Jones Lang LaSalle Inc (JLL) 2010 Q3 法說會逐字稿

Good day, and welcome to the third quarter 2010 earnings release conference call for Jones Lang LaSalle, Incorporated. Today's call is being recorded. Any statements made about future results and performance, or about plans, expectations, and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements, as a result of factors discussed in the Company's annual report on Form 10-K for the year ended December 31, 2009, and in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any forward-looking statement. A transcript of this call will be posted and available on the Company's website. A web audio replay will also be available for download. Information and a link can be found on the Company's website. At this time, I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir.

Thank you, operator. Hello, everybody, and thank you for joining us for this review of our results for the third quarter, and the first nine months of 2010. With me today in Chicago, is Lauralee Martin, our Chief Operating and Financial Officer. To summarize this quarter, the market recovery we've talked about on our first and second quarter calls, continues around the world. Market growth rates are becoming more stable, although at different speeds, in different geographies. And what everyone would like the pace to be quicker, it does look to be a steady, healthy growth trend.

We as a firm, continue to invest in growing market share in this environment, and during the quarter saw healthy revenue growth, in both our transactional and annuity businesses. In the third quarter, we reported net income of $37 million, that's $0.84 a share. And that compares with $20 million, or $0.46 a share for the same period one year ago. Year-to-date, net income was $69 million or $1.57 per share, compared to a net loss of $56 million or $1.50 per share for the first nine months of 2009. Revenue for the third quarter was $708 million, compared with $595 million in the third quarter of last year. Revenue totaled $2 billion for the first nine months of 2010, compared with $1.7 billion one year ago, an 18% increase, 17% in local currency. And finally, our Board of Directors is pleased to declare a dividend of $0.10 per share of our common stock.

Our comment on conditions in global real estate markets first, and then Lauralee will discuss our performance in these markets. The latest forecast from Global Insight indicate that global economy will grow 3.7% this year. Asia-Pacific, excluding Japan, is expected to grow at a healthy 8.2%, Japan at 2.7%, the Euro zone 1.5%, and the US 1.6%. We are seeing a similar trend hierarchy in our real estate markets. So turning to those markets, we posted slides in the Investor Relations section of our public website, joneslanglasalle.com. Slide three shows the Jones Lang LaSalle investment sales clock, which we update quarterly. Clock summarizes conditions in major markets, at different stages of the real estate cycle.

As you can see, in the third quarter of 2009 capital values were falling in most major real estate markets. One year later, the image is reversed, with values rising in most markets, or bottoming out in the remainder. Total global commercial real estate investment reached $132 billion in the first half of this year, compared with $76 billion in the first half of 2009. Preliminary figures indicate that the third quarter's global volumes stood at $69 billion, virtually unchanged from quarter two. Cross-border of volumes are up everywhere, accounting for 43% of transaction volumes, nearly back to the 45% level that we saw at the peak of the previous cycle, and confirming this continual globalization of real estate capital flows.

In the US, capital market momentum continue to build, with third quarter volumes reaching nearly $24 billion. And year-to-date transaction volume was approximately $58 billion, 78% higher than the same period in 2009. Preliminary figures indicate that investment volumes in Europe fell by 12%, during the quarter to EUR21 billion, which is a 5% increase on Q2 2009. In Asia-Pacific, provisional figures indicate that aggregate volumes increased by 12% on the quarter, to approximately $18 billion, with cross-border activity increasing more rapidly at 23%, compared to the second quarter, and a total of $5 billion.

All this means that a significant weight of equity capital is still targeting prime assets across all sectors. And with the low supply of high-quality assets to meet investor demand, prime yields are continuing to compress. Prime capital values are rising most notably in many of the world's top office markets, which have risen by 30% to 50% over the past year in the major cities of London, Washington DC, Paris, Shanghai, and Hong Kong.

Moving to slide four, this tells a similar story about conditions in leasing markets world-wide, although the progress here continues to trail the recovery in global capital markets. The US saw the second consecutive quarter of positive absorption with 8.8 million square feet of occupancy gains across the 41 markets that we cover. The gains shifted year-to-date absorption to positive for the first time since 2007, with a net absorption totaling 5.5 million square feet.

In Europe, net absorption was positive for the fifth consecutive quarter, with occupied stock across the region increasing by 900,000 square meters. The total was driven largely by increases in the major cities, London, and Paris, and Moscow. In (inaudible) markets which we monitor in Asia Pacific, aggregate net absorption totaled 1.5 square meters in the quarter. And that's a 27% increase compared to the second quarter.

Leasing demand continued to improve in most Asian markets, due to relocations, upgradings and expansion, as both multinational and domestic firms resumed healthy hiring levels across the region. These generally positive trends in leasing are putting steadily more attention into leasing market demand and pricing, reducing companies who delayed acting to move ahead and secure forward space requirements. This in turn, is underpinning the growth that we have seen in the capital values of commercial real estate over the last 18 months. So against this generally positive cyclical recovery background I'll turn the call over to Lauralee.

Thank you, Colin, and good morning to everyone on the call. Similar to previous quarter's, I will not repeat the financial results available in the press release and supplemental slides, but we'll focus instead on the progress we continue to make against our 2010 priority, which we have outlined on slide five. First, we continue to make progress in growing our market share. For the past two quarters, we've discussed transaction activity increasing in the market, and how we are capitalizing on these opportunities around the globe. This quarter continues that trend.

Leasing revenue was up by more than 20% in each of our regions this quarter, with the most significant percentage increase in EMEA, up 42% in local currency compared with a year ago. The Americas also had a strong quarter in leasing, up 38%, compared to the third quarter of 2009. Asia, which emerged from the downturn in the third quarter of last year, also has a more normal comparable, still reported a solid increase of 21% in local currency, 27% in US dollars. Project and Development Services, or what we call PDF, benefited from increased CapEx availability by investors in EMEA, by business outsourcing expansion in India, as well as growth in the industrial, logistics, and healthcare sectors in the United States.

We're also pleased with our cross-selling efforts to new and existing clients for this service, furthering our internal G5 goal, which we call Connections. In the third quarter of 2010, PDF revenue was up 25% on a global basis. There was a large increase in our PDF revenue in our Asia-Pacific region, up 69% for the third quarter of 2009, which was driven by corporate outsourcing expansion. But also included about $6 million of revenue from growth contracts, where reimbursed cost are included as both revenue and expenses. Adjusting for the impact of the growth contracts, PDF was still up more than 25% in Asia.

Earlier this year, we committed to improving our operating margins, and maintaining cost discipline through the market recovery. We have demonstrated margin enhancements throughout 2010, including in the third quarter. Adjusting for restructuring charges, third quarter firm operating margin was 8.8%, with an EBITDA margin of 10.9%, compared with 8.2% and 9.8% respectively last year. On a year-to-date basis, adjusted operating income margin was 7.2%, compared with 4.3% last year.

Our third quarter compensation to revenue ratio was 65.4%, compared with 63.8% in the third quarter of 2009, and 64.4% in the second quarter of this year. The increase reflects the impact of several significant new client wins in our corporate solutions business, that requires start-up hiring and transition cost in the third quarter, in advance of their revenue generation to begin in the fourth quarter, as well as the timing of incentive compensation accruals, which in the United States in 2009, were heavily back-ended into the fourth quarter, due to the late market recovery. On a year-to-date basis, we have seen improvement from 2009, with the cost to revenue ratio at 65.4% for the first nine months of 2010, down from 63.3 -- 66.3% in 2009. And we expect our full-year ratio to improve further against both the current year-to-date percentage, and the full-year 2009 percentage.

We have also reduced our operating and administrative costs by 1.5% of revenue in the quarter, and 1% on a year-to-date basis compared to last year, demonstrating disciplined management of our controllable expenses. Cost control also remains a key focus of our clients. And our ability to add value and support their goals is validated, as we continue to expand our leadership position, in both property and facility management outsourcing space. During the third quarter, property and facility management revenue grew 10% over last year on a local currency basis, driven by a 20% increase in the Americas. We are pleased that we reported increases in each of our geographical regions. And that revenue from these services continues to be between 25% and 30% of overall firm revenue, providing a strong annuity revenue base to our performance. Increased revenue, of course, is driven by implementing new wins and expansions, which Colin will discuss shortly.

Our priority for LaSalle Investment Management continues to be leveraging our global scale. In the third quarter, we reached $5.3 billion of net capital raise on a year-to-date basis, including $1 billion in the third quarter reflecting investor confidence, and our strong reputation in the market. We have invested $2.5 billion year-to-date on behalf of our clients, $1.7 billion of those investments were made in the third quarter, mostly into funds where we are filling commitments. So minimal increase to our advisory fee. This was our strongest capital investing quarter of the year.

Our advisory fees have remained relatively steady this year, as our count -- account take-over success, has offset asset dispositions and value declines. For 2011, our advisory fees will continue under pressure, as investors continue to review relationships and challenge fee structures. Specifically, the investment periods for two large funds in Asia are scheduled to end mid-year, and will most likely will expire with uninvested committed capital, from which we are currently being paid advisory fees.

We will be commencing new rounds of capital raise in these fund series, but as the market has moved such that new fee structures are more focused on funds invested, this will delay replacing these current fees. The positive aspect is that we will also be resetting investment hurdles, to increase our ability to again earn incentive fees on the new funds going forward. We do expect that this pressure will be partially offset by investment activity in newly established funds, and as we are accelerating investing several of our funds in separate accounts to pay acquisition fees. We continue to be very pleased with the annuity and margin contribution of this business to our overall performance.

Finally, our balance sheet position remains solid. We recently renewed our unsecured credit facility with our bank group, increasing our capacity from $840 million to $1.1 billion, and extending the maturity from June 2012 to September 2015. The new facility is priced at LIBOR plus 2.25%, bringing our all-in interest rate to approximately 2.5%. With increasing acquisition opportunities starting to emerge, or expected to emerge in the marketplace, we feel strongly positioned to capitalize on our leadership business positions around such opportunities. Let me now turn the call back to Colin, so he can discuss some of our wins in the quarter.

Thank you, Lauralee. So referring back to the slides, slide six shows a few examples of key business wins, which contributed to our third quarter and ongoing results. Let's start with our global corporate solutions business. So far this year, we have won 38 new assignments, expanded our relationship with another 22 clients, and renewed 21 additional contracts. Among the wins, Sony Electronics retained us to provide facility management services for it's six million square foot portfolio in Europe, the Middle East, Africa and in Asia-Pacific.

In the US, we mentioned the Citi and International Paper assignments, which we were awarded early in the quarter on our last call. In addition, Spanish-owned BBVA Compass Bank renewed and expanded their relationship with us. We're also pleased that BBVA Compass is a new member of our relationship bank group, and participated in the recent renewal and extension of our credit facility, which Lauralee just referred to. In EMEA, Stanley Black & Decker selected us for transaction management on it's eight million square foot portfolio. Additional corporate solutions wins included a major contract with the Australian Federal Police, and a facilities management mandate from Tyco Electronics in China.

Turning to investment sales, and other capital market activities, our range of accomplishments included securing $158 million in senior debt financing for the Sheraton Chicago Hotel and Towers, acting for Rockspring in a EUR223 million acquisition in of a 51% stake in the O'Parinor Shopping Centre outside Paris, completing $473 million sale of a portfolio of four Direct Factory Outlets in Australia. And amongst hotel transactions closed during the quarter, those included the Royal Palm South Beach in Florida, the Lutetia in Paris, the IBIS Bencoolen in Singapore, and that last was the largest single asset transaction recorded to date this year in Asia-Pacific.

Examples of leasing and tenant rep transactions which we concluded in this increasingly active market, include a long-term 320,000 square foot lease of office, technology lab, and data center space for Dassault Systems American campus in Massachusetts. In EMEA, our Turkish retail business continued to gain momentum, winning three large leasing assignments, and two management contracts across Turkey. And in Taiwan, we completed the 420,000 square foot relocation of HiTi Digital. Finally, Jones Lang LaSalle Solomon's valuation business in Asia-Pacific, completed a four-year assignment for the Agriculture Bank of China. We valued more than 325 million square feet of space for this bank's $22 billion partial Initial Public Offering. And that is the biggest IPO ever, anywhere.

LaSalle Investment Management continued to raise capital strongly during the quarter. As Lauralee mentioned, total new commitments for the year reached $5.3 billion in the third quarter, as LaSalle's clients maintain both their long term allocations to real estate, and their confidence in LaSalle as their investment manager. LaSalle's assets under management now stand at $40 billion. And although the pace of acquisitions is picking up in the each quarter, the immediate challenge is to complete and allocate acquisitions, in a market where pricing is still attractive, compared to long-run averages, but where the market, as we said earlier, is extremely competitive for assets.

Let's now look forward and consider prospects for the remainder of the year. In capital markets globally, significant volumes of equity capital will continue to chase prime assets, making further yield compression likely across a broad range of markets. However, a lack of prime products over the short-term will continue to constrain investment volumes. We now expect total transaction activity to reach $275 billion to $300 billion for the full-year, and we expect a pickup in the pace of sales from distressed financing structures.

Full-year transaction volumes in Asia-Pacific are expected to increase 15% to 25% over 2009 levels, while in Europe volumes are expected to rise around 30% year-on-year, and in the Americas, approximately 90% over 2009. Leasing market demand fundamentals will continue to recover through year-end, with corporate occupied exhibiting greater confidence, and scaling back on their cost cutting activities. Domestic companies and multi-nationals are also expanding in emerging markets, and particularly in Asia-Pacific. Corporate priorities do however continue to reflect objectives to occupy efficient, cost-effective, and sustainable space.

A shortage of high-quality supply is becoming a challenge for corporates in some Asia-Pacific and European markets. A return of landlord favorable conditions in these markets is likely to force the hand of occupiers, as they plan forward with more confidence, and seek consolidation or expansion space. In the institutional funds management area, we expect capital to continue to flow into real estate, in part because many institutions through, as I said earlier, are maintaining their commitment to real estate, are currently under-allocated to the asset class. We are also seeing institutional investors begin to consolidate their real estate portfolios, moving away from the spread of smaller managers assembled over the last cycle, and moving towards larger managers. This obviously is a trend which we expect to benefit LaSalle.

We would like to conclude our remarks by mentioning some of the awards, and other forms of recognition that we've received, which underscore our position as the leading real estate services and investment management firm. Starting with LaSalle Investment Management, in September we received two honors in the prestigious Euromoney award, being named Best Investment Manager Globally, and Best Investment Manager in Asia. In the US, we earned the Best Places to Work honors in Atlanta, Orange County, California, and Phoenix. And in EMEA, we won Best Places -- excuse me -- in EMEA we won places on Best Employer lists in Spain, Germany, and Ireland.

In the 2010 RFP Asia Awards for Excellence, the Outstanding Individual in Business Development, and the Project Manager of the Year awards were given to two of our colleagues. And we received the Property Council of Australia's 2010 Property Business of the Year award for the Australian continent. We won the Best Real Estate Consultancy Firm of the Year award in India. And just last night, we were named the Best Property Consultant in the Middle East and North Africa. Finally, Procter & Gamble awarded us it's Top Global Performing Partners Excellence Award.

So to sum up this morning, we are very pleased with our performance for the third quarter and the first nine months of 2010. We anticipate that markets will continue to strengthen steadily around the world this year. And we will continue to invest behind our business to gain market share, and generate profitable new growth and improved margins. And in closing, Lauralee and I, as is customary, would like to thank and congratulate our colleagues around the world for the outstanding work, which they continue to do throughout the quarter. We think they are the best in the business, and their understanding of the markets, and ability to deliver excellent service to our clients, positions us well for the remainder of the year. So with that, we'll move to your questions. So operator, would you please explain the procedure to the callers?

(Operator Instructions).

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

Hi, good morning, guys. Colin, just first on your outlook commentary for Capital Markets, the growth rates by segment or by geography that you gave, are those growth rates for those Jones Lang LaSalle, or for the broader market overall?

Those are numbers for the broad market.

Okay. All right. And just to comment on expecting more distress, could you maybe elaborate on why you believe that will happen now?

We are beginning to -- distress was a phenomenon largely confined to Europe and the US. There was a little bit in Asia and Japan, and that really hasn't started to move yet. But what we are seeing, in particular, in Europe is banks in Germany and the UK, beginning now to move on -- the I'll call them distressed financing structures. For a long time, they kind of waited and held off, and move the problem down through time. And that's been possible, because of the backing the banks have had from their governments. But also or recently from the capital markets with equity injections. So they have been able to buy themselves time.

And they have also benefited from the gradual recovery, which we discussed in the course of this morning's presentation in the underlying -- the prices of the underlying assets. So it's been broadly, a good thing to do. But what we are seeing now, is a mixture of banks feeling better, having dealt with some of the more immediate problems in other sectors, pressure from regulators, and the passage time beginning to help them with the process of moving some of the assets to foreclosure or at least to actual refinancing structures. And it's a trend we are beginning to see just in this last quarter, picking up momentum. So we expect that to continue for the rest of the year.

Okay. And you guys have a sense for -- I know Real Capital Analytics in the US has a view on what the opportunities set, or what the distress pull is here in the US? Do you have a sense for what it could be in Europe to?

We haven't got those numbers. The focus of the distress is around the German mortgage bank, [Hypo Banken] Landesbanken. And it's in the portfolios, of particularly the RBS and Lloyd Banks in Britain. There's less distress around other countries, the Dutch and the French banks are in reasonably good shape. But is the German and English banks, in particular, around those two groups that I described where the bulk of the activity will emerge.

Okay, and then if I can, just one quick modeling question for Lauralee. Just on the revenue impact for the wins in the third quarter, that caused the expense pickup, can you give us a sense of what the revenue impact could be in the fourth quarter that should come from those?

I can't disclose the revenue, but maybe I can take your questions, I know we've had a number of the analysts on the call, already ask the question either in their written documents or by phone. If we look at the components that I talked about that impact our cost to revenue ratio and just take the US. And if you look at last year we did not really have seasonal margin expansion in the US last year, it was almost flat third quarter to fourth quarter, which is not normal for our business.

And it was because of that tremendous delay in the uptick of results, and then a catch-up in compensation accruals in the fourth quarter. We think that impact in the US, and again it's not apples to apples, but roughly was about 1.5% of a cost to revenue ratio for that timing. And then if we look at the advanced (inaudible) that we are doing for a couple large accounts, it's about 70-ish basis points these are in the US. So you end up with a just a little over, let's say, 2% to 2.25% kind of impact on a -- the margin, but it's right into compensation ratios. But if you then, translate that to the globe, it gets you just close to 1%.

And then if you think about the rest of the world, which is bonused largely on forms of profit share and participation, and look at where we were in Europe at this time last year, which was a loss of $26 million versus today about a breakeven, which means we are now into profits, which our people can get bonus on, which we are delighted about. And in Asia, we were in profits last year, but we are obviously significantly advanced against that again in terms of any seasonality. That's why we do have some comparables, when people are going from third quarter to third quarter, that don't make sense. And we therefore feel comfortable, as we get through the year that we are going to continue to advance our margins, and all of our ratios in terms of productivity. If that is helpful.

That is very helpful. All right.Thank you guys.

Your next question comes the line of Bose George with KBW.

Hi, good morning. Your capital deployment was up pretty meaningfully this quarter. And I was just wondering what changed this quarter, in terms of investment opportunities that you guys are seeing in the market?

Yes, you are referring to the LaSalle business obviously?

Yes

We've -- right through the somewhat of the last 18 months, obviously respected, primarily the needs of our clients, and LaSalle as a fiduciary, was very cautious, obviously during the downward spiral in pricing, not to put money out. And honestly, it's valued declined immediately. Since the market has turned around, depends on geography but let's say 12 months ago, average across the world, they've been turning their acquisitions activity on again. And gradually increasing the pace of their investment, as confidence in pricing and markets has recovered.

We have referred to the ways in which these activity levels have picked up. For example, an 80% increase in the US year-on-year, and that reflects increased availability of good stock, attractive pricing. And that process of better stock coming into the market, pricing -- more confidence around pricing, it just meant the pace of activity has increased gradually quarter-on-quarter through Q4 this year. And we expect to see that pace of investment activity continue through Q4 of this year. Again as pricing picks up, as markets get more liquid again around the world, and move from the primary markets to some of the secondary or B markets, we will expect to see more and more product coming available, and therefore more opportunities to invest.

Great, thanks. And just last quarter, you had commented that the transactions that were taking place broadly were just for the best properties. Are you now seeing that broadening, or is that kind of still the same?

Yes, that is cyclical trend which you see in every cycle, where the initial transactions are for the very best high-quality assets, because people feel safest buying those. Part of a market, you typically have a buyers market, but as pace picks up, as the availability -- free availability of the top quality asset declines, as the stock gets turned and used up, then activity and money begins to spread out to secondary assets. So less good assets in major city centers, if we're dealing with office stock, but also activity moves to B and eventually C locations. I'd say that the movement is still cautious. We're seeing -- take example, Washington DC, you're seeing more activity in the suburban areas, where was confined solely to the center of the city, up until Q1, Q2 this year, that is now spreading out We are beginning to see activity moving across secondary cities in Britain and Germany for example. And across secondary cities in China. And so it's spreading out ,but it is not a -- it's not a really rapidly stayed, but it's part of the constant recovery cycle.

Great, thank you.

Your next question comes from the line of Michael Mueller with JPMorgan.

Yes, hi. Good morning. Question on LIM Advisory fees. Q3 was considerably above the Q2 level, AUM went up. Just putting aside what could happen to the funds, the two large funds I believe you said in Asia that are going to expire mid next year, does the Q3 revenue fully reflect what's been put to work, in terms of the capital put to work the AUM? Is that a good run rate, or is it theoretically going to be a little higher into the fourth quarter?

I think you made the point, Michael, you made the point that a lot of the fees that we earn are based on commitments fees. In other words, once the fund (inaudible) the fees -- the fee flow is fixed, whether the money is invested or not. So to the extent the funds are put to work in the quarter don't earn any extra revenues from capital put to work. But on some accounts there are small transaction fees.

I commented that a lot of the money that we invested this quarter was against those commitments. We don't get more fees, but what happens is relative to those ultimately expiring and not getting funded, it's incredibly important for protecting those fees. And our people are being very careful in their fiduciary role to invest cautiously. There is a great deal of concern by investors that their commitments are out there. And they see advisors going to burn through those, for the sake of getting that money out.

And after discussions with them, what we have really said is we will fiduciary spend that. We might get through that, pieces of it. We probably won't. But we are immediately are going to be back in raising capital from you, for the next round. So that those of you that are liquid, that like what we are doing, can come right back in. Those of you that need to manage your own flows of capital, we have a good relationship, because of how we respected that. So will be looking for you at the fund after that.

And net-net, there will be a little transition through there. It keeps investor relations. It does allow us to reset hurdles for incentive fees, which is important for our people. And we think net net, it's just a bad thing for the business. So that short-term, we are feeling those commitment fees, so we protect that amount. And it's really going to be the opportunities that our people see in the marketplace in the next nine months, as to how that goes forward.

To pick up on the points we alluded to during the initial presentation, in general we are seeing in institutions maintain or even increase their allocations to real estate. And that is new in the cycle. In previous cycles, they've often said, well, I got burned in real estate, I'll pull back. We haven't seen that at all.

And the effect of the relatively strong recovery in equity markets, has meant that they have become relatively under allocated to real estate, given their targets. So that's one reason we are seeing money to continue to now starting again to flow back into real estate. The flows, initially have been from institutions who themselves have inward cash flows. So think of insurance companies, and pension funds with constant inward fund flows. We are not yet seeing it from the endowments, who -- the ones that ran into the real liquidity crunch, and are still working through, frankly, some of their historic legacy commitments.

And the other interesting indicator which we hear from the industry as a whole, is around open-ended funds, where we are open-ended funds, in particular, in the US, one is not immature, It's not spent yet. So there's no queue, to get in or out. We are beginning to invest, but for those funds that are mature, the talk in the industry is for exit queues, which were quite significant a year ago, to where in many cases flipped to queues of people to get in. So the worm has turned, if you like, and confidence on the private institutions in general for investment flows into real estate is recovering.

Okay, and last question. Looking at that increase in Advisory fees for Q2 that to Q3, was one particular product that grow we good chunk of the increase, or was a very broad-based? Was a more securities oriented, direct oriented --?

There was a significant piece in the securities business -- has been all year. But, initially we have seen fund monies -- part of that total $5.3 billion for the year was our open-ended fund, which from memory is $1.7 billion of that ?

The Royal mill,

And is the Royal Mill fund as well, Europe is $12.3 billion. So there is a couple -- separate accounts, there is as an open-ended fund in there. There is securities, it's is fairly broadly based across the geographies, and across the stars of investment.

Okay, great. Thank you.

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

Hi, good morning.

Morning, David.

Just a couple of questions there. One, just going back to quarter that you had for putting money to work at LaSalle Investment Management. I'm curious, if you give us a sense of quarter ago, I guess the commentary was as a fiduciary, you were somewhat concerned about valuations and whatnot or opportunities. So just curious, if the change there more -- is a pricing has come in some or improved, or is it more a function of the confidence that you now have?

It's the confidence David. I think if you take our investment people, a year ago they were all doing what we call defense. In other words working, scurrying to ensure that Leasing levels stayed up in assets, renegotiating lease contracts. We were working heavily with banks on funding structures, around individual asset financing. And third, people within our funds and individual investment accounts were working hard, in just defending position of the asset, which we had on our books. And they did a very well. And seen very like, if you will asset give back, across the whole of LaSalle's portfolio. Really, it's less than five assets, I think, it's less than the fingers on one hand of assets, that we ended up actually backward financing. So we've done an extraordinarily good job on that.

As markets recovered, and they could move away from defense, the acquisition teams are beginning to work again. They are being very careful and selective, as we described last quarter, and they continue to be that. But the fact that more of our people are now working in that area, that confidence has recovered. That markets are increasingly liquid, I mean there is volumes increases we've talked about in Capital Markets, reflect increasing activities across the pace. All of that represents a steady sensible build into strong markets, buying into strength as it were.

Yes, yes. Okay. That's helpful. And then just one other, Lauralee, you commented on putting capital to work potentially on the acquisition front. And just kind of curious, can I have some more color there, is there a particular spots that you have in mind, or is it more function of opportunity?

We have articulated our five growth strategies, and clearly the last round we put a lot of effort into local markets. And I am sure that this time around at least, what we're seeing bubbling up around the world, there will be opportunities again, although we feel uniquely positioned after what we did last time. Our corporate business, continues to demonstrate it's success in winning new clients. And we are hearing more and more about what they want in some of the more technical areas of that business. And that's an area we might look at. And clearly we talked about the regulatory changes that are going to impact potentially asset management businesses, that are held by financial institutions, and whether that pops up any ideas or opportunities as well. So those three areas are very important to our business, and our growth, and we'll see what we can find.

So presumably, you are taking, say, a more aggressive stance in let's sa, three were six months ago towards actually seeking out acquisitions?

Yes.

Okay.

And certainly the state market for acquired businesses is blowing up again, looking to put themselves on the block, as the value of corporations recovers.

Sure, sure. Perfect, thank you both.

Our pleasure.

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

Thank you. Good morning, Colin, Lauralee. My first question on -- Colin, you had mentioned of 30% growth in investment sales in EMEA for the industry. That would imply for you is specifically a strong pickup in the fourth quarter versus the third. I know you're not guiding for you, but is there something -- was there a temporary slowdown in the EMEA in the third quarter, and an expected pick up in the fourth?

Yes, the strong markets we have seen in a EMEA during the first -- well, last quarter of last year, and first couple of quarters of this year, did pause. And we think it was a -- two-fold effect. I mean this is market psychology, so this is very soft stuff. But we think there were too many effects. One, a lot of work had been done, a lot of business had been pushed through pipelines in the first couple of quarters. And it was kind of a little bit of a pause, or indigestion at that point, people took stock.

And secondly, there was obviously lots of nervousness around the Euro and the European debt and currency situations around those peripheral markets, Ireland, Portugal, Spain, and Greece. And the impact of that took some time to work through investor confidence. But in the course of the Q1, Q2 problems that they had, it's slowed up that the level of activity in, and that came through in Q3. It does seem to us, that that pause has been kind of worked through, we're seeing good pipelines. Certainly the confidence that the Euro won't be terminally impacted by what's going on in the peripheral economies seems to have passed, and confidence is recovering there. So both in the sentiment area, the momentum area and the confidence in the European economy as a whole, things do seem to be picking up again. So we expect a reasonably healthy fourth quarter of activity, fairly broadly based across the European, the big European economy.

Okay.

We also do think that we are well-positioned against that. As Colin mentioned a great deal of that is cross-border capital flows, and that is always been the strength of the Capital Markets business, on both locally, but across the region in Europe. So if you looked at what the market did in Europe, which was down third quarter from second quarter, we were only down just a little under 3% which is much less than the market, because we pick up on the international flows.

Okay. That make sense, thank you. Another question, just oh your discussion, Lauralee, on the margin, and why flat margin or why the margins were what they were in the third quarter? I guess net net, does this imply that the fourth quarter does has some margin outside, versus fourth quarter of 2009?

Well, I think the answer is margin upside, definitely upside as we think about the quarter going into fourth-quarter much more into a seasonality than we had last year. If you think about what -- again I said, in the US which is a big part of our business today, over 40%, the margin third quarter to fourth quarter last year, was almost flat. So yes the firm will have some benefit, as we get a more normal seasonal trend. And now comparing on a revenue basis, a more normal year-over-year comparable as well, instead of unusual activity.

Okay, now I think that's clear, thank you. Couple other things. One, just broadly, how do you look at the fourth quarter of 2009 revenues versus fourth quarter of 2010? You really have three fairly easy comps for the first three quarters of this year, and then things seem to have picked up a little. Certainly you posted total revenue growth positive number in the fourth quarter 2009, so do you call that a tough comp?

I wouldn't say tough, it sort of obviously -- it's picking up from the floors that we are on in the first quarters of 2009. But as Lauralee said, we think that seasonal pattern which we see every year, will be repeated again this year. And Q4 is generally, by a wide margin, as you know our strongest quarter.

Okay.

And other than sort of an early recovery in capital in the UK, capital markets was still at a relatively low level in the fourth quarter of last year. Not that it's robust today. I mean if we look at it, we can see just overall Europe in the third quarter, we were still down over 20% revenues, if we went back to 2007. But every time there's a pickup in Capital Markets, we start closing that gap. And I think there is just a nice continuation of healing progress in that part of the business.

If you look at the comps, well back to 2007, you will see our US numbers are above that year, because we had the additional impact of the Starbucks revenues. But Europe was still -- we still have somewhere to go, to catch back to those historical revenue levels, that point Lauralee just made.

Okay, thanks. And one final question somewhat tied to what you just said about Starbucks. I was doing a calculation, noticed that based on year-to-date and assuming a halfway decent fourth quarter, it looks like if you combined your -- the 2007 Leasing revenues for your Americas, or for the total Company in 2007 and Starbucks, you actually will be close to meeting those numbers in 2010. So -- and then, which has to be an indication of stolen market share. Can you just address that? How have you been able to -- how are you going to actually hit peak revenues in Leasing? Kind of a softball question, I guess, in 2010 versus 2007? Is it hiring people, more production per person --?

We're about in the US, 16 net new brokers. The gross is much higher than that, but we continue to upscale the productivity. Last year, that would have been a net 35 approximately. So clearly, we have continued to add, but more importantly we have continued to upscale the capability And I think probably more valuable piece of that is, it's been added in places we were not before.

So new markets that we weren't in, a lot of adds into industrial where I talked about our PDF wins. But that really comes out of the referrals, because we now have a couple hundred and industrial brokers that are referring logistics and distribution, and those kind of activities into our PDF business, which then makes the leasing brokers more productive because they can take back benefits to clients . We have been making inroads into healthcare. And so again life sciences, healthcare new opportunities there. So it's yes it's definitely market

And another concrete example, which is specific to illustrate the general. You recall that we have been working for Procter & Gamble for six or seven years in the service management project, Advisory lease administration space. We did not do their transactions, because it couldn't deliver in the US. Well, just a year and a half ago, we picked up their US transactions, the global transactions for the US piece in particular. And that's specific, the general point is, we are now able to service our big Corporate Solutions clients tenant representation needs in the US in a credible way, when we couldn't really do before Starbucks. So another example of the cross-sell picking up share.

Okay, and that's all for me thank you guys.

Thanks for the soft ball question.

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

Hi, thanks. I wanted to follow up on the corporate services business to get, I guess a little better sense of, I guess, the marketplace, and how these new contracts are being structured? Is still the same kind of a truck ROI that you have seen historically, or is it just more noise, it's about -- kind of pass through in timing versus any kind of structural changes in those contracts you saw this quarter?

It is in a structural change, Brandon. We have now, we believe the market leading practice in a service we call mobile engineering, which is really a way that we can service the distribution branches of, if you think banks, or stores if you think retail, or all sorts of other things. And we have had several significant wins in that area and it's one of the fastest-growing parts of our business. But it does require us to increase the number of trucks, and increased the number of engineers, which we feel very comfortable doing because we have the contract in hand, that we have complete line of sight to, that makes that a very nice margin business for us. So not a contract change, it's really an expanding, and again, a new growth opportunity for the firm.

So should we expect to see more of this type of commentary the next couple quarters, as a bigger part of the --?

No, it was just the absolute size of the couple of wins we were talking about that are really transformative. I mean, there, one in particularly is significant.

Okay, fair enough. And then a different take on the capital funding question. Have you seen expectations, from either teams that you're talking to about recruiting over or potential sellers, have you seen those expectations for valuation for their work change for the last three or six months, given the sustained recovery in Capital Markets in Leasing? Or still expectations -- low enough that you think you can still get ROIs on those capital deployments?

Well, if we can't get ROIs on hiring individuals or buying companies, then we won't do them. We are looking for accretion, from usually 9 to 12 months in, because it is that period of time that people take to reestablish their contacts, and get business running again. Yes, of course, as you go through this cycle, people tend to be keen to move to bottom of the cycle. It gets more challenging as you move up. And at the top, people are generally pretty happy with where they are. But this is still good market, we are finding for bringing people in.

We've got a policy of building our Capital Markets business in Asia and in the US. We've been customarily selective about who we bring in. We've got a clear plan, and we were sitting on pace for that plan in both geographies. But we do it in a way that -- when you bring teams in, you've not only got a make it attractive for them to come, but you've got to be sure of two other things. Firstly, they want to come because they find the platform and our values and start of operation attractive and fitting with their beliefs. But you've also got to respect the people who are also with us, who are already with us, and not create two large set of disparities between the existing and new people . So there a lot of things to balance there, but we are still hiring, and is still a market where we can

Okay, just touching a bit, over to EMEA, as you compare the structure of that organization now, and I guess relative to the different revenue drivers, how should we think about the margin trajectory there? Is a different personnel structure, an office structure, do you feel you have got more margin potential there, then you had three or four years ago? Or has the mix of business changed, and you need more corporate services so you feel that those-- I think historical margin trajectory or points, are to be tougher to reach?

There is a couple of things playing at the same there. Yes, we have been deliberately growing rate capital for the Corporate Solutions business. And that has an annuity aspect to it, it has a steady margin, but it's generally an attractive margin, is generally structurally lower than the numbers we see from our big transaction businesses in Leasing and Capital Markets. So, yes, there is a growth there, and a mix improvement, we hope in favor of Corporate Solutions, and that's where we are driving that business. But we have also referred to the cyclical recovery in our Capital Markets and Leasing businesses. That has been strong. And this year-to-date, and as those businesses continue to pick up, again, it's straight cyclical recovery with market share increase on our part, that will enrich in the margins from the current position we are at. And I think if you look back to 2007, 2006, you'll see the source of numbers we made back then.

And final question -- just to confirm -- I want to make sure I understand your comments on seasonality in the business. It doesn't sound like you expect any real change, in what historical seasonal patterns will look like from Q3 to Q4, in terms of revenue contributions, different geographies, or is there something else going on, exclusive of LIM in the transaction businesses, is anything different that would skew seasonality this year?

No, right now, it feels like we're moving into more of normal seasonal patterns. Pipelines indicate that people are getting ready for a big year-end. And that it's -- it feels like it's into a continuing good market recovery.

Fair enough, thanks a lot.

Your next question comes from the line of David Ridley-Lane with Bank of America.

Sure. Can you quantify sort of the Asian transaction volume that was delayed here in the third quarter, or can you give a little more color about how the deceleration in Asia?

Yes, I would more put it into the fact that it's hard to compare -- normally Q2 and Q3 in Asia are sort of the same. And I think what we saw was -- some thing's got accelerated in Q2. And there was kind of a lull in July and into August, where there was nervousness in that marketplace, which then sort of slow the pace, that then moves us towards the end of the year. So right now, we -- about 47% of the business revenue we have in Asia Pacific is annuity. It's property management and facility management. And so when you have a few lumpy transactions, you feel it a lot more in those current quarters. But we look at it and say, I think you could read too much into it by just focusing on a couple million dollars in those two quarters, versus the general trending feels good, and moving forward into the fourth quarter.

We had our Board meeting in China. We felt very good about the energy in China, and what's going on there, and even the regulatory changes that could mean good things for real estate over there, in terms of insurance companies being able to put money into property. I personally was just in India, and that just feels like just a good solid recovery. So I would say the fundamentals in Asia are sound, and they're, if anything moving away from, trying to let the rest of the world sort of make them volatile. They are moving towards having their own economies of strength.

Okay . And one follow-up question. Given the commentary around acquisition, can you remind us what you're debt to EBITDA comfort range is, including the cash owed on the stock

We are an investment grade company who takes a great deal of pride in that. So as you kind of think through a cycle that sort of says you're very comfortable at 2.5 EBITDA range, you can move around that, but ultimately you want to see a vision that is in sort of in the immediate, so that you can come back to that level. That being said, our EBITDA grows on a continuous basis. The banks clearly recognize that, in terms of capacity. And when we count that, we do count that as all of our debt. So we paid down debt in the second quarter. And that was even after -- we paid on bank debt, and that was after using the bank debt to pay this Staubach debt. So we are in a good place.

All right. Thank you very much.

Your next question comes from the line of Ralph Davies with JPMorgan.

Good morning. Just following on in terms of LaSalle. I think -- I know you talked about the two funds in Asia where you're earning fees on kind of invested capital. And I was just wondering can you for quantify globally how much capital you're earning fees that's not invested presently? Maybe how that compares historically?

We don't disclose that.

It's the order of $1 billion to $2 billion I would say, probably on the low side of that one to range.

And I guess my -- and so would that kind of -- how would that compare historically?

Well, historically those funds -- the two Asia funds, the four or five year funds with a three year investment period. So if you go back three years, they would have had considerably more to be invested, on which we were earning revenues, because it was committed. As we work through the investment phase, then those numbers have come down. So the numbers I have given you are lower than they would have been two to three years ago.

Got it. And then I know you have talked previously about or you talked on the call about kind of merging investment opportunities across the investments spectrum. I guess I'm just wondering, in terms of that uninvested capital, how much flexibility in terms of those mandate, do you have to invest maybe kind of secondary opportunities for secondary assets?

Our investment style is clearly stated on each fund, and it's agreed with individual clients, where we have individual mandates. So we -- LaSalle keeps strictly within the agreed investment styles. Of those two funds, for example, in Asia Lauralee referred to, one is a logistics fund, so it invests in logistics development and semi-stabilized developments. And the other is an opportunity fund, and they both are operating within the same styles.

As you get out to at this point in the cycle, although our skills are recognized in those two areas, to match those styles. There is a level of conservatism in the institutional world, which has been borne of the burn that many of them suffered over the last two and three years, which means that currently there is a tendency for core to be more in favor. That's style we can invest in too, in particular, in the US and Europe. So we can match styles to the different to the changes in market needs. But within a fund that has been launched, there is an agreed mandate, and we stick with in the --

Thank you.

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

Thanks. One question. Can you remind us of your -- what you have left on your share repurchase program, and if you have any interest in buying it at current prices, especially in light of at least some degree of a selloff today?

Well, we would have to check that, if I recall it was about 2 million shares, give or take. And we had some conditions around not being able to do that, until we did the recent modification with our bank lines. So clearly the benefit of our bank line, besides reduced pricing was much better covenant relief around all sorts of things, that being one of them. We just completed that, we normally look at how we think about capital structure, as we go into our budget plans for next year, and what we think the opportunities are. I will say that we will be weighing that against what we see our market opportunities for business growth, against just buying back shares. But we always give that careful consideration, as we think of all of our uses of capital.

Great, thank you.

At this time, there are no further questions.

Well, thank you, operator. And thanks to everyone on the call for joining us . Thanks for your continued interest in Jones Lang LaSalle. And as ever, we look forward to speaking to you again, at our next quarter results at the end of January. Thank you very

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