider, renewed and expanded our strategic alliance. We will now provide facilities management and project management services in addition to tenant representation and lease administration for the global 9 million square foot ACS portfolio.

And finally in the corporate arena, Proctor & Gamble renewed our strategic alliance relationship to both provide facilities management and project management services for P&G's 16.5 million square foot global office portfolio. We were initially retained by Proctor & Gamble in 2003 for a five year term. The fact that the new contract was signed a year ahead of its original expiration date is evidence of our team's performance and of the strong partnership which we've created with our clients.

Our fifth strategic priority is to develop the world standard business delivery platform in our business. And in addition to our internal systems, we continue to leverage our investment in client facing technology to pursue, win, and then service new businesses actively. We know, for example, that our One View technology platform played a role in securing the Pfizer and ACS wins, which I discussed earlier.

And because our technology enables us to service clients regardless of location, it is also a factor in expanding the existing client relationships.

So to close, we are very pleased with the strong results which our colleagues have generated in the third quarter, and indeed throughout this year. There are short-term challenges in the capital markets, but we have developed our global platform and comprehensive service offering to position us to generate additional growth across our business.

We will continue to carefully hire talented individuals and teams and pursue targeted acquisition opportunities. And I would like to take this opportunity to welcome all of our new colleagues who have joined us so far this year.

Our overall aim is unchanged, to continue to invest judiciously to build profitable market share, develop new product and service capabilities, and to improve our client service delivery.

So with that, we would now like to take your questions. Operator, perhaps you would explain the process.

Operator (OPERATOR INSTRUCTIONS) The first question is from Jeff Kessler with Lehman Brothers.

Thank you. And congratulations on a good results in a tough environment.

Thanks, Jeff.

First question is on margins, particularly margins in EMEA. You continue to invest over there. Does that continue to put a little bit of pressure on margin? And when do you expect the folks that you have brought on as producers and the infrastructure that you're putting place, particularly on the facilities management side, to start turning those margins around?

Well, first of all, let me start, Jeff, by saying that although the margins were down in the quarter for EMEA, were more than double up for the year. And we have said that this would be a year of improving margin performance there.

What we have been is fairly aggressive on the consolidating environment in Europe and we plan to continue. But what that does is, it puts some pressure on just the integration costs, putting offices together, technology, and then the opening purchase accounting that comes off of built-in pipelines there. So that is what put pressure on, in this particular quarter.

Those do burn off fairly quickly, and the acquisitions that we've done, we expect to be contributors into 2008. In regards to staff and productivity, it generally with a hire takes a little bit longer, though we've been hiring in terms of improving markets where we've actually had business for them to perform and quickly get into the flow. So EMEA is an area we think margins will continue to be an enhancer of performance for us this year and next.

Okay. Sticking with EMEA for a second, cap rates have been going up particularly in London, but perhaps a little bit as well in Spain. Can you give us, perhaps, a broader brush stroke of what the yield perspective is, particularly in areas like Germany, which was a little behind in its recovery?

Have rental rates continued to increase there, and have you begun to see yields also have begun to increase in Germany, or have they been made stable as well?

I think you've probably actually answered the question for us, Jeff, in a sense that you've got the hierarchy there of countries. The U.K. and Europe, as we mentioned, has seen the biggest yield of cap rate outward movement. And that omen started in London at the beginning of this year or late last year.

And I think we flagged this on earlier calls. There was just a sense amongst investment professionals, indeed, our own business included, that London cap rates heading down into the low, mid-three percent return, initial real returns, were getting a little too aggressive. And therefore, money had begun to move out of the British London market and towards Europe. So we've seen prices in Paris and Germany hold up very well. Some drift in Spain, as you mentioned.

And in terms of rental rates, the fastest growing rental rates in Europe this last quarter were in Germany. Frankfurt, you might say of all places, showed a 24% increase year-on-year, and the Russian Federation. So you've got some very -- sort of hopscotch in terms of rental growth still in Europe, and the overall market, as we said, for rental growth rates are between 10% and 30%. Europe looks pretty good. That's [before] predictions on where yield rates might settle, we'll abstain from doing that.

One question on the nature of the buyer that you're seeing out there. Granted, we saw the highly leveraged buyer probably disappear from the market months and months ago. But what are you seeing now in terms of how much leverage a buyer is willing to take before they begin to really consider their returns? In other words, how far down in terms of leverage are you seeing your typical buyer go?

You're not seeing 100% equity buyers, obviously, but clearly you've seen a lower amount of leverage being put in. But how low is normal at this point?

Well you can -- tell me, what is a typical buyer? We'll start with that question. We're seeing buyers in the market, the traditional institutional investors are still very much active, and indeed, they are finding the market easier and more favorable to them as the very highly leveraged players have left the market.

And typically, they'll be looking to put between 55% and 70% leverage on a deal, let's put 65% as a useful kind of rule of thumb. Which is similar to the sort of level of debt which our own investment company would typically use on stable properties.

But there are some investors in the market who are prepared to, at this point, just to secure assets, move in with quite significant levels of equity and quite low levels of debt. So it's typically around 60% to 70%, but you can see some quite significant variations on the downward side.

Okay. Thank you. Because we were just trying to gage what, if any diminishment in the number of buyers that are out there, given the lower levels of debt that a number are willing to put on.

We actually manage for a large number of separate accounts that we buy on their behalf, totally on leverage. So for example, I mentioned in the U.K. where we manage for a large separate account, all of our activity over the last two years has been completely unleveraged. And it's been tougher for us to finance it for them. So there are institutions waiting to get back in the game with the better pricing, and not afraid that the debt markets aren't there.

Okay. Thank you very much.

That was three questions, Jeff.

I got them in.

Your next question is from Michael Fox with JPMorgan.

Good morning, guys. And I would like to congratulate you on a good quarter in a tough environment.

Good morning, Michael.

Can you talk about -- Lauralee, you mentioned incentive fees in Q4 and years to follow up. Can you give us some more color on that and what you might see in Q4 and in 2008?

Yes. Let me start off, we will be issuing our investor debt here very shortly, when we get promised some more information with the completion of the capital rates that LaSalle Asset Management has just recently closed on.

But we have a number of funds because of the vintage year of these funds, that are nearing where they, in fact, will be into incentive fee performance that we can look forward to in '08. And because of the year that they would purchase their assets in, even with a slight rise in cap rates yield on a sale process, they're still extremely well positioned to performance.

We also have a number of separate accounts that have measurement periods when they do valuations and they measure us against the various benchmarks that we have. And those generally take place in the fourth quarter.

So we will have that level of activity in the fourth quarter and then going into '08 and beyond, again, you can look at the schedules we've provided you on fund maturities. But we have a number of funds where they are fully invested or committed, are starting into their liquidation mode, and should be clearing hurdles going into '08.

Okay, great. And then, with regard to leasing, can you give us an idea -- it sounds like the segment of the market that you guys primarily concentrate on in the U.S. is performing pretty well. Can you give us an idea of the pipeline for your leasing business in the U.S. as well as in Europe?

You're right, we judiciously seem to be in the central business district office market in some of the more active cities in the U.S. In general, what we've seen in talking to our corporate clients, sitting with them, that that uncertainty around -- we've kept close to them.

And we actually polled 20 of our client relationship managers for the corporates recently, and the general picture is that nobody really is holding back or changing their plans for expansion, with the exception of some financial institutions, particularly in the New York and in London where you see some people hitting the pause button. So you can expect some -- we are seeing some delays there in transactions.

But otherwise, across the piece, corporates remain confident. You've seen the earnings results, you've seen, indeed, the U.S. growth numbers coming through yesterday at surprisingly high figures. Our sense is that the corporates are investing robustly in the space and not really changing their plans. And indeed, in the tech sector, for example, you've got some very strong growth planned.

Okay, great. And just to follow up on that, can you give us an idea of how important the financials are in New York and London to your overall business?

Well, clearly in those markets, for the city market and for downtown and midtown New York, it's pretty important for us. But I don't have nay numbers, Michael, which we can quote to you.

Okay, great. Thanks a lot.

The general point, however, Michael, to make across the piece is, as we said, our business is very broadly spread, and no one of these markets is going to cause us disproportionate harm.

Okay, great. Thanks.

(OPERATOR INSTRUCTIONS) Your next question is from David Boardman with Wachovia.

Good morning. Thank you for taking my question.

Hi, David.

We've been reading a lot about some of the more domestic tier brokerage houses sending people over to Europe to start polling the audience over there to maybe try to bring them over to the United States to invest. And I was wondering if you could comment on -- you already having quite an established platform over in Europe. What's their appetite to investing in the U.S. market today with the way currencies have moved and the way pricing has moved here in the U.S., and how you're positioned to take advantage of that?

Well, I think our global capital flows research, which we publish twice a year, David, is a good place to start for that sort of question. But of the last year, $670 billion of money which was invested in real estate worldwide, something like 45% of it was cross-border transactions.

And cross-border and cross-continental capital flows are increasing at a very rapid rate. And with the way we typically talk about it is that it's flowing from everywhere to everywhere. In other words, the Australians are investing in Asia, Europe, and the U.S., the U.S. investors are moving from the U.S. to Europe and Asia Pacific, and the Europeans similarly spreading their activities.

The overwhelming -- I guess it's in one area which is growing more rapidly than any other in terms of its attractiveness, it's Asia Pacific. And we've seen that in our own funds, where Lauralee referred to the very strong capital raise we've had this year. A good proportion of that was into our Japanese and broader Asian funds, and we're seeing interest in those funds from both European investors and U.S. investors.

So directly back to your question, yes, have to start in Europe, Germany. U.K. to a lesser extent, into the U.S. But the real strong interest currently is into our Asian platform.

Okay. As far as the performance in your investment management group in Q3, it looked like you raised $1.3 billion in your global public securities business. You had $10.3 at the end of Q2, you had $9.8 at the end of Q3. It looks like performance might have been a little bit weak, which might have been expected with the way equity [rates] in the U.S. and some property companies internationally have performed.

But it looks like it might have been a little bit weaker than some benchmarks I might look at. I was wondering if you could comment on performance in your public securities business versus some benchmarks out there.

I think first of all, the returns in real estate and public securities have been pretty diverse across the globe. So for example, if we go into the third quarter, you're going to have very strong -- YTD, you're going to have very strong performance in markets like Australia, Hong Kong, Singapore, and Japan and Canada, and probably the worst performance in Britain. So depending on which of the funds and where they're at, they can have different weightings and that can be there.

So there are times that we'll be above the indexes and times we'll be slightly below the index. And generally speaking, across the board, we stay above that. We did have some outflows of securities in the third quarter, but we're up $1.8 billion to date, which is, I think, relative to the overall industry and outstanding performance in terms of growth.

The monies flowing in continue to be very strong, but you'll have different parts of the world decide that they may or may not want to be in real estate securities at any given point.

Your slide deck goes through kind of your exposure on separate account funds management business, which are comments that you've just highlighted. Where's your exposure on the public securities business? Is it heavily weighted to investing in the U.K. market?

No. It's a global portfolio that has weighting around the world. And they will shift that as they determine where the next opportunities are.

That's been the rapid growth area over the last 12 months.

Okay. Just one last question. I was wondering if you could quantitatively or qualitatively talk about what your Q3 might have looked like on a July-August-September basis, and how that might have compared to previous quarters?

If you could just go a little bit further with your question?

What I'm trying to understand is, with other companies or peers in your space, September was obviously weak. And I'm trying to gage versus other quarters, how did September, or September being the last month of the quarter, feel? Obviously, July and August were strong, but coming out of the quarter, how was the business operating in September, specifically?

We, David, across the quarter saw pretty even trading, even in the fact that it was up significantly year-on-year, but it was significantly with similar ups in each of the months. So we would not subscribe to that picture.

Fair enough. Thank you for taking my questions.

Thank you.

Your next question comes from Brandon Dobell with William Blair.

Hi. Thanks. I wonder if we can give us a little color around your compensation philosophy in the different regions, i.e. salary bonus versus incentive comp, and if you're seeing any local market change, the local market dynamics that would be different from what you had expected. As this market gets more transparent, more global, are you seeing people look at the U.S. commission structure and say, "We want to be in that same range," or are still people sticking with their historical compensation practices?

Well, I think you're aware that we have moved to more of a variable, though not a commission model in the U.S., meaning that instead of an annual bonus, our market people have compensation that runs on a quarterly basis based on performance. And that's really been pressure in the U.S. as we've expanded it and have hired from many of our competitors.

If we go into Europe, it's still very much a base and bonus model for us, though the bonus is highly variable and the most significant portion of our market producers' compensation.

In Asia, it's a mix, depending on the market. There are markets that are very incentive-oriented completely, such as in New Zealand, into others that are more of a base and bonus model, such as China. So I wouldn't say there's dramatic changes going on around the world in compensation.

Probably the one place I would say there is compensation pressure in Asia, in particular, around talent. And Jones Lang LaSalle has an incredible reputation of training and creating talent. And that does put compensation pressure on both us and LaSalle Investment Management in that part of the world.

The good news is, many times our people leave us and end up at clients, and it does full circle. And we also have a high history of boomerangs, which we're even more proud of, that says once they test it they come back home.

Just to give you a feel for numbers, Brandon, in the U.S. we've hired close to 100 transactors this year in Europe. Across the different markets and product types, about 160. And we haven't yet got a count for Asia, but we're hiring as fast as we can, particularly in India, China, and of course, Moscow, which is Europe.

So I think what we'd say is that our compensation practices are very effective at retaining good people, but they're also proving very effective in allowing us to hire good people as well.

Okay. And one other question, there. If you look at maybe the U.S. and Europe, if there was a period of, let's say, call it protracted slowdown or just not a whole lot of growth in transaction volumes for your business, what would be the potential variability around what a professional might expect to earn? How wide is that, I guess, is a potential band?

Well, that's got to depend -- it will vary hugely by individual and by market, because one of our philosophies is that good people performance well in good and bad markets. So you may find that whether a market is a factor of 100 or 50, some people are still earning very similar rates of income. Others might drop quite a lot.

But our payment models do vary around the world, they vary by markets and by market conditions. So I'd hesitate to give you a single answer to that question.

Okay, that's fair. One final one. Maybe over in the facilities [that] occupy our services managed in business, could we get some color on the recent wins and renewals. How would that look from a same store growth, or a cross-sell perspective, i.e. are you adding one or two more services, twice as many services?

Just trying to get a sense for, as I think about it, modeling that business in broad terms. How much is coming from existing clients just upping their work with you, or adding a new business to the overall mix?

Well, this year so far, Brandon, we've not lost any renewals. We've succeeded in --

18, I believe is the number.

18 for 18. And we've picked up over 60% of the RFPs on which we bid and we go for most of them. So we continue to see successful performance in our business area in terms of winning and retaining clients. On a cross-selling point --

I was going to say if you reference the press release, we talk about our corporate clients being managed in our account management business. And that is going to measure that combination of all the products we sell into them, whether it's facility management, lease administration, project management, consulting, and into tenant representation. That was up in the quarter 40% over the prior year.

What I'm not able to tell you is how much of that was sort of same client to new client. But clearly, it's a state that we're very successful at expanding it.

Great. Thanks a lot.

Thank you.

Your next question is from Will Marks with JMP Securities.

Thank you. Hello, Lauralee. Hello, Colin. I have a question, first of all, on share repurchase. Did you mention anything -- and I guess, repeat it, please, if you did -- if you do any during the quarter?

Yes. We bought 425,000 shares, Will.

Okay. And then a CapEx figure for the quarter. Did you --

Yes. It's $26 million, I think it was.

Okay. And so for the remainder of the year, can you give me an estimate? And then maybe looking out to next year, a figure?

We're probably going to have potentially a CapEx about at that same number in the fourth quarter. We're still building out a number of our major offices such as our principal office in London, and expanding our offices in Asia and India.

Also, our technology expansion continues both with the global finance and HR system. We're expecting that the number will start to decline into next year, because we spent so much in terms of really, the facility management expansion this year. The forecast for the total year is just a little over $80 million.

For next year?

No, for this year. We have not yet done next year.

Okay. Colin, you talk about [stealing] market share and increased head count. Do you have an approximate figure of what your head count is up versus a year ago, or your revenue producing head count?

No, but we'll work on it during the call, Will, and if we get a number, we'll volunteer it as the call goes on.

Okay. And just my last question, related to cash flow. It looks like last year compared to currently, your net debt level was at around $145 million and it's about half of that today. And you ended the year with zero. So it looks like you could easily end the year with positive cash flow -- or, sorry, I guess a negative net debt number. So what are your plans in terms of share repurchase going forward, or what do you plan to do with that money? You increased the dividend, which is a small amount of that.

Well, we will be paying bonuses in the first quarter, so that will eat up part of it. But our plans are to continue to pursue acquisitions. We've done abut $90 million so far, and we plan to take advantage of what we think will even be more of a consolidating marketplace potentially with some of the disruptions out there.

And then we will use cash that we can't productively put into growing the business into buying back shares, which has been our modus of operandus.

We do have the share buyback available. Just a little under 2 million shares are out there still.

Okay. And then, how much did you spend? Do you have an either YTD or a third quarter acquisition spending number?

$90 million.

That's a YTD number?

Right.

Great. Thank you.

(OPERATOR INSTRUCTIONS) Your next question is a follow-up from David Boardman.

I just wondered if you could talk about the foreign exchange contribution this quarter. I had looked back, I didn't notice anything talked about in previous quarters. And my understanding was a lot of your costs and revenues were generally matched on a global basis. So I was just wondering if you could talk about that?

We have $0.11 a share contribution in the quarter. And you're right, we haven't talked about it prior to this, because YTD it's only $0.15. So it wasn't really much to talk about until this quarter.

We are matched in each of our local currencies, revenues against expenses, so the variance only comes from profits. And so that's what you're seeing, is that's the profit contribution with the currencies year-over-year.

Clearly, we've got strong performance in Europe, strong performance in Asia, strong performance in LaSalle Investment Management, which has positions in both Europe and Asia. And the sterling and the euro and some of the other currencies are obviously quite strong.

All right, thank you very much.

Your next question is a follow-up from Michael Fox.

I just had a quick question about the margins in Asia Pacific. Obviously, this quarter was much better than we had in our model. Can you give us an idea of the type of improvement that we should expect going forward relative to the prior year periods? Should the change be somewhat consistent with what you saw this quarter, or moderate a little bit because of the continued hiring and investments?

Well, I think what you're seeing is what we've been telling you is going to happen sooner or later, and that is we would get to the point where, when we took the step up in infrastructure, we would now start to leverage it. And clearly, we are starting to leverage that in Asia Pacific. So we would expect expansion for a period of time.

There may be a point, then, where we've got to do another step up because the growth and the pace of growth there is just so strong that it doesn't take long before we've exceeded our office sizes and so forth.

I might also add that you're getting the benefit of the jumps on LaSalle Meghraj, India, in our results, and we're very pleased with that addition to our position there which give us over 50% market share. But that is a very profitable market for us, and their contributions will be in our results going forward.

Okay, great. And then, can you give us an idea what the organic growth was for the overall business in the quarter?

I'm sorry. In which -- overall, for the [entire] company?

Yeah, just total organic revenue growth.

[Serving] our acquisitions, you mean?

Yes.

I think the European revenue contribution was probably about 10% of their revenue. So we're getting revenue contribution but we're not getting profit contribution from that. Once we get to the rest of the world with the Americas, it's principally organic. And then Meghraj will be in there. We haven't disclosed that number. You can get partially into that contribution because though the minority interest is not 100% Meghraj, we do have a couple other positions in our portfolio that are in that number.

Just on order of magnitude, Michael, the organic is probably very high 20s to around 30% of the 35% YTD.

Okay, great. Thanks a lot. I appreciate it.

And there are no further questions at this time.

Will Marks asked a little earlier about our total fee earners. We have around 11,000 professional staff, and 8,000 of those are categorized as fee earners. We use a broad definition. It is not just [as now], as brokers. It's people earning fee from all sorts of professional work, not just brokerage activities. Our consultants, for example, would be in there as well.

So I hope that -- I know you can't respond, Will, but I hope that helps in your question.

Operator, are there any more questions?

There are no questions at this time.

Okay, well, with that, we'll conclude today's call. I'd like to thank everybody for their participation and for their continued interest in Jones Lang LaSalle, and we look forward to talking to you again following the fourth quarter. Thank you very much. Have a good afternoon.

Thank you for participating in today's conference. You may now disconnect.