Jones Lang LaSalle Inc (JLL) 2010 Q4 法說會逐字稿

Good day and welcome to the fourth 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 there those included in the Forward-looking statements as a result of factors discussed in the Company's annual reports on Form 10-K for the year ended December 31st, 2009. And in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any Forward-looking statements.

A transcript of this call will be posted and available on the Company's 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 would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks.

Please go ahead, sir.

Thank you very much, Operator. Hello to everybody, and thank you for joining this review of our results for the fourth quarter and full year of 2010.

Lauralee Martin, our Chief Operating and Financial Officer, is with me and, in line with our prudent and far-sighted approach to planning, we left Chicago before the storm, and we're pleased to be talking to you today from Atlanta in Georgia. When I get through with the initial market summary, she's going to cover our performance in detail. And that in a few minutes.

To summarize the year, we are very pleased and encouraged with our results. Record 2010 revenues of $2.9 billion drove the full year net income of $154 million, or $3.48 per share. Adjusting for certain charges, net income would have been $166 million, or $3.77 per share. In addition, our strong cash flows and disciplined cost management enabled us to reduce our net debt position by $250 million in 2010, to $273 million at the year end.

So, as the numbers show, we finished the year in very good shape and we're positioned for continued growth and strong performance in 2011. Margins improved across all our operating segments. We expanded our Americas market positions, EMEA finished the year with positive operating income, and in Asia-Pacific we recorded solid growth in annuity and transaction revenue. Finally, the sound investment management continued to raise investment capital throughout 2010, attracting $5 billion of net new equity for the year.

Turning our attention to Global markets, conditions continue to improve in most parts of the world. The global economy has finally moved towards a more sustainable economic recovery. And although still at different speeds in different markets. Private consumption and many factories are picking up around the world, so growth is no longer totally dependent on government spending. The latest forecasts from Global Insight show the global economy growing at 3.7% in 2011 reflecting, the two-speed recovery. Advanced economies are anticipated to grow by 2.3%, while emerging markets are expected to grow by 6.4%. We're seeing that same multi-speed recovery in our Real Estate markets.

We've posted slides for you on the Investor Relations section of our website. That's www.joneslanglasalle. com, for your reference. If you're looking at those slides, slide 3 shows the Jones Lang LaSalle Investment Sales Clock, which gives you a snapshot of conditions in major markets at different stages of the real estate cycle.

You can see that in the fourth quarter of 2009, some markets have begun to reflect rising capital values while most others were still finding the bottom of the cycle. A year later, at the end of last year, values are rising in virtually all markets around the world.

Capital values for prime assets are growing strongly in top tier Office markets as yields have fallen, with values up 20% annually, and we found the Office markets achieving growth as high as 50%.

Full year transaction volumes totalled $319 billion, 50% higher than 2009 levels. In the Americas, the recovery in capital markets continued and, in fact, accelerated during the fourth quarter. Investment volumes of Hotel, Industrial, office and Retail assets totalled $38 billion for the quarter, a 150% increase from the fourth quarter of 2009.

Full year volumes more than doubled, to $97 million in the US, from 2009 cyclical low of $45 billion. Our preliminary numbers indicate that direct investment into commercial real estate in EMEA rose by 61%, to 36 billion Euros in the fourth quarter, and full year volume was at 102 billion Euros, a 45% increase on 2009.

In Asia-Pacific, quarter four investment volumes totalled $25 billion, up 32% from quarter four 2009, while full year volumes reached $85 billion, a 29% increase on 2009.

Turning to slide four, we see a similar trend in Office Leasing markets around the world. Although progress here still lags the recovery in the Global capital markets. Leasing volumes are increasing world wide, driven by more optimistic business sentiment and strong corporate balance sheets. In Asia-Pacific, net office absorption more than doubled in 2010, and European leasing volumes increased by one-third over 2009, with a positive net result absorption returning to the US.

In the US, that absorption gains continued in Q4, accounting for more than half of the year's total net absorption of 13.4 million square feet. While New York and Washington D.C. have been the leading markets of absorption, two-thirds of the US markets finished 2010 with occupancy gains, indicating that the recovery is now broadening out.

In EMEA, office leasing volumes also rose in the fourth quarter, with more than 32 million square feet let, a 17% increase on the prior quarter, and the overall take-up for 2010 reached 114 million square feet, increasing 32% from 2009. Net absorption was positive for the sixth consecutive quarter, with occupied stock increasing by nearly 13 million square feet, driven largely by activity in London, Paris and Moscow. In Asia-Pacific, aggregate net absorption in the Tier I markets we cover, with nearly 55 million square feet for the year, more than doubled 2009's levels.

So, all in all, in more synchronized recovery markets globally, particularly in many of the larger markets, and with some positive outlook as well.

With that, I'll turn the call over to Lauralee.

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

Similar to previous quarters, I will not repeat the financial results available in the press release or the supplemental slides. I will focus, instead, on full year revenue and expense trends as we look forward to 2011. Details of our results for 2010 can be found on slide five.

As Colin discussed, we are very proud of our 2010 record revenue of $2.9 billion. The 18% increase over 2009 was driven by strong transaction revenue improvement in our Leasing and Capital Markets businesses as markets recovered, as well as solid growth in our Annuity businesses, both of which benefit from expanded Market Share positions.

Leasing revenue was up $216 million, an increase of 27% in local currency, with healthy contributions from all of our regions, but with the most significant contribution coming from the Americas. Capital Markets and Hotels revenue was up $102 million, an increase of 51% in local currency, again from contributions from each of our regions, but also a solid recovery in our leading Global Hotels business. We invested in these businesses throughout 2010 by adding strong market hires in anticipation of capturing market improvements, and these actions are rapidly paying off.

We also continue to demonstrate steady annuity revenue growth, led by our Property and Facility Management businesses, which were up 11% in local currency year over year.

Our compensation-to-revenue ratio for 2010 was 64.9%, an improvement from 65.5% in 2009, benefiting from our moves to more bearable compensation and improved productivity in our transactors. We also continued our disciplined expense management, achieving leverage across our fixed cost base. As a result, we made significant improvements in both operating income and EBITDA margins on a full year basis in all regions, as well as in LaSalle Investment Management.

For the consolidated firm, full year adjusted operating income margin was 9.1%, up from 6.6% last year, and our full year adjusted EBITDA margin was 11.5%, up from 9.6%.

Our Americas region delivered very strong result for the year with performance contribution from all business lines. Full year revenue across the region was up 22%, led by the success of our Leasing business. Leasing revenue increased 28%, or $140 million, to $638 million for the year, demonstrating the success of the Staubach merger, as well as our organic growth efforts in Local markets, and new products such as Industrial.

We saw significant productivity gains from our brokers and have been actively adding talent on an ongoing basis, with more than 70 broker adds in 2010.

Capital Markets revenue more than doubled in the year, to $84 million, with strong revenue growth in both Investment sales and in our Real Estate Investment banking. We expect our high impact hires in 2010, as well as this year's recently announced additions in our Hotels business, together with the broadly improving market conditions, to provide continued momentum into 2011 for the Americas Capital markets.

We're very pleased with an 11.8% operating income margin for the year across the Americas, up from 8.4% in 2009, with a full year EBITDA margin up 14.6%.

Turning now to EMEA, revenue across EMEA increased 17% in local currency in 2010, driven by improved transaction revenue. We protected our market positions through the downturn and saw the benefits of this commitment, as well as the benefits of our investments in our Retail capabilities, where we have strongly advanced our market positions both locally and across Europe. Capital Market and Hotels was up 37% in local currency for the year, with good momentum in the fourth quarter as revenue increased 41%, compared with the fourth quarter of 2009.

We expanded our successful Fit out business, Tetris, to Belgium, England and Italy in 2010. And now have capabilities in five countries, including France and Spain. In addition to improved transaction revenue for the year, our operating and administrative expenses remain tightly controlled, which further contributed to our improved operating performance.

The larger markets of England, France and Germany are now nine to twelve months into a cyclical recovery, with steady transaction improvement and growth in annuity business. However, the smaller markets across Continental Europe and [MEANA] still appear to be bottoming, and were a drag on performance and margin for the year.

Looking forward to 2011, in addition to strengthening property fundamentals in most major markets, our leading Retail market positions and expanded Corporate Solutions client base, and the continued export of Tetris to other EMEA countries, we expect improving revenue opportunities for the region, and continued improvement in margin.

Asia-Pacific revenue was up 17% in local currency in 2010, led by transaction revenue improvement, but also continued steady growth in our annuity businesses, as well as strong performance in project and development services. We added more than 50 million square feet under management in 2010, to our property management portfolio, an increase of over 10%. And won significant new and expanded opportunities in Corporate Solutions, including large Asia-Pacific-based multi-national clients such as Telstra and Infosys.

We were pleased that we maintained our leadership position with our important US-based multi-national clients, but our success in winning new business, in particular with locally-based Chinese and Indian companies, positions us strongly for the anticipated growth in the region. Operating income margin was 7.3 for the year and our EBITDA margin was 8.2%.

Turning to LaSalle Investment Management, we completed our second best year of capital raising in LaSalle's history, with over $5 billion of net capital raised in 2010. We have always emphasized that investment performance drives success in this business, and the performance summary on slide 12 highlights why LaSalle had such a strong capital raising year in 2010, despite the impact of the Global financial crisis on Real Estate returns.

In 2010, Advisory fees were $238 million for the year, a 3% decrease in local currency from 2009. Although Calpers remains an investor in our funds, our separate account relationship ended on December 1st. New wins during 2010, and LaSalle's attractive platform for investors as we seek takeover account opportunities, will help offset the reduction in advisory fees from this client.

As we highlighted last quarter, our Asia funds will convert in the middle of 2011 to advisory fees paid on invested, not committed, capital. The business is focused on replacing these lost fees through capital raise efforts for the next phase of these funds, as investors have been pleased with our management and communication to them through the downturn. The business goal is to maintain a stable advisory fee base similar to our 2010 level.

There were modest levels of transaction and (inaudible) fees in 2010, however transaction fees increased slightly in the fourth quarter, reflective of increased investment activity, which should also increase in 2011. Also in the fourth quarter, operating income was negatively impacted by above-normal professional fees related to a transaction pursuit. If these expenses were excluded, the business operated at its typical margin levels in the quarter.

Excluding the impact of impairments, full year operating income margin for LaSalle was 19.1% for the full year 2010, compared with 17.6% in 2009, indicating the stability of this business's performance.

Finally, our balance sheet remains a solid foundation for our business, with 2010 generating strong cash from our earnings. We repaid $250 million of net debt over the course of the year, slightly less than our total remaining net debt position, demonstrating how well-positioned we are to respond to market opportunities and a continuing consolidating industry.

Looking ahead to 2011, our primary uses of cash will be to make the second payment to the Staubach Company shareholders in August for $156 million, and to co-invest alongside our LaSalle clients for growth of the business. We expect capital spending, particularly IT, to return to more normal levels after two years of managed low capital expenses.

In conclusion, we are proud of our balance sheet strength and our investment grade ratings.

Let me now turn the call back to Colin, so he can discuss some of our wins in the quarter.

Thank you, Lauralee.

To give you a sense of the opportunities in today's markets, and how our people are taking advantage of them, slide 6 in your deck shows examples of recent business successes across our business' regions.

Let's start with our Corporate Solutions business. We won 60 new assignments in 2010, expanded our relationship, or renewed with an additional (inaudible) suppliers. In the fourth quarter, a major International bank headquartered in Europe selected us to provide a range of services for its multi-million square foot global portfolio. AT&T Mobility awarded us a contract to provide maintenance management and mobile engineering services for an America's portfolio of approximately 2,300 Retail sites.

We created a partnership with Beaumont hotels -- sorry, Beaumont hospitals in Detroit, to supply a range of services across the Hospital system's 8.5 million square feet portfolio. Beaumont is now our largest health care client, and our partnership also gives us access to new expertise and capabilities in the Health care sector.

IPG selected us to provide transaction management and other services across its three million square foot EMEA portfolio.

In Asia-Pacific, Standard Charter Bank named us as a transaction services provider for its 16 million square foot global portfolio, and we are SCB's exclusive provider in Taiwan, Singapore, India, parts of Korea and all of Europe, and will provide services in all other parts of the world as well.

Moving to Investment sales and other Capital markets activities, our fourth quarter achievements included the sale and acquisition financing of 353 North Clark in Chicago. We advised [ Vasakronin] on Sweden's largest ever single asset real estate transaction, the 483 million Euro acquisition of a whole city center block in Stockholm. We completed the year's largest industrial portfolio sale in Australia, a $230 million transaction for Colonial First State property. And, finally, hotel transactions closed during the quarter included the Hotel (inaudible) in Paris, and the (inaudible) in Thailand.

Examples of significant fourth quarter Leasing, client representation and Property Management accomplishments included the following -- on behalf of Navistar Inc, our tenant rep., Industrial capital markets project and development services, and our business and economic incentives teams all collaborated to complete the acquisition of a new 1.2 million square foot corporate headquarters in suburban Chicago. In London, we were appointed joint leasing agents for (inaudible), a 595-thousand square foot development, which when completed will be Europe's tallest building. In Asia-Pacific, Orchard Funds Management awarded us the year's biggest property and asset management appointment in Australia, a 4.3 million square feet portfolio. And the [Super Tech Group], a major Indian developer, assigned us property management responsibilities for Super Tech Emerald Court, a one-million square foot residential asset in New Delhi.

These examples do not capture another positive trend we're seeing in our Asia-Pacific business, winning business from rapidly expanding local companies and government agencies in China, India and other major emerging markets. Many of the names are not recognized outside the regions, but these are organizations with big plans, lots of assets and both within and outside their countries they are on an expansion path.

As I mentioned earlier, LaSalle Investment Management raised capital steadily through 2010, as LaSalle's clients maintained their long-term allocation to real estate and continued to show confidence in LaSalle. LaSalle is focused on delivering optimal performance for its clients, as indicated by its out performance against many of the bench marks against which they're measured. At year end, assets under management stood at more than $41 billion.

Let's now take a quick look forward to market prospects for 2011. We expect the momentum in Global investment markets to continue through the year, with global volumes projected to exceed $380 billion, up 20% to 25% on 2010 levels. In the Americas, transaction volumes are anticipated to reach at least $135 billion, a 40% increase on 2010. In Asia-Pacific we expect the 2011 investment volumes will be at least $100 billion, a 15% to 20% growth on last year. And in EMEA we see direct Commercial real estate transaction volumes continuing to rise, although at a slower pace, 10% to 15%, compared to the 45% growth level we saw in 2010.

In Global Leasing markets, new office supply is trending down and that should help erode vacancy rates throughout the year. Rental growth on prime assets in top markets is at its strongest since early 2008 and the dwindling supply of quality space, coupled with strong occupy demand, is expected to keep the pace of rental growth accelerating.

Asian markets, notably Hong Kong, Singapore and Shanghai, continue to lead the way, while London, Moscow, Paris and Stockholm are showing the strongest growth in Europe.

We are also seeing signs of rental growth returning to some core [CBD] office markets in the US, including, notably, Washington D.C. and San Francisco.

In the funds management arena, we see institutional investors in Commercial real estate holding, or even increasing, their capital allocation to the asset class. Real estate's relatively high income component, diversification benefits and inflation hedging capabilities are attractive to institutional investors who need to fund obligations, such as their pensions, on a regular basis. Real estate is currently offering a relatively high yield, compared to other asset classes, given the low interest rate environment. All of these factors, we believe, will be positive for LaSalle Asset Management, as we seek to replace capital for our clients this year.

So to close our remarks this morning, we would like, as we customarily do, to name some of the awards and other forms of recognition that we've received, and which reflect both our commitment to superior client service and our position as leader in Real estate services and Investment management.

Proctor and Gamble award us its Top Global Performing Partner's Excellence Award for 2010. In India, we all won four awards at Mumbai's Property World Awards, and the Advisor of the Year honors in Commercial, Residential, Retail and Hospitality asset classes. In the Australia Awards for Excellence, one of our colleagues was named the Australian Facility Manager of the Year, and we also won the State and Federal Government's Excellence Awards. We earned Best Places to Work honors in 11 US markets, including here in Atlanta, but also Los Angeles and Washington D.C. And the same honors in Spain, Germany and Ireland.

We were named Best Consultancy in Saudi Arabia and Dubai at the 2010 Bloomburg Pan Arabian Property Awards. At 2010 Euromoney Real Estate Awards we won Best Advisor and Consultancy Firm in Central and Eastern Europe, Italy, Russia, Turkey and in Mexico as well.

And LaSalle Investment Management, I'm proud to say, was named Best Investment Manager globally, and Best Investment Manager in Asia in the Euromoney awards. And just last week, the London office marketplace analysis confirmed that we were the number one Leasing agent in London for the period of last year, filling more than 4.8 million square feet of space, to capture a 28% share of the market.

So to conclude and summarize, we were very pleased with our 2010 performance and with momentum we're carrying into the new year. We see continued recovery in markets globally, particularly in the larger markets, and we will focus on growth and on expanding our operating income margins throughout 2011. We think our competitive platform gives us a solid foundation in this environment. While we face many high-quality competitors, we believe we have a unique set of attributes that makes us the best choice for clients seeking Real Estate and Investment management services. We have the size and the scale and resources necessary to provide whatever services they need, wherever they need it. The connectivity and collaboration among our people is unparallel, which means that we can marshal those resources to deliver the greatest possible value and results where ever they are required. And we have the strongest financial position in our industry, which means that we will be here for the long haul to support our clients.

So with that, we will move on to questions. And Operator, perhaps you could explain the question and answer process, please.

We'll pause for a moment to compile the Q&A roster

Your first question comes from the line of Bose George with KBW.

I had a question about the leasing activity -- the growth is very impressive. I'm curious if some of that can be seen as a catch-up from people who did shorter-term leases in 2009 and are now coming back to extend. Is there any way to quantify if that's a part of it?

It is certainly a part of it. We can't quantify for it for you, but clearly during the period of downturn, companies big and small went for short term renewals and short term roll overs and were reluctant to take long-term commitments.

What we've seen in the course of last year, world wide, and I'd say quarter four in the US was the last major economy to start doing this, was we saw big companies and then smaller companies begin to realize that the tenant market would be coming to an end at some point, that the best space in particular would become scarce. We saw them growing in confidence. We saw them looking forward for longer time periods in their planning and, indeed, taking commitments on a more normalized basis to the space requirements. I think that trend is clear. It's well-set and as I said in the comments, we think it will continue through 2011. The corporate market, and those are our ultimate tenants in everything we do, has clearly regained its confidence through the latter half of last year.

Great -- the exhibits that you have on page 3 and 4 are very helpful. I'm curious how those trends compare to what you're seeing in more second tier cities, or is that incorporated into that as well?

No. It's a good comment.

These are the City Center, CBD values in big cities. What you see -- these will be class A properties. What you see within those cities is class B property in city centers or suburban markets will be lagging. The city center [colleagues], as will secondary cities across countries. For example, if you're in France, Paris has been recovering healthily in the leasing markets for close on a year now. But if you're in Metz or Toulon or Toulouse, it's going to be a while before it gets going again.

The train is led by the major markets, and the secondary markets follow up. And the same thing applies in capital markets to leasing markets, albeit, as we've seen through this recovery, capital markets are out ahead anticipating the fundamentals.

Thanks a lot.

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

Good morning. Colin, could you give us a little color on the differential between the leasing performance in Europe versus the other markets, whether there was just a pause there, or -- maybe just provide color on the difference?

No, I think what you're seeing across the piece is just a steady recovery. We've tried to characterize some of the numbers in the broad annual figures. But when you get those recoveries, you'll get courses where it goes slightly faster than others. But the trend is just solidly upwards. So I don't think you should read too much into the detail of one individual region and one individual quarter. Just focus on the broad trend.

Okay. And just in general, as we think for 2011 about the growth in leasing -- it sounded like you're focused a little bit on rent growth. Are you still expecting a large part of the revenue growth to come from renewals still, or is new absorption going to be driving the line item a little more next year?

Renewals is placed low. There will be some new absorption probably everywhere. There's space to be absorbed because major corporations, all corporations, have downsized in the recession and didn't quite get the space downsized to the extent they downsized people. So the first trend is they'll fill back into that space, and from there you get positive net absorption. Which, again, we're seeing across Europe and the US.

Then you get into this virtuous circle. We've been in a vicious circle where all of the things I mentioned were going the wrong way, but now you get a virtuous circle where the numbers of square meters increase, the price per square meter increases, and our fee generally tends to trend up because the fee pressure comes off as markets recover. You get kind of a triple uptake in activity for us.

Okay. And then just a question on the Capital Markets growth, specifically in the US. Do you have a sense of splitting out what portion was driven by the hotel activity versus just broader commercial real estate activity?

We got those numbers, not in hand but in general, what we saw last year was a very low base. The hotel Capital Markets activity world wide really bloomed because it had gone back to such low levels. And of course as we talk about recovery and occupation and rental rates, hotels go down real fast, but they come up very quickly as well. So people saw occupancy rates and room rates recovering quickly across hotel markets, and that drove a lot of capital into the sector.

Okay. Just one last question and I'll hop off. Obviously there was some rumor about the ING portfolio and the potential of you guys looking at that. Could you comment, one, on that situation, and then, just in general where you guys are focused in terms of adding incremental growth onto your current platform for 2011?

Well, we're focused on the organic -- firstly and foremost, we are in the last cycle, on organic growth. Because that's the fundamental base for building our business. If we can get -- keep that up in double-figures, we'll be very happy. You drive it through, obviously, productivity increase, which is some way to go from our existing base. But as Lauralee said, we've hired 70 brokers in the US this last year, we continue to add individuals across our platform world wide. You heard us comment that the recovery is broad across all of our service lines, so wherever we can see the opportunity for hiring good people, we will do that.

We've also embarked again in a small way on acquisitions, and we mentioned a couple of those. So that's healthy. That's getting under way in the course of this year. And again we'll do that as we will grow people in our investment management, as well as our advisory businesses.

As to the transaction you -- or hypothetical transaction you referred to, we don't comment on whether we looked at any one individual transaction. What we do is look at every opportunity and we offset against a number of criteria. They have to fit, obviously any acquisition, in our overall strategic goals . They have to very importantly fit with our culture and clients' needs, and then the issues of ethics and integrity are also sort of paramount in a way we judge businesses. A lot of people don't even get through our financial hurdles. We'll continue with that rigorous approach to evaluating

Okay. Helpful. Thank you very much.

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

Thank you. Good morning Colin, good morning, Lauralee.

First, I want to ask about cash flow. Was there any -- the ability to pay down net debt by $250 million, going forward in 2011, was there any kind of anomaly in 2010, or if you do have some EBITDA or operating growth, should we see a growing level of cash flow as well?

I think I understood your question in that. There was no anomalies in 2010. We give you the difference between our adjusted and our non-adjusted, but that was very nominal and insignificant.

We had tight CapEx controls internally and managed those I think very well through the downturn. And we'll have some return of IT, as I mentioned, but nothing I would say unusual. And we're looking forward to putting more money out in LaSalle Investment Management. But our cash flow will grow with the performance of the business and we're very excited about that.

Okay, great. And then in terms of putting that money to work, there -- I saw that there was a deal, maybe small in Atlanta, and I know this question was just asked about specific deals, but are you -- would you say you're looking more closely than ever at acquisitions right now and are there good opportunities?

I'd say in comparison to the last cycle, Will, we probably will. Because we have that experience going through 2005, successfully acquiring 30 plus companies. We know how to do it. We've got a good deal of confidence in our ability. And our people are sensitized to it. Back in 2004 or 2005, we had to get people familiar and comfortable and teach them how to evaluate these acquisitions. Because many of them rise on the ground locally, and it's important our people around the world understand that, A, we're interested in doing them, and B, how do pick up the initial conversation.

I think one of the things that you've seen us do very successfully is take an opportunity and then leverage it with the platform, whether you see really what we said would happen with the strength of the Staubach Brokerage organization into the corporate, and us being able to push all the products across our platform. And now international, which is very exciting. But subtle examples would be in our industrial, where we did a small acquisition, and then levered it across organically, going from really no position in industrial three years ago to where we can claim a top position in the top most important, eight most important industrial markets in the US.

Another example would be this recent transaction into the hospital space. We know we can take our skill set and leverage it into new sectors and opportunities, and that's where we're going to be looking and targeting. But, as Colin said, it's a consolidating industry. And that is going to cause others to look at our platform as the opportunity that describes just what I talked about. So that will be our focus.

Okay. Great. Thanks. A few other things -- you mentioned that the loss of the direct CalPERS as of December 1. One, is that one reason for the decline, albeit slight, in advisory fees? And, two, the net capital change, I believe had been $5 billion or slightly over at the end of third quarter and was still $5 billion at the end of fourth, so did you replace that?

The (inaudible) management that we reported, we report on a lag, a one-quarter lag. However, we adjusted for CalPERS. So CalPERS is in those numbers. So, yes, we've been able to replace some of that as value increases. If you think about our securities business coming back. And some of it is the success that we've had in takeovers and other opportunities.

The answer on fees, is that is a part of that impact in the fourth quarter. And you know, we will -- we've said we've been managing our business really around margins looking at fee structures and the type of resources we need to put against that and will continue to do that going into 2010.

Will, we -- in our prior comments -- we raised in 2010 $5 billion to $6 billion in investment management business and it surprised me how strongly we were able to raise that money. And it came in the middle of a period, or the end of the period, when the LP world wide lost money and we're very hesitant and cautious in reinvesting in real estate. We had one or two in particular very major votes of confidence by institutions that only got to know us, as well as some increases in allocations from existing clients.

What it said to me was that we've got a very performance record for momentum for organic growth and organic additions to our capital base in LaSalle, which will continue on in through 2011 and beyond.

Okay. Thanks. Just one other question. I did a quick calculation looking at 2007, 2008 and added on Staubach, and it looks like your leasing revenues globally are above where you were then, slightly. Which I think in looking at competitors, you've stolen market share and others are still down 10% or 15% from the peak, is how I'm calculating it. Can you talk about just -- let's just focus on US Leasing and stealing market share, and have you taken it from larger players in particular, anyone -- is there anything that we can learn from this?

Well, Will, we'll go with your numbers since they sound okay to me.

Okay. Thank you.

They come from you, not me.

Right.

So, I sense through the recession, you heard us say this during the various calls we did in 2009 and '10, our sense was that through the recession, we did take share and we took it pretty much globally, as far as we could measure it, everywhere. And our analysis of why was that during that period of difficulty, such businesses that was came to us because people were looking for reliability, quality and, if you like, the brand name. And so probably during that period, some of the smaller players would have lost share, medium sized players as well, towards the larger, moving towards the larger end of the market.

That argument will cease to be as compelling in the course of 2010, but nevertheless, that momentum has been maintained and I think our image of good work has carried on.

Now, of course, within that we added teams during the back end of the recession. In London -- we did acquisitions across Asia and of course the Staubach merger in the US. And our sense is that we've only just begun to yield or to reap the full fruits of that acquisition, where our former Staubach colleagues are able to cross sell business to our effective world wide platform and into other services in the US. And vice-versa, when our credit in the US market to do tenant work and rep work for our corporate clients. And we said all through, that held up very well during the recession given where it could have been, but certainly got to continue to pay dividends as we pick up into the growth phase again.

Great. Okay, thank you very much.

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

Hi, good morning.

Good morning.

Just a couple of quick ones. One is on the money that was raised or presumably I think the comment was or the note was that $3 billion put to work during the quarter, can you give us a sense for where that money is being put to work? This is on the LaSalle Investment Management side.

Broadly, the larger piece went to Asia,. I will give you the numbers -- $1.3 billion to Asia, $1.1 billion to Europe and $0.8 in the US. The reason that's pleasing is actually the Asian markets recovered earlier and Europe was next and the US is next, so we're very much tracking our investment activity. We're investing as the markets start to turn and grow again.

Perfect.

It also illustrates, as well, the power of that platform we have globally with that spread of activity in particular in emerging markets in Asia.

Yes. Okay. And then, by way of comp expense, can you give a little bit more sense -- one of your competitors was on the record a couple months ago putting out a number of say how much of the cost cuts that were done during the downturn, how much of that will need to let's say return as the business, as growth returns, whether it be by way of travel or some of the other cuts -- Can you give a sense for, as you think about it, obviously we were pretty aggressive on taking costs out of the business on the way down. How should we think about both comp and expenses on the way up?

Well, we will look forward to our transactors making a lot more money as the markets improve. But that's variable compensation and will have relationships to revenue. So the way we manage the businesses is against revenue on the variable cost to make sure that it's in line with productivity and results. And then the fixed expenses, we manage very aggressively. They're going to be more our space, our technology, those types of expenses and we think very prudently about them before we stake the step-ups in what we need for growth of the business. So it's -- expenses will come back but we manage against the margin.

I guess you said presumably that translates to margins at least holding if not improving?

Yes. As you know, we've articulated a medium-term goal of a 12% global operating income margin and we need to increase from where we are today to get back there.

Okay. Perfect. Just one last, you commented on CapEx returning towards more traditional levels. Do you have a target in mind for this year?

Yes. We were -- we'll probably be more like $25 million high, $20 million to $25 million high, in all of our CapEx expenses than what we had this year. So it's still going to be very reasonable and nothing that would be an issue against our cash.

IT costs with expansion of offices, you saw we opened Zurich, that was an acquisition, Vancouver, also I think as well. But some small scale opening, but the bulk of that investment will go into IT.

We spent on CapEx just under $50 million in 2010, just under $40 million in 2009 and we would be more in the $75 million range.

Perfect. Thank you both.

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

I want to focus on the property facility management service line for a second. Maybe some color on the fourth quarter growth in the Americas and EMEA, in the context of the last couple quarters, which weren't quite as strong. Any comment on how we should think about the drivers for the fourth quarter slowdown, as well as what the near term outlook may be?

Well, they tend to come lumpily and so you have a big win and it moves. And so sometimes quarter to quarter isn't probably the best way to think about that business. But you'll see that we've got -- what I always like to do is look at the total year and look at the fourth quarter, or look at the quarters that are in there. But across the board, it's still very, very solid. The strongest growth we've had, really, has been in Asia-Pacific, where we have a very brilliant property management business as well as our multi-national facility management business. And obviously in the US in both.

Okay. So a continuation of the average growth, especially in the Americas and in Asia-Pacific, shouldn't be out of the question. Taking away how strong or weak the fourth quarter was on a relative basis to previous quarters -- a decent continuation of the four year growth rate seems okay?

Yes. I would say on our facility management business, the pipelines continue to be very full. And our win rate stays very high, so there's no reason that momentum should not be good.

We talked about the win rates and renewals in the corporate sector for the facilities management work during the prepared remarks.

Colin, you mentioned that you've got expectations for 40% growth in the transaction business in the Americas in 2011 from a market perspective. Perhaps any color behind some of the assumptions for that? Is that -- does that include recovery in the CMBS markets, sustained low rates, I guess some ideas on how you guys came to that general conclusion it would be great.

Our forecasters, who have actually erred traditionally on the cautious side in upswings, and it's after a 100% increase in the Americas this year. Just in general across the world we've toned down, if you like, our growth expectations in Asia and in Europe because they came out in an early cycle and were ahead of the US. We still think the US market activity level has got some rebuilding to do. Which is why it's, relatively speaking, double the growth rate of Europe and Asia. And that's the single biggest difference. Just the cyclical pattern being delayed in the US, compared to Europe and the Asia-Pacific region. We see nothing at this point which will break the momentum of uptick in activity levels. There is a lot of refinancing.

2011 is the start of the big refinancing boom with $250 billion to $300 billion to be refinanced in the US. Two-thirds of that is with banks, one-third is with -- is the CMBS market. That flips over, those proportions to the other way around in 2016. So it's an ongoing four to five-year refinancing challenge.

That's going to have two impacts. First of all, it will throw out, increasingly we believe, distressed assets. Because now the banks have got capacity to deal with them, with the capital basis repaired. But also it's going to crowd out some of the financing available for new transactions inevitably as the capital available is limited.

The CMBS market is coming back. I think last year about $10 billion was issued with something like that planned for the first quarter of this year already. So we see that market coming back. We all agree it will change, it will be more transparent, more cautiously underwritten than in previous -- than in the previous cycle. So there's all sorts of things conspiring together there to be good, and the only thing which would be a negative potential as we look forward would be the interest rate factor. You can clearly see it rising in Asia. And to choke off the inflationary trends there, it's beginning to perhaps come through in Europe. Five year money has gone from sub-100 basis points to 150 basis points over the last few months. And that's potentially presaging some inflation there. Not yet here in the US. But it could come in the course of the year.

That just will pressure the current -- at the moment even grade A properties have a 300 to 400 basis point risk premium over long-term risk free money. In fact, it gets compressed as interest rate rises. We could see some hesitancy in the market. But no signs yet.

And Brandon, just relative to the start of your comment in the US -- I think you know this, but I'd just like to reconfirm it, we have, contrary to the previous cycles, this time around we not only have greater investment sales, we have debt capabilities, we have agency debt capabilities, we have workout debt capabilities. So we have put in place all of the requirements to really feed our performance into the US market uptick, which we're quite excited about .

Fair enough. One final expense -- kind of leveraging off one of the previous questions about compensation expense. It's been a couple years since we've had a couple years in a row of a good market and with the changes that will come on the comp line from a bigger contribution from Staubach, and the changes in some geographies from bonus and salary to a more variable comp level, how do we think about the comp line acting in -- over the course of a couple of years of good results? Because I wouldn't take '08 and '09 as a good benchmark. So, if you think about how useful 2010's numbers were as a predictor, and how should we think about '11 and '12 on the comp line. How do we think about that on a relative historical context, or how to model that?

We're pretty pleased with the level of percentage on sort of a sustainable basis in 2010. It reflects where we want to be in some markets. And it's a little higher than where we want to be in others. So if we take parts of Europe where we still have countries that have not benefited from coming out of the downturn, those ratios will get better. But we're also expecting there will be some pressures in the high inflation markets like in China and India, where they haven't had increases for a number of years and our talent is viewed as the best in the industry. So we know we're going to have some pressures there.

But with all that give and take, We think we can manage ourselves with a number that is pretty close to the 2010s. We'd like to strive for a little bit better, but where we really are going to get our leverage is now off of the production that comes off those resources all around the world. Which are incredibly important to us because people make our business.

That's helpful. Thanks a lot.

Your next question comes from the line of Michael Mueller with J.P. Morgan.

Following up on the operating expense margin from a little while ago. So the 12% target, that translates into a 14% of 15% EBITDA margin target. One, I just want to make sure that is correct. And, number two, can you talk about the various targets by region because obviously the margins are quite different when you go from the Americas down to Asia to LIM, et cetera.

First of all, you do have it correct. We typically run a difference of sort of 2% to 3% operating income margin to EBITDA margin. So that is accurate if you go back in our history. As a profile, in 2007 our EBITDA margin for the total firm was 14.7%. Our operating income margin was 11.9%, to put it in perspective.

At the moment, I would say the place we are most off of our target goal is in EMEA. So clearly that has a lot of ways to come back and with transactions, that's going to typically be sort of a ten plus kind of operating income margin. Asia has a blend of annuity and transactions, so a lot of that will be the mix. So again they're going to be ten plus. LaSalle Investment Management is below its historic margin level a little bit on a steady state, but quite a bit when you add in incentive fees, which in a normal business environment, there's going to be consistent incentive fees. A little volatility in there, but enough of a global portfolio that we have incentive fees on a regular basis. So the performance improvement is going to come principally from EMEA, LaSalle Investment Management, in that order, and then Asia and continually across the globe as we put it all together for improvement.

Okay. When you were talking about 10% plus for EMEA and Asia, those were operating margins not EBITDA margins, is that correct?

Yes.

Okay. Thank you.

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

Thanks. A few follow-up questions. Lauralee, on the tax rate, is there an approximate figure we can expect going forward?

We had said to you at the start of the year that we look to manage in sort of a 23% to 25% range. We have been for the first three quarters running at the low end of that. With the very strong US performance, that drove us slightly into a higher tax jurisdiction globally, so we rose to 24%. So, somewhere between 23% and 25% is still a very good range and then it's a question of where the income falls.

Okay. And on the broker hiring in the US at 70, was that a net number? If not, that was --?

That was a net number.

Okay. What is the total that -- total number of brokers in the US that we can compare that to?

You know what? We'll have to ask them.

That's okay.

The Staubach forces were 700 that were added to ours at the time, but I don't know the answer to that.

Okay. And do you have an approximate figure of --

Actually, I can answer that. We're just under a thousand brokers.

Just under a thousand, okay.

By the way, that is up more than 2% over our 2007 level, so --

Okay, great. And then on -- someone was asking earlier about the move from salary and bonus to commission, of your brokers around the world in sales and leasing agents, what percent would you say are salary plus bonus versus commission, if you care to comment on that?

Most of Europe is still salary bonus, although we have commissions in a few parts of the world, Germany, France, and we have blended commission bonus in -- that we've been moving to that at least sort of moderates that in the UK and looking at some of the other markets.

In Asia, we have a fair amount of commission. In India, and New Zealand. But a lot of the other parts of the world are principally based on bonus.

Okay, great. Just one final question. Typically in the first quarter your net debt level goes up by, I don't know, $50 million to a couple hundred million dollars. Can we expect to fall in that range this year?

We will be paying bonuses, so it will be the bonus levels that will drive that. And also a little bit different is we also pay commissions very timely, so we had very strong performance in December from the commission brokers and those will be paid, actually have been paid already, in January. So it will go up. I would say it's probably more going to be a couple hundred million, but it depends on just receivable, collections and so forth.

Great. Thank you very much.

Thanks, Will.

At this time, there are no further questions.

Well, thank you operator. With no further questions, we'll draw today's call to a close.

I'd like to thank everybody for joining us, for your interest in the firm and we look forward to speaking to you again at the end of the first quarter.

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