Jones Lang LaSalle Inc (JLL) 2009 Q2 法說會逐字稿

Good day and welcome to the second quarter 2009 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 or objectives are forward-looking statements only. Actually results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company's annuals reports on form 10K for year ending December 31 2008, and our other reports filed in 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. A web audio replay will also be available for download information and the link can be found on the Company's website. At this time I will like to turn the call over to Mr. Colin Dyer, Chief Executive Officer for opening remarks. Please go ahead, sir.

Thank you, Brandy and good morning everybody and thank you all for joining us for this review of our results for the second quarter and for the first half of 2009. With me on today's call is Lauralee Martin, our Chief Operating and Financial Officer. Headlines for the quarter include revenue, which for the second quarter was $576 million, a 13% decrease in US dollar terms from quarter two 2008, but only a 6% decrease in local currency terms. Revenue for the first half of the year was $1.1 billion, a 13% decrease from 2008, but down only 5% in local currency terms. We reported a net loss of $14 million for the quarter or $0.40 per share, adjusting this for restructuring and certain non-cash co-investment charges in the quarter, net income would have been $11 million or $0.30 per share. Year-to-date the loss was $76 million or $2.15 per share. Again, adjusted year-to-date loss would have been $11 million or $0.31 per share. Adjusted EBITDA was $49 million for the second quarter, compared with $55 million for the same period in 2008. Adjusted EBITDA for the first half of the year was $60 million, compared to $77 million for the first half of 2008. These results reflect both the seasonal nature of our business and the lack of significant transaction and incentive fee opportunities in the current economic and market climate.

Before we look at the numbers, let's look first at the general business and real estate environment in which we're operating. After five or six quarters of recession in most economies, there are some early signs of economic recovery and economists consensus is that most countries will start to see a very slow recovery from the second half of this year. Annualized world GDP growth is expected to be less than 1% for second half, while some economies, notably in Europe, are not forecasted to record positive growth until 2010. Some of the largest global property REITs have taken advantage of improved corporate equity and credit markets to strengthen their balance sheets. Total global REIT debt and equity issuances reached $32 billion so far in 2009 and that is nearly double the 2008 half-year total.

In real estate markets there has, however, been little progress since our last earnings call. Real estate fundamentals and real estate debt markets remain weak and sales and leasing transaction volumes remain low. Tenants have frozen space requirements or are restructuring their operations and in the US and Europe, leased space takeup was down 30% to 40% on the year, and down 10% on the prior quarter. Office employment could continue to decline well into 2010, raising vacancy rates, despite relatively low-levels of new supply in mature markets. Some far-sighted corporations are taking the long view and taking advantage of current low rent levels to fix for longer-term deals, but they are still the exception.

In investment sales, the properties currently trading are high-quality buildings with secure, long-term leases, but with real estate debt markets still constrained, transaction activity is predominately in smaller deal, primarily equity-funded or with seller finance in place. The UK market was amongst the first to reprice and London actually saw improved volumes and a 25 basis point yield or cap-rate compression in the first quarter. With a strong buying pool our challenge there currently is now lack of stock. We also saw yield compression in Hong Kong and [Seoul], but most other markets are still showing significant falls globally. Class A office values in Singapore are now down by up to 50% from the top of the bubble and values in Munich, Paris and Melbourne by up to 35%. In the US although transaction volumes remain weak, the sale of several prominent office assets in the east and west coasts suggests that prices are now also down by up to 50% from their peak. In Europe, after seven quarters of declining volumes, 42 sales volumes equaled quarter one with volumes flat in the UK and Germany, but up in France, Holland and Spain. Meanwhile, the sale of distressed assets remains just a trickle and markets are still waiting for this to turn into a flow or even a flood.

To sum up, continued pressure in commercial real estate markets, particularly in capital markets and leasings, early positive signs of returning stability in the global economy, echoed by a slightly better tone in world real estate markets as players accept the new realities and begin to work out plans to move forward. In this environment we, Jones Lang LaSalle, have been proactively driving to the same operational priorities as we have throughout the recession. We continue to strengthen our balance sheet, to reduce costs and size our business to market conditions, we continue to take market share both by retaining our key revenue generating teams, but also by hiring selectively new talent, and we continue to innovate in our services to our clients. These four priorities have put us in a stable, confident position to weather this great recession and drive broader growth as markets recover. So now Lauralee will cover our cost, balance sheet and results priorities, and I will follow with comments on building new service lines and growing our market share in our core lines.

Thank you, Colin and good morning to everyone on the call. We've posted slides on the Investor Relations section of our website www.joneslanglasalle.com for your reference. I will use these slides as the framework to discuss our quarterly results, but we've also included year-to-date comparisons in the appendix beginning on slide 12 for your reference.

Slide two provides a reconciliation from our reported GAAP loss to an adjusted net income of $11 million for the second quarter of 2009 or $0.30 per share. We continue to take actions throughout the quarter to reduce discretionary spending and align our staffing levels with the current market conditions. As a result, we took additional restructuring charges of $13.1 million after-tax, primarily related to severance. We anticipated a portion of these charges last quarter when we communicated our annualized savings target of $100 million in base compensation and benefits for these actions, but with the majority of the actions implemented, we now expect the full benefits to exceed $125 million. We will record restructuring charges in the second half related to the staff reductions and integration plans we have already implemented, but the magnitude of these charges will be significantly less.

We have continued to take an aggressive approach to manage discretionary spending. We will echo what we told you in the first quarter, that we expect these actions to result in $50 million of annual savings on a local currency basis in the operating and admin line. We also reported in the first quarter that we anticipate our planned capital expenditures to be $45 million or less for 2009 and this remains consistent with our current expectations.

We recognized $14.9 million of non-cash co-investment impairment charges in the second quarter, or $12.7 million after-tax as a result of real estate asset value decline. As a reminder accounting rules require that impairments of value determined to be other than temporary must be taken at the individual asset level and separate from the overall value of funds performance. At the same time the accounting rules do not allow us to recognize any unrealized increases in asset values for other assets in a fund. These impairments are non-cash charges and therefore, do not impact our bank EBITDA. I will cover this in more detail in the LaSalle Investment Management performance discussion.

Moving to slide three, adjusted EBITDA was $49.3 million for the second quarter, which compares to $55.3 million in the second quarter of 2008. The comparison of adjusted EBITDA by segment shows strong performance in the Americas, supported by our corporate outsourcing business, and the addition of the Staubach organization. La Salle Investment Management experienced the most significant decrease compared with other segments, primarily due to lower incentive and transaction fees.

Turning to slide four, we reported significant seasonal improvement in our adjusted EBITDA compared with the first quarter of the year. We saw double digit improvement in each of three geographic segments compared to first quarter EBITDA, and our consolidated EBITDA improved substantially consistent with the seasonal nature of our business.

Slides five and six show our revenue performance in the quarter, compared to last year as well as the first quarter of 2009. First, looking at the year-on-year comparisons on slide five, in the Americas revenue was up 31% for the quarter, principally due to the addition of Staubach and the continued wins in our corporate outsourcing business. Colin will be highlighting some of these new business wins shortly. The Americas operating income this quarter was $18.6 million, which includes over $3 million of non-cash amortization on intangibles. EBITDA was $31.2 million, an increase of nearly 75%, compared with last year's $18 million, further demonstrating the success of the Staubach merger.

In EMEA second quarter revenue continues to be impacted by declines in transactional revenue as well as weakening foreign currencies against the US dollar, which included a 21% decline in the Pound Sterling and a 13% decline in the Euro. Management services revenue, which is primarily annuity revenue, was flat compared to the second quarter of 2008 in local currency despite a reported down 17% in US dollars. Second quarter revenue in Asia Pacific was down 8% in local currency overall, but the growth in our annuity revenue was up 19% in local currency compared with the second quarter of 2008. Transactional revenue continues to be impacted by the current markets and adverse currency movement. LaSalle Investment Management's revenue was negatively impacted by $15 million of non-cash impairment charges, but we are pleased that our advisory fees remain stable, with $59 million recognized in the quarter, in line with our first quarter advisory fees. I will spend more time on LaSalle investment revenue in a few minutes when we turn to slide 10.

Now turning to slide six we reported seasonal revenue improvement in each segment consistent with historical patterns and in line with our improved adjusted EBITDA performance. On slide seven, Capital Markets and hotels activity remain at a very low-level in the second quarter, resulting in significantly lower revenue in each segment compared with last year. We are, however, taking market share from your competitors, as demonstrated by our number one position in the UK for transaction volume, according to property data's lead table, and by our highest position ever in Real Estate Alert's recent US lead table of office investment sales over $25 million.

On slide eight, the Staubach merger continues to be very positive for the firm and we're extremely pleased with the integration and performance after passing the one-year anniversary of the transaction in July. Compared with the second quarter of 2008, our leasing revenue in the Americas more than doubled to $122.7 million, despite very challenging economic conditions. Outside the Americas, leasing revenue declined in US dollars, but by smaller amounts in local currency. In EMEA, leasing revenue was down 32% in local currency and in Asia Pacific, leasing revenue was down 30% in local currency, while there is activity and transactions in closing -- [our] closing, they are at reduced value as rental rates continue to fall. There are bright spots in Asia to report. The month of June was the best ever financial result for our Hong Kong business based on combined revenues from our leasing, tenant (inaudible), and residential business lines.

Turning to slide nine, we provided additional information about our management services revenue this quarter, which is primarily comprised of property and facility management, and project and development services revenue. Our project and development service offering, which where we call PDS is more transactional in nature with revenue aligned with the CapEx budgets of our clients. As our corporate clients in particular have reduced their capital expenditures, our revenue has declined as well, down 11% in local currency. The Staubach Company also had a strong PDS business which contributed to the Americas PDS revenue, declining only 3% in the second quarter. Despite the economic impact to our PDS business, we're very happy that Engineering News Record annual ranking of construction managers recently ranked us at our best showing yet in what is considered to be the construction industry's gold standard for size ranking, improving our position from last year. Focusing on the more annuity-like revenue and management services, our property and facility management grew 19% in the quarter as a direct result of our significant wins in our corporate outsourcing business.

On slide 10 we have provided detail of LaSalle Investment Management's revenue. On a year-over-year basis, advisory fees were down 18% in the second quarter, 11% in local currency. As I mentioned earlier, the second quarter advisory fees were stable relative to the first quarter of 2009. We noted in our earnings release that assets under management, which have always been reported on a one-quarter lag, were $36 billion. One-half of the $5 billion decrease from our last reported assets under management was due to valuations in our public securities business and from foreign exchange moment. Our consistent focus, however, has been to drive stable, profitable advisory fees. Advisory fees on funds in separate accounts typically do not have a direct correlation to assets under management but instead are based on the net operating income, contractual arrangements, or equity either invested or committed. As a result we reported stable sequential advisory fees in the quarter, and while there is clearly fee pressure in the industry, we are not immune to it. We expect to maintain a healthy margin from advisory fees through this cycle. We're very pleased that we recognized over $3 million of incentive fees in the quarter as we liquidate mature funds. We continue to expect to earn limited incentive fees for the remainder of 2009 as property values fall globally and transaction activity remains limited.

LaSalle Investment Management's results were also impacted by $14.9 million of non-cash co-investment impairment charges in the second quarter. Future impairments will be dependent on performance at the individual asset level and therefore, difficult to predict. The business continues to work aggressively to stabilize property performance, extend existing debt where necessary and position assets for exit in a more orderly marketplace. We continue to pursue new client opportunities while remaining patient with our existing dry powder.

Turning to slide 11 and our balance sheet, during the quarter we completed our secondary offering of 6.5 million shares and closed on our bank amendment. The net proceeds after bank fees from these transactions were $211 million. As a result we paid -- excuse me, as a reminder, we repaid our annual bonuses of over $200 million in early April. Through June, we repaid an additional $71 million of net debt this year, as a result of seasonally better performance, aggressive receivables collection and reduced spending, particularly in CapEx, acquisitions and dividends. The debt balance on our credit facilities at June 30th was $398 million. Our debt balance typically peaks in the first half of the year and we anticipate our debt balance to continue to fall as we generate cash in the second half of the year.

We ended the second quarter in a very solid position relative to our debt covenants with a leverage ratio of 2.4 times compared to an amended maximum ratio of 3.75 times. Without our recent equity and debt actions our leverage ratio at June 30th, when our debt is at its seasonal peak would have been 3.0 times, so we would have been considerable cushion even without actions. As a reminder, our strategic rationale for our equity offering and bank amendment was to position the firm with differentiated financial strength among private and public global real estate service providers. This strength will position us to maintain absolute client focus, grow our corporate outsourcing and our LaSalle Investment Management businesses, and capitalize on an industry recovery.

So to summarize, in a challenging market environment, we are pleased with our improved operating performance from the quarter, we will continue to focus on driving down costs, use our strong business positions to win new business and drive profits. Let me now turn the call back to Colin to discuss some of our recent wins and accomplishments.

Thank you Lauralee. Lauralee has covered the actions that we have taken to maintain financial flexibility and a strong balance sheet, so I will spend a few minutes talking about recent accomplishments in these areas, where we have driven innovation or grown market share. Those are, as Lauralee said corporate outsourcing, maintaining LaSalle Investment Management as a premiere investment management business and our new services in value-recovery and energy-management and sustainability.

Let's start with corporate outsourcing. We increased our first half Corporate Solutions wins by 40% year-over-year. We were awarded 60 new assignments -- sorry, 69 new assignments in all, including 32 wins from new clients, 22 expansions and 15 renewals. This confirms that corporate occupiers continue to see outsourcing as a smart strategy for controlling costs and rightsizing their real estate portfolios and that they view Jones Lang LaSalle as the preeminent global platform. In EMEA, Whirlpool expanded our relationship in the region, adding lease auditing services to our responsibilities, and Bank of New York Mellon awarded us lease administration and property management responsibility for their 1.2 million-square-feet of space. In Asia, we successfully renewed our contract with DBS Bank, one of Asia's largest financial services group, and we're providing them with facilities management for their Asian portfolio. Standard Charter Bank also appointed us facilities management and project management partner across China and the Philippines.

In the Americas, Merck selected us to provide facilities management and project management services for the pharmaceutical company's 14 million-square-foot-portfolio. And also in the Americas, Corinthian Colleges, one of the largest post secondary education companies in the US and Canada, choose us as its real estate strategic alliance partner for 4.5 million-square-feet portfolio. We also expanded our position as the Bank of America's largest facility service partner, winning more than 60% of their Merrill Lynch portfolio, including their high-profile New York properties. We are also proud that we were given considerable responsibility for managing the bank's entire US critical facilities business.

Our global coverage in corporate outsourcing is a big differentiator for our firm. Recent multi-regional wins for Jones Lang LaSalle include France Telecom, where we are providing transaction and tenant representation services for a 106 million-square-feet portfolio, the Standard Charter Bank where we have expanded our relationship to provide lease administration for the bank's 17 million-square-feet global portfolio and Smith Industries, where we have been retained for tenant representation and lease administration services for their 7.5 million-square-feet of space. Also internationally Shell named us a preferred provider for tenant representation, project management and consulting services for its 20 million-square-feet-square-foot America's portfolio which ranges from Canada and the US, to Mexico and Latin America. In Asia Pacific we won Shell's regional contract for tenant representation, capital market, project management, valuations and strategic consulting and we have already started work on new assignments for them in India, Malaysia, Australia, Hong Kong and in Europe. These wins and our growth in revenue in this sector justify our continued investment in our world-leading platform.

Turning to LaSalle Investment Management, given the tough conditions in global real estate investment markets, protecting and improving the performance is LaSalle's number one priority, and we have reinforced or asset management teams in all regions to achieve just that. We're also focusing on staying close to our institutional clients with constant open and honest communication about market conditions. LaSalle is also allocating senior people to new business pursuits. A number of competitors are dropping business lines, down-sizing their platforms, or even exiting the real estate sector, and this is creating new opportunities for LaSalle to win business. As the broader asset markets recover, real estate will continue to hold its place in future investment strategies.

Indeed as equities rebound and properties reprices, the so-called denominator effect will ease and real estate could see increment dollar allocations. As an example German open-ended funds saw EUR3.1 billion of net inflows in the last quarter, and we at LaSalle saw over $1 billion of net inflows into our global REIT business in the first half of this year.

However, investors will base their future alliance decisions on how managers perform under duress today. All of LaSalle's efforts are designed to insure that we emerge from the downturn among the strongest players in the industry with our reputation enhanced as a completely trusted advisor who puts our client's interests first in both good times and bad.

In the area of innovation, we are developing our value-recovery services for public and private entities affected by distressed market conditions. This involves integrating a range of our services for each client situation. So for example, we are providing receivership management and leasing services in the US on 20 assignments in ten states totaling approximately eight million-square-feet. In Europe, Barclays Capital appointed us to provide an asset strategy and cash flow scenarios for two shopping centre investments in Belgium. In Asia Pacific, we've won 17 value-recovery mandates this year, including an exclusive in Singapore to refinance or privatize a prime property fund, the auction of a group of residential properties in Hong Kong, and three separate asset management mandates in Japan - two for residential portfolios and one retail portfolio.

In the area of new services I am also pleased to report that demand for our energy and sustainability service continues to grow very strongly and we're building our capabilities and our leading position in this field. To staff these assignments effectively we now have well over 500 of our people who have earned lead creditation or have equivalent qualifications from similar organizations across the world. I should say amongst these lead-qualified professionals is our CFO and COO Lauralee Martin who has been accredited since 2008. These professionals are putting their credentials to work for our clients. For example, we served as the lead consultant on two of the first three properties certified platinum under the new operations and management standards for existing buildings. This includes our work with the McDonald's Corporation on its world headquarters in the Chicago suburbs and Beacon Capital's building at 550 West Washington in Chicago.

In another major achievement, upstream sustainability services, our UK-based sustainability team, was appointed by the global reporting initiative to lead development of global sustainability guidelines for the construction and real estate sector. GRI is an independent global action center of the United Nations environmental program and it's fast becoming the global standard in corporate sustainability reporting. So as we use current markets to build new service capabilities in areas like value-recovery, energy and sustainability, we're also working to expand our share in our traditional core business lines. As Lauralee said, the UK investment agents league listing the total value of transactions completed shows us moving up to first place from second on the list last year. And as she also said, a recent US Real Estate Alert report on brokers in office transactions of $25 million and more showed that we had more than doubled our market share in the first half of this year to over 12%.

US transactions completed during the quarter include brokering an agreement which enabled Whirlpool Corporation to sell its 570,000-square-feet manufacturing facility in Jackson, Tennessee. In London, we completed the largest office transaction in the UK so far this year, acting for the Government of Oman in its GBP445 million acquisition of a 75% interest in Bishop Square in the city of London. Last week in Paris we completed the largest transaction this year in the French market - the acquisition of the Triangle de l'Arche on behalf of our client MACSF, which is a French insurance company. Our French Corporate Solutions project management and capital market teams all collaborated on this assignment.

In early July, also in Europe, we completed Germany's largest transaction for the year-to-date, representing Heinz in the sale of newly completed 215,000-square-foot [MM] retail development in Berlin's Alexanderplatz, one of the city's top retail destinations. So overall, we have seen some significant investment sale share gains in some very fragile markets across the world.

Moving to leasing and tenant representation, in the Americas we've won more than 400 new assignments, totaling over 48 million-square-feet during the second quarter with more than half of the wins coming from new clients of the firm. In US leasing our total agency portfolio grew by 12% year-on-year, to 168 million-square-feet, and in Atlanta we were selected for property management and leasing services for the Georgia Pacific Center in downtown Atlanta, a 1.1 million-square-foot landmark building. Also in the Americas we won a three million-square-foot leasing assignment for the majority of Arden Realities suburban Chicago portfolio, and recent tenant representation assignments include a 100,000-square-foot project for Frost Brown and Todd in Cincinnati and a 350,000-square-foot assignment for Digital Reality in Boston.

Investment in industrial teams bore fruit when the Covington Capital Corporation awarded us the leasing assignment for its 780,000 square-foot industrial warehouse facility in Dayton, Ohio. CCC has also retained Jones Lang LaSalle for all industrial investment transactions throughout the United States and we're proud to have this entrepreneurial real estate development and investment company as a new client to the firm.

In France we represented Societe Generale which leased about 50,000 square-feet of space in a new building in the Saint-Denis suburb of Paris, and we secured 113,000 square-feet for a major pharmaceutical company in the Southwest suburbs of Paris. Over in Germany, we recently won a leasing mandate for 425,000-square-feet of prime CBD office and retail space in Dusseldorf.

As Lauralee said, our Hong Kong team recorded its best month ever, thanks in large part to nearly 40 transactions which they closed for major international law firms. In Shanghai, we represented DBS in its lease of 140,000-square-feet of space plus naming and signage rights in what will now be the DBS Tower in Shanghai. And again in industrial work, our China industrial team joined our Los Angeles-based port, airport and global infrastructure group to represent New Jersey's Preferred Freezer Services in their cold storage expansion into China. A new 280,000-square-foot refrigerated warehouse is being constructed in Lingang Logistics Park in Shanghai and in follow-on business, we'll also represents FPS exclusively in its expansion through China and act as global marketing partner for the Lingang Group, the state administered development company responsible for developing this 30,000 acre manufacturing and logistics park. Greater China, like India, is a very important growth market for Jones Lang LaSalle and our combined revenues from these countries was level with 2008 in the first half of this year. We will be continuing to reinforce our leading market positions in these markets as their economies lead the global recovery.

Finally, our colleagues' talent, accomplishments and outstanding client service performance continue to be recognized by third party awards and industry leading rankings in the second quarter of this year. There were many, but here are just three. Firstly, we were recognized as the best overall provider of corporate real estate services by the Watkins 2009 survey. The Watkins Research Group is an independent market research firm which conducts the survey every two years, interviewing more than 200 corporate real estate decision-makers from 182 international companies representing North America's largest users of corporate real estate services. Of the 19 service providers evaluated, Jones Lang LaSalle was rated first in every one of the 10 survey categories, which included delivery of results, adaptability of services, pricing, reputation, and financial strength. This award is a big deal and we are very proud that our commitment to service during this recession is being recognized in such an emphatic way. Our team in Japan were selected by Procter & Gamble for a partner award recognizing our delivery of outstanding facilities management services for them and we were one of only 20 business partners selected from their 500 Japanese suppliers. Finally in the awards category, our Middle East and North African business was named Hewitt's Associates best Middle East employers list in 2009.

So much for market situations and our current achievements. Looking ahead, we're going to continue to focus on the priorities which we have discussed during this call. They are maintaining a strong and flexible balance sheet, focusing on cost-reductions, taking market share by protecting key teams and revenue-generators and through selective external hiring and finally, growing our new products and services, which address the challenges and opportunities arising from the down turn. I should say that it really goes without saying that we will hold in all of this to our core values of internal collaboration and working with total integrity and always in the best interest of our clients. Our careful focus on these priorities has given us a stable base, which allows us to operate with confidence in today's business environment and positions ours firm for renewed growth as markets stabilize and recover. With that presentation, we would now like to open the call to your questions. Operator, perhaps you would explain the process, please.

Thank you, sir. (Operator Instructions) Your first question comes from the line of Mark Biffert with Oppenheimer.

Good morning. Colin, I was hoping that you could maybe provide some of that color and see how it ties to EBITDA. Last half of last year, about $191 million, $192 million of EBITDA, I'm wondering how all of that transaction activity that you mentioned translates into EBITDA growth through the second half of this year and whether you think you can surpass the numbers that you reported last year?

Well, let's first say, clearly, that we don't provide any guidance and some of the question -- one part of that question would lead us into guidance territory, so we don't give that. The examples of the transactions which we have just been through are intended to show you a couple of things. First of all, that there is business activity out there in what are widely seen to be very depressed transaction markets worldwide. And that we as a firm have benefited from some of the best of those transactions with the leading sales positions developed in the UK with the sale of some of the largest transactions [we're] involved [in] in the largest transactions across the major European economies in particular. I think it also demonstrates the fact that we are being proactive in building -- continuing to build teams where they think that is appropriate in some markets, but also in retaining our key talent so that we can get these sorts of transactions done.

Okay. And then in terms of fund flows that you are seeing into LaSalle Investment Management, you guys -- it looks like brought in a little over $1 billion into that. And what kind of in-flows are you seeing quarter to date into that space and do you expect that to move higher and positively benefit some of your management fees in that business?

If by quarter to date, you mean Q3, --

Excuse me. Q2, are you asking?

Is a quarter behind? Is that what you are reporting in terms of the in-flows?

No, I'm sorry. The in-flows we report for the quarter that just occurred, we report the assets under management on a one-quarter lag because it just doesn't get reported and rolled up until that period of time.

Okay. So Q3, are you continuing to see inflows into the space in Q3?

The inflows are quarterly inflows. So there is a difference there between assets under management which is a quarter-lag on the inflows, which are current quarter numbers. But yes, the inflows particularly into the private -- sorry, into the public securities section of LAM has been comfortably strong, I would say. We have been pleased with that. And that does continue, it's a steady flow rather than a one-time event.

As to private equity funds raising, that has been very limited. We raised $500 million from memory in the first quarter and since then, it's been fairly slow. There is not a great deal of appetite in the institutional market currently for fresh investment in real estate. What we see is institutional investors, largely waiting, looking for market trends and some sort of clear direction to emerge in real estate markets. But as I said earlier on, one particular issue, which institution investors had, which was that they were seeing their allocations to real estate look over allocated as compared to equities. That has kind of self-corrected as equity markets have recovered and as the value of the real estate portfolios have been repriced regrettably downwards but it's taken care of that denominator effect.

Okay. And then jumping to the leasing revenue, previously Colin, you had mentioned that you guys, where the market was down 40% you were only down 20%. How does that currently compare in the second quarter relative to the market and your performance?

Those are second quarter numbers.

Are you talking -- we give you in the charts the regional breakdowns, but I think what you are referencing is the first quarter Americas where last quarter we sort of gave you a place holder against if we did a pro forma Staubach, is that what you are referencing?

Yes.

We would have been in the low 30% down in the Americas on a consolidated basis. Which actually -- we're delighted because that was the Staubach organization's highest record quarter because it was just prior to our merger.

Okay. And then lastly, on the restructuring charges that you mentioned for the second half of the year, compared to the current quarter is it half of what you reported in the second quarter? Is it just to give us a direction on where that could be or how big that number could be?

It will be significantly down, probably less than half of that number. What we have is that we have taken actions and just under the accounting until certain notifications are done, we can't report them. So it's more tails off at the end of that activity.

Okay, thank a lot.

Your next question comes from line the Kevin Dougherty, Bank of America Merrill Lynch.

Just following up on the restructuring charges, could you just provide a little more color maybe on what accounted for those charges this quarter and how the $25 million in incremental savings came about?

Well, they are principally severance. We've continued to take actions around the world. Our most aggressive actions have been in Europe. We have taken some actions in the Americas, Asia-Pacific and LaSalle Investment Management. The biggest change is as we've taken these actions, we have been able to have the payback periods be less than what was earlier anticipated. In the US our payback has generally been about three months, Asia and LaSalle Investment Management each about four and a half months, and Europe, seven and a half months. So it's really been good execution and focused execution that has allowed us to take the actions and get more savings.

Okay. And then you also talked in past about, I guess, $50 million in discretionary cost savings, could you provide an update on maybe how much of that would have flowed through in 2Q and then how much is still yet to be released over the course of the year?

We're pretty much at a run-rate at this point in time. Let me refresh you, that is local currency, so what you will see is significant down-actions around the world because of currencies, but we wanted to make sure we were giving you local currency. But we are at a run-rate now that is achieving that number throughout the year, and just to refresh, it's things like travel and living, it's professional fees and so forth. The good news would be we would actually like to see that tick up, because that means that business is picking up, but at this point in time we believe we have that number captured, no matter.

Okay. I also wanted to see if you could talk about the revenue opportunity from the corporate solutions wins that you mentioned and then what's typically the right way to think about the EBITDA ramp-up as you bring on some of those newer clients?

Between the wins and transfer of business into our firm and then the revenue and then ultimately the profits generated from that, there is typically a time lag of six months or so. So wins in the first half of this year may begin to show revenue in the second half late on. From here on in revenue begins to flow into next year. There is typically also a period where we don't make profit as we take the cost of transfer and then the revenue ramps up after that. The wins we have seen this year have been across the globe, so all three regions have contributed and our win rate on the RFPs which we have competed on has been over 50% in each region and well over 60% in the US.

And maybe an order of magnitude on the size of that contribution from those new assignments?

We haven't sized that out yet and we don't give guidance on it either, but it will be very handy. You can see the revenue from our corporate business was up in the first quarter -- first half of this year, and the second quarter too. And we think that is very satisfactory in an environment where there is pressure on from the corporates to reduce costs. So we think in that environment you're able to increase the numbers of clients, increase the activity with our clients and maintain a comfortable revenue growth. We're pleased with that performance.

And just maybe a way to give you a feel, if you'll recall we had strong growth in that business last year and now as we're reporting the year-over-year performance you can see it flowing through at very healthy double-digits. So clearly that win, execute and translation does flow through the P&L. We showed you that growth both in the press release and then in some of my discussions as we looked at management fees around the globe.

Great. Thank you.

Your next question comes from the line Sloan Bohlen of Goldman Sachs.

Good morning. Colin, just first a question on strategy. It sounds like post-IPO, the reason for the IPO was to solidify the balance sheet and use as a marketing tool for the outsourcing and investment management. Can you kind of talk about that, and then, a little bit more in reference to what the potential growth in some of the brokerage businesses could be going forward and how you potentially use a stronger balance sheet there?

It was a secondary offer, but we liked the idea that IPO (inaudible). But the -- we were clear when we went to market, both on the quantum of funds that we were looking for, and we were clear on the reasons, both for raising the equity, but also for adjusting the covenants around our bank lines. That was to obviously solidify the balance sheet to two significant commercial ends. One was to enhance our ability to win corporate business, because we found that as the recession, particularly the credit crunch, ground on, corporate clients -- we were spending an inordinate amount of time talking to corporate clients both existing and perspective about our balance sheet. Because when they are committing their business management to us for a period of five years, they want to be sure that we'll be around for that period of time. So by doing the things that we did around the balance sheet we completely swept away that issue and we know that as a result of that we have significantly enhanced our ability to win business. It was good already and it has got even better.

The second area was in LaSalle Investment Management and there are two prongs there. Firstly, we're being invited by parties to bid for new mandates or to take over the management of funds. And in doing so, those principals are also looking at our financial strength because they want to be getting into bed with a manager who, same story as Corporate Solutions area, who is going to be around in five years time.

And so they, that was the first prong with respect to -- and the second one was that we as a firm have always co-invested in LaSalle's funds and we wanted to have the flexibility on our balance sheet to continue to be able to do that in the coming years. And so all of those things were taken care of with the actions which we drove.

You talked about the possibility for enhanced revenue in the brokerage sector, but of course with the Staubach acquisition we have a considerably enhanced brokerage team and strategically filled in from the Jones Lang LaSalle perspective the hole in our service offer in the US where we were weak in brokerage. We are now able to service our corporate client in that area in a very robust way.

Likewise, in our brokerage activity, in leasing and our investment sales activities, more broadly around the world, what you have are a group of professionals who are operating in revenue terms at well under their peak of say two and three years ago. So we have the people in place, we have the geographic coverage, we have the service line coverage intact and ready to go as markets continue to stabilize and improve. And then we have added to that additionally by selectively hiring some teams, such as a ten-man team who came in at the end of the first quarter into our business in New York. So all that (multiple speakers) leaves us well-placed to pick up in our brokerage activity as markets stabilize and improve.

Okay. And at this point is there a geographic preference for further expansion if you were to grow in brokerage businesses as you look at the opportunity [type] going forward?

I think at this point the markets are in general so low in transaction volume levels that we're sitting with enough capacity in each individual to pick up and grow his or her individual business in brokerage lines across the world that we're nicely placed and we wouldn't be looking at selective investments. But as things tighten, I would anticipate it's the pace at which the markets begin to pick up in activity which will determine where we'll be putting people into or hiring people into the business. If you look at the kind of hierarchy as to where the world might recover as a driver of that, I think we would say that Asia and particularly India and China, which will be in high single figure growth in the second half of this year. We're very well-placed there. That it would be a candidate for adding -- those areas will be candidates for adding people as the markets recover. And then the hierarchy goes through broader Asia, picking up South America, probably the US sometime after that and probably Europe and Japan following in this process of recovery.

Okay. And then kind of to that end you talked a little bit about the potential of distressed assets that might come to market and how that is a trickle and it could be a flood. Could you talk about 1) what the opportunity set could be there, and then 2) could you talk about how lenders are being accommodating in extending terms and if you could maybe reference that by geography?

Well, let me address the lender piece first, which is most important with LaSalle Investment Management. If you have maintained good relationships with your lenders, which LaSalle Investment Management has and you demonstrate that you are the best at managing that property, far superior than them, the lenders are accommodating, because they want to protect value. So, again, a consistent performance is absolutely critical in terms of the lenders.

I'll turn it over to Colin, because the opportunity around the stress that you are talking really comes from the value-recovery business that we have been building.

I would say, I mean, LaSalle have renegotiated a couple hundred of bank lines on individual assets around the world and they have been able to -- over the last 18 months, and they have been able to do that, as Lauralee said, because of the quality of their relationships. That is what you see across the broader market. Where borrowers have good relationships with their bank or balance sheet lenders, they are generally able to extend their loans or renegotiate the covenant rules around them if they have come under covenant stress and generally financing is being rolled forward. Tougher in securitized lending. We'll come back to that in a minute. So that has meant that so far at least in this recession that the banks have been helping the equity players to stay with their assets and manage those assets rather than foreclose and force a fire sale of assets and with these markets that an entirely sensible thing for both equity and debt flows to do. So banks and equity are generally working together to keep financing in place and keep ownership in place.

When, however, that breaks down and for example, there is insufficient cash flow to service a loan and that is generally a pretty definitive trigger for some action, we are being invited to come in with a number of services. It starts with general portfolio or asset strategy advice, if it's a single asset, on how to manage that asset over the coming one to two years. We then are often brought into asset-manage or straight manage the building. We could -- we're asked to take over leasing and then eventually, at some point, the distressed asset can/does turn into a sale. The reason why we so far have seen a trickle really across the world is that that process of forbearance by the lender and then this whole process of working through and getting the asset into shape for a profitable sale just takes some period of time. Probably a lot longer than the market had originally anticipated. So that is the process from lender through to execution of a sale. What I would say is that you can see from the data that is published, that the number of distressed assets and the dollar value of distressed assets across the world is beginning to mount, so this process will turn from a trickle to at least a stream over the coming 12 to 18 months.

Thank you. And just lastly, one little follow-up on that. Do you think the catalyst for when those transactions perhaps happen, you mentioned the securitized market, do you think it's the maturities of those CMBS loans that are tougher to work out that kind of triggers a lot of sales to happen? Maybe could you frame timing of when that might occur?

I might take a crack at that one. If you look at the progression of our value-recovery service, we're working with a number of banks around their home-builder portfolios through auction and technology capabilities that we have that can move those kind of things. That was the first wave that hit big distress. The next part of our business that has been growing the most rapidly is retail. Why? Because that was the next piece of the industry that has hit some distress. The message is as the distress happens, it moves forward. I think everybody is talking about the CMBS and actually how it will play out and clearly what you are seeing is a lot of discussion around nothing can really happen until there is a default, because the documents then require it to go to a special servicer. So it's in motion, but you can see it driven by stress and then requirements to deal with what comes out of it.

Okay. Thank you guys very much.

Your next question comes from the name of Will Marks with JMP Securities.

I had a question on -- I believe Lauralee you may have mentioned the term briefly, intangible amortization, did you quantify as you have in previous quarters what that was for acquisitions?

I talked about it in the context of the Americas, which was about $3 million, principally because that is now going to drop off pretty dramatically as we go into the balance of the year. I think we only have a million left on that as we go forward. We can give you more detail on that, Will, if you want to call us on line for some of the others. The pieces that are in the rest of the world are pretty much what they are going to run pretty consistently.

But it's becoming less meaningful?

Yes. The Staubach piece in particular, we had one 12-month piece that was pretty high into the P&L and as we put it all in our disclosures, it would drop off when we hit the one-year anniversary, which has now occurred.

Okay. Also somewhat related on Staubach, was there much in the area of revenues that you couldn't recognize for GAAP purposes?

It was relatively modest. We still had a small amount. It was about $4 million.

Okay. And then I was also a little confused. I believe you said that low 30% pro forma decline in leasing revenues in the Americas without Staubach and that would imply that Stubach's revenues -- (multiple speakers)

No, with Staubach. I'm sorry. On a pro forma basis, as if they had were part of us.

Apples for apples.

As if they were a part of you a year-ago? You were -- okay.

Right, because we were up dramatically because they are part of us, but if they would have been, it would have been in the low 30s decline. And again, that was their record all-time quarter, second quarter of last year so that would be a tough comparable.

Right. Because the -- . Go

Just against the market as a whole, that is a good performance as we said. Shows us picking up share.

And Staubach was -- I believe Staubach employees were incentivized to close deals and particularly in the second quarter because that was the end of their fiscal year - is that correct?

Last year? Yes.

That pressure has gone now. (multiple speakers)

Right. On the balance sheet, your deferred business obligations, can you break out what is Staubach?

We have given you that. It's the majority of it Will, but we can get it for you. It does amortize in. Are you trying to get to interest? Is that what you are trying to do?

No, I --. Just more of an understanding of what the present value of the future payments you need to make for Staubach is.

Here's what we'll do, we'll have a look at that while we're talking, we'll take some more questions, and we'll come back to you when we have it on the call here.

Okay, a couple more quick -- (multiple speakers:

Just to put it in perspective though, as you know we gave you the number at the time we started, and did the acquisition. We -- in the quarter accrued so half of our interest was cash and half of our interest was accretion. So when you look at our interest line, $335 million is the piece owing to the Staubach organization at this time.

Okay. I'm sorry. Your interest line -- interest expense was $[14.5] million for the quarter?

Yes, but half of it was cash interest. Half of it was non-cash, which is accretion against those portions.

Got it. Okay. A couple of other quick questions. The lag on the investment management side brought up the question that I have and that is on the securities side of the business, where I would assume that assets under management are up due to stock price performance in last quarter, is that also from March 31st?

It's a lag also. So we're anticipating that with the improvement of the market that will be helpful in the next quarter. To give you a contrast, I think it's difficult as you look at that number, which is obviously fallen pretty dramatically from its peak, which was $54 billion. Of that decline to today, $4 billion was currency. So just the dramatic decline because a great deal of our portfolio is in Europe with the pound sterling and the Euro and then we had $4.4 billion of decline in the global securities. And so that is what is driving a big piece of that, but as I said, we focus on the annuity revenues and we have talked about the importance of having a margin in our business with the costs of running the business and the margin on the advisory fees and that has been protected and preserved and we're very proud of that.

Okay. And then you mentioned the $4 billion in currency, $4.4 billion in securities, so the rest is in hard-asset real estate, I would assume. Is that all or generally from pricing it -- repricing appraisal?

Yes, that is correct.

Okay. And do you expect assets to be priced down in the second quarter as well? Meaning that when you report in the third quarter?

Yes. There is a steady downward trend as we go through our quarterly earnings, some are rolling 12 month, six months, and some are quarterly evaluations, but there is still clearly a downward trend being worked through. It's service advance in the UK, where assets have been repriced very rapidly, it's probably some way to go in the US to give the extremes.

I think the market has now recognized value impairments that will come out of the fact that there is just been a repricing based on the cap rates of property just in total. Going forward, as Colin said, there will be continued evaluation if property performance deteriorates, but that generally goes at a much slower pace than what has occurred in the quick evaluations in the marketplace overall.

Okay. Perfect. That is all from me. Thank you.

Your next question comes from the line of Mike Mueller with JP Morgan.

Most have been answered, but just following up on that prior question. Is there a way to quantify, thinking about the appraisal process and all of the assets under management in the fund in terms of what the timeframe is to burn through it? Let's say real estate value don't change at all from today and they are just static own over the next couple of years. How long would it take with the appraisals coming up, whether it's quarterly or every six months to fully mark the AUM to market? Is that a one-year process? Is it a multiyear process?

I don't know, because we don't know where markets are heading. I think what is important, we do evaluate our portfolios quarterly. So as Colin said, the goal is to be very honest with investors. They don't want to feel that you are deceived them around the value of their investments. So those values are done for investors and that relationship is very important. So we think we have done a good job of being open and transparent as to where that is.

Okay. And then I think in terms of the new initiatives you were talking about with investment management, you talked a bit about value-recovery, are there any other business lines that you can touch on that we should expect the Company to move into over the next year or so?

Move into -- we have obviously constantly our internal plans for new business lines which look attractive to us. They usually grow out of existing relationships which we have with our clients. I wouldn't expect anything radical over the next 12 months. More like add-on and tack-on services to existing broad-business areas. If you look at where we are seeing growth, we have referred to quite a bit of it. Eventually all business lines, but dollar growth even in this market across our Corporate Solutions business, that's both large and small corporations, as dollar growth and footage growth in our facilities and property management business, our US agency leasing portfolio has grown as we said by double dig percentages in the quarter, and our value-recovery business lines and the assembly of those lines and our energy and sustainability services as we referred to extensively are also growth areas. And where you see growth as we have said consistently, we have been cutting costs where markets have been declining and where we have seen growth we are been carefully investing behind that growth. So expect to see us backing those lines of account growth in this market environment.

Okay. And last question, you mentioned that you have been invited to take a look at potentially taking over the management of some funds out there. If we are thinking relative to the existing AUM, can you size up how significant that opportunity set is?

They will be significant enough to be worth mentioning to you on subsequent calls when we have achieved them, but I wouldn't give you a number at this point in time.

Okay.

But we'll let you know.

Okay. Thank you.

Your next question comes from the line Brandon Dobell with William Blair.

Thank you. Lauralee or Colin, would you expect the same type of seasonality in the leasing business globally that we have seen historically? And I guess within that, one kind of subquestion would be the pace of new sublease space coming on the market. If you could characterize how that has trended over the last couple of months? Trying to get a feel for if we should expect that to be a net contributor to a better half in the back half of the year relative to previous years.

Well, you may have seen our excellent Peter Roberts, head of our Americas business, on Bloomberg television and he was saying that the total vacancies in the US lease market, in offices at least, is nearing the high teens and it's could peak as high as 20% and more. In fact it's beyond that in some submarkets. So we're clearly still in a situation where vacancy rates are growing and that means that we have a net negative absorption across the US and indeed, across most of the rest of the word. What we are seeing or beginning to see in some markets and if you take at class A office buildings, which are really the top of the market, rents in those assets dropped pretty much as dramatically as they did across the broad markets. I think in terms of 30% in major CBDs across the world. What we think we're seeing currently is that the lease rates/rental rates for class A buildings in major centers are beginning to stabilize.

It doesn't mean to say that they are rising yet. But if you take London, Hong Kong, Tokyo, Mumbai, Moscow, on our rental clock we begin to see those rental rates in those marketing bottoming out. That is a good first sign, because what it will say, it will be the first signal to occupiers, the clients for the space, that actually delay is no longer a profitable thing. But in those markets at least, they might as well get moving and begin to take space. We suspect that will start, as I indicated, in the better buildings in the major cities and when that happens we could rapidly find there was been a kind of panic/reaction and that prices have been cut on those major buildings, perhaps too far in the kind of very dramatic reaction to the credit crunch impact on the markets, which we saw in the last quarter of last year and first quarter of this year. So we can't at this point say volumes are picking up any time soon, but we can see some early signs of stabilization in lease rates. You asked a question about seasonality?

Right.

And Lauralee, do you want to try that one?

You saw our seasonal first quarter to second quarter. I think the challenge, Brandon, is that we're seasonal, but on a year-to-year comparison, down.

Right.

So I think that what we have done is address our businesses in terms of cost and sizing to that down market such that we performed through that seasonality, even though it's at a lower level.

Okay. So if you look at, not the absolute level of activity the past several years, but just that kind quarter on quarter trends, second quarter, third quarter, fourth quarter, that same kind of trend should exist, even if it's 30% lower than last year. But it sounds like you don't see anything out there that would suggest that the seasonal trends of past would be markedly different, but just at a lower level. Is that fair?

We have more moving parts than we normally have so against a market stable or growing, you can impose a seasonality. You have some unknown overall down trend still at play. So there are just more moving parts.

Okay. That is fair. If you look at the second quarter run-rate for operating or administrative experiences, is that a good benchmark to kinds of build out the rest of the quarter, say the next two or three quarters or even four quarters from a dollar-spend perspective? Just trying to get a sense of relative to that $175ish million or so that you talked about at the outset, if this current run-rate is the right place to start or if you think there is kind of more knock on affect from the cost that we haven't seen flow through yet?

I think that should be pretty close. You do have some variation in things like travel that will match the seasonality, because our travel is very much business and client-related so you have that. And then the other piece is we will have expenses come into the operation with the outsourcing wins. Clearly there will be revenues that go with them as well, but again, that could change, but if it changes, it would be to good growth and profit reasons, not because we backed off of any cost controls.

That is fair. Focusing on that outsourcing business for a second. Could you characterize for us, let's call it "The pace of RFPs," or the pace of potential opportunities out there, any color around relative size? Are you seeing bigger RFP than you usually see and bigger opportunities, and final question and it will be a bit of a difficult question, but how do you think about the profit margins in let's call it "The corporate services business," or the property/facility management business, relate to the rest of your operations? I know that transactions are going to be low these days, but transition margins are low, but trying to get a sense to look at it long-term basis, how we should think about your structural margins and focusing on property management first?

Well, the pipeline is very strong so not as slowing. I think our people would say that this the size of the outsourcings are up and up fairly dramatically as corporations are taking the need for cost-control to the next level. In terms of margins, the margins of our FM business in the US, where we have considerable scale are quite attractive. They are descent in Asia. And Europe, where we don't have scale there, marginal. Relative to the other business lines, they track with the normal pricing that we have in the marketplace. So tenant representation, as you know, we showed you the Staubach margins at the time of the merger and that would continue. Our project management business, again, that is a percentage of cost and it's an attractive business to us. And so it's a business that we find very attractive both for its annuity characteristic, but also because of its margin and profit constriction.

And final question -- sorry, Colin.

Just a bit more color. Our highest win rates are in the multi-national across border awards and in that area we can see year on year a quarterly win rate, which is double last year. So quarterly number of RFPs won, which is double last year's level. That gives you a feel for the strength of the demand in the market as well as our performance against that demand.

Okay. And then final question over in investment management, you talked about free pressure, but hopefully being able to sustain your fees where they are. I want to get a better sense of how we should think about the interplay between fee pressure, loyalty to clients, opportunities to get other business? Can you use pricing as a leverage to increase your AUM? The pricing dynamics around that business right now, and how you feel comfortable that you can maintain that advisory revenue if indeed you are seeing fee pressure.

The biggest pressure out there, which is what the industry is facing is on committed funds, because clearly no one wants to rush to get those assets under management, because that would not be a smart thing to do. So that is probably where there is the most pressure. There is pressure on the balance of it, and there is client relationship pieces. I think there is a nice balance that says when there is not enough revenue to properly manage the asset, that is really the issue. So the opportunities that Colin mentioned on potential takeovers are really driven by the fact that they were businesses that were going to earn their money on incentive fees. They are not going to get those incentive fees and now they do not have the resources to keep adequate staff of the talent and caliber to manage those portfolios. So yes, there is tension, but it will be played through, but I think, again, focusing on what you really want in that portfolio is the performance of the assets will be the balancing factor.

These decisions are really not being taken on price, meaning fees. Clearly that is it is an element of the scorecards that investors will use or institutions will use in selecting their managers, but far more important to most of them is the point Lauralee made about performance, but it's also one of their feel for the quality of the team, their level of trust, their level of historic communication, which the management team has shown to its clients. And all of those factors particularly in an environment where people are cautious, all of those are as important or more important than pricing at this stage.

Appreciate it. Thanks a lot.

Your next question comes from the line of David Gold of Sidoti.

Good morning.

Well, good morning, David.

Just wanted to follow-up on the cost-cuts in the quarter. I guess one thing we are conscious of is the potential for where the line is of basically reducing costs without say cutting into muscle. And so I know that is something that you have been very focused on, but just curious how we think about that and sort of where we are in that? I guess, are we at the point that maybe as lean as can be, or is there still maybe some potential for cost-cuts?

I think we're beginning to feel that we're at the bottom of the recession and if you say that cost-cuts broadly match the shape of recessionary curve, I would say that we're coming close to the point that we're not looking to make more radical cuts in the cost base of the business. Clearly, as Lauralee said, we'll have the continued benefits year-over-year of cuts that we have made over the past 12 months. That will come through in coming quarters. We're clearly very focused on tight cost-control, but it's point of the cycle that we believe that we have got good teams in place, we have lost some of the inevitable fat which you build up as a organization during growth periods. We have certainly looked at removing our poorest performers in revenue-generating terms, and kept the best and adding to the best. Our focus over the coming six to 12 months will be shifting to drives revenue growth and building the revenue line, because we think it's beginning to get to the point in the cycle where that becomes the next imperative.

I see. So from where we sit today, presumably, on the cut side, it would be close to over if now over?

I would say it's managed. There is no question that our businesses that have the costs in them have bonus pools and profit-sharing that if they do not see the revenues, they will take appropriate actions, but they also know there is a point, I think you referenced, when you said, "When you get into muscle", that there is that tipping point where you lose a place in the market because you don't have the critical mass. I think what we have shown with the examples that we tried to give you is that we have not done that. That if we have been able to keep our tipping point and take advantage of the fact that other's tipping point has fallen through.

Okay. And then just one other minor. You mentioned in the release about LaSalle Investment Management raising $1.1 billion during the quarter and just curious if you could a) give any color as to if those funds are separate accounts and b) if the funds are targeted on a certain geography, where would that be?

The majority of that money, David, was in your securities business. The first quarter we mentioned a couple of private funds, which was in Canada and Mexico and our ventures in Europe. They are modest. I think we've only had a couple hundred million in the private sector, so most of it is securities.

Okay. Very good. Thank you both.

(Operator Instructions) And there are no further questions at this time.

Well, thank you operator. With their being no further questions we'll conclude today's call. I would like to thank all of you for participating and for your continued interest in Jones Lang LaSalle and that would cover our investors, analysts, but also our many colleagues who listen into these calls. Thank you all and we'll see you all on the third quarter call.