Jones Lang LaSalle Inc (JLL) 2011 Q3 法說會逐字稿

Good day, and welcome to the third-quarter 2011 earnings release conference call for Jones Lang LaSalle Inc.

Today's call is being recorded. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company's annual report on Form 10-K, for the year ending December 31, 2010, 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 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. Hello to everybody joining this review of our third-quarter and year-to-date results. Our Chief Operating Officer and Financial Officer, Lauralee Martin, is with me today in Chicago, and she will be reviewing our performance in detail in a few minutes.

Firstly, to summarize our results, in the third quarter, we reported adjusted net income of $50 million, that is $1.12 per share, which is a 30% increase over the same period one-year ago. Year-to-date adjusted net income was $101 million, or $2.27 per share, which is a 25% increase on the first 9 months of 2010.

Third quarter revenue was $903 million, a 28% increase in US dollars, 23% in local currency from the third quarter last year. Revenue totaled $2.4 billion for the first 9 months of the year, which is a 24% increase, 19% in local currency. Our Board of Directors has declared a $0.15 per share dividend.

So in addition to this healthy revenue and earnings picture, we did continue to make selective strategic investments in profitable growth. In Asia Pacific, who became the leading real estate services serving Indonesia, the world's fourth most populous country, with the acquisition of Procom, a top competitor in an active emerging market. And in October, we acquired DST International in Singapore, both as part of our plan to establish a full complement of high-end residential property services in the regions. Both acquisitions build on the leadership position which we have earned in other key Asian markets, such as China and India, and support our aim to establish the firm as a clear industry leader in all of the high growth Asia Pacific economies.

Also in October, we established a market-leading presence in the US Pacific Northwest by merging with Pacific Real Estate Partners. In EMEA, we are making good progress with the King Sturge integration, combining offices quickly so that mixed teams of former King Sturge and Legacy Jones Lang LaSalle colleagues are now located and working together to service our clients. We can see our market leadership reflected in such industry rankings as Property Data's UK Investment Agents table where we are now far and away the number 1 in UK property sales.

Finally, on the acquisition front, at LaSalle Investment Management, transition and integration activities following our acquisition of Trinity Funds Management in Australia, are progressing on schedule. Lauralee will share details in her comments, but Trinity is part of our push to expand and deepen LaSalle's global access to, and distribution of, real estate investment capital.

To put our results in context and summarize current conditions in global real estate markets, we have posted slides in the Investor Relations sector of our website, www.joneslanglasalle.com. Slide 3 shows the Jones Lang LaSalle sales clock which we update quarterly. It's a snapshot, shot of conditions in major markets around the world at different stages of the real estate cycle. Capital values for prime offices continued to grow in virtually all major markets during the third quarter, increasing by 14% year-on-year across 23 major world markets.

Global investment sales volumes held steady during the quarter, totaling just under $100 billion, about the same as in Quarter 2, but 36% higher than in Quarter 3, 2010. Market volumes in the Americas at $37 billion, were down by 24% from a very strong second quarter, with most of the pullback in secondary markets. While the appetite for core assets, particularly in major markets, remains strong. Year-on-year market volume gains were impressive in the Americas, up 56% from the third quarter of 2010. Investment volumes in the European markets were also strong, with $41 billion transacted during the quarter, a 15% increase on Quarter 2, and a 38% increase above a year ago. And at Asia Pacific, transaction volumes totaled $21 billion, a 13% increase over the second quarter, and 7% of above Quarter 3, 2010 levels. Prime office yields held steadily in most major global markets during the third quarter, thanks to attractive spreads and continued robust investor demand for high-quality, well-let assets.

Moving to slide 4, which summarizes conditions in major leasing markets around the world, sentiment was cautious in global office markets during the quarter, with US office leasing activity weakening, down 26% year-on-year. In Europe, leasing volumes remained relatively stable with notably strong activity in Paris, Germany and many Central and Eastern European office markets. Office leasing activity was also stable across most of Asia Pacific, particularly in markets dominated by domestic corporations. Vacancy rates continue to move downwards worldwide, to 13.8% across 94 global markets. The lowest level in 2 years. The Americas and Asia Pacific reported the largest of these declines. Prime rents continue to grow, our global office index, which tracks the rental performance of prime office space across 81 major markets, increased by 1.1% in Quarter 3, slowing marginally from 1.6% in the second quarter, but up 5.5% on the year.

Echoing the comments which we made during our second quarter call, it is clear that concerns about the Eurozone debt crisis and the pace of global economic growth, did make corporate occupiers and real estate investors more cautious during Quarter 3. Nevertheless, our business, capital markets and our leasing activities, continue to grow during the quarter and we saw improved performance in our Asia Pacific business and at LaSalle Investment Management. As one of our colleagues put it, sentiment may be soft but our numbers are solid.

I should add that our strong business results are thanks entirely to the incredible contributions of our people around the world. And Lauralee and I want to thank them for their efforts. We currently owe a very special debt to our colleagues in Thailand who continue to serve their clients while battling the floods which are devastating their country. So to discuss these results in more detail, I will turn the call over to Lauralee.

Thank you, Colin, and good morning to everyone on the call. As Colin mentioned, we are pleased to report another quarter of very solid performance across the vast majority of our service lines and geographies, which resulted in 28% revenue growth, and 30% adjusted net income growth as a consolidated company.

In the Americas region, quarterly revenue increased 22% to $379 million in comparison to last year. This growth was broad-based as each of Leasing, Capital Markets and Property and Facility Management were significant contributors to the growth. The 22% growth in leasing revenue outpaced broader market leasing volumes as a 44% quarter-over-quarter and 79% year-over-year increases in our Capital Markets and Hotels revenue continue to reflect the successful expansions of our capital market platform in the Americas. Furthermore, transaction pipelines for both Leasing and Capital Markets continue to look good heading into the remainder of the year.

Year-over-year margin comparisons in the Americas continues to be negative as the business upgrades its service delivery capabilities. But we remain on track to achieve our goal of having the margin be down no more than 1% from last year. Our progress is demonstrated by a sequential quarterly revenue growth of 9%, which delivered a sequential 20% operating income growth, excluding equity earnings.

Turning to EMEA, our acquisition of King Sturge has compensated for year-over-year market pressures and we are realizing the benefit of their positive impact on our revenues across the region. The acquisition contributed approximately $60 million of revenue in the quarter across service lines, with the most significant impact seen in Capital Markets. The region's 2011 operating income and operating income margin improved, excluding the impact of the $5 million of intangible amortization from the King Sturge acquisition. Our market presence is largest in those countries best positioned to managed through the current challenges. That being the UK, France and Germany. But recovery across the region continues to vary by country. While market recoveries remain challenged, we are looking more aggressively at synergy opportunities to take additional costs out of the business as a supplement to our acquisition integration action.

Regarding the integration of King Sturge and Jones Lang [southland] firm, which continues to go quite well. We recognized approximately $16 million in the quarter for staff retention, lease exits and some severance and other transaction costs. Of the $16 million, $6 million was part of the purchase price, which the King Sturge partners paid as retention to their non-equity partners, but is accounted for on our books as part of the transaction costs.

Turning to Asia Pacific. The Asia Pacific region delivered solid performance in the quarter in both revenue and profit growth. Revenue across the region was up 22%, 12% in local currency, while operating income increased to $14 million, from $7 million in the prior-year. Revenue growth was balanced among leasing transactions and annuity-like revenue streams from property and facility management. Our improved results benefited from continued strength in operating performance driven by our teams across greater China and India. Asia Pacific increased operating income and EBITDA margins by 250 basis points and 180 basis points, respectively from the third quarter of 2010 to the third quarter of 2011. While quarterly margins declined between the second and third quarters, this follows the same seasonal pattern between the second and third quarters of last year. We expect Asia Pacific to continue to perform well over the balance of the year.

LaSalle Investment Management delivered significant increases in both revenue and profitability in the quarter, driven by higher incentive fees from the sale of properties and maturing funds as our team delivered investment performance to clients. Advisory fees were $59 million in the quarter, and $185 million year-to-date, maintaining an annuity run rate similar to the prior-quarters and last year. We delivered this solid performance against the expiration of investment periods for 2 large funds in Asia towards the beginning of the quarter.

Regarding our Public Securities business, while there has been general market talk related to Japanese investment flows, we have seen less than 2% withdrawals from our Securities business over the last month, which translates to roughly $1 million of the firm's annualized revenue. LaSalle continues to prove its competitive strength with its track record of investment performance and increased its year-to-date capital rates to nearly $5 billion of net equity. The acquisition of Trinity Funds Management during the quarter with an additional $700 million of assets under management, is providing LaSalle with credibility in Australia and importantly, access to Australian investors who we expect will benefit from LaSalle's global capability.

We continue to maintain our investment grade balance sheet and are benefiting from the resultant low interest expense. We have reduced our year-to-date interest expense to $27 million, from $35 million a year ago. In the third quarter, our cash interest was less than $4 million. In the third quarter we made our second installment payment to Staubach for $150 million. The non-cash interest expense for this payment had an interest rate of about 6%, which is now funded on our credit facility at an interest cost of under 2%. We also repaid net debt during the quarter, funded the Trinity acquisition in Australia and co-invested just over $45 million, about half of which was related to Trinity, and the rest for assets as LaSalle begins new rounds of fundraising. Our balance sheet strength remains a differentiator with our clients and an important priority for us.

In summary, we are pleased with our performance this quarter. We have produced another strong quarter of both revenue and adjusted earnings per share, and we have solid pipelines in hand in the face of inconsistent markets. I will now turn the call back to Colin.

Thank you.

If you now turn to slide 5, you'll see a few examples of recent business wins. In our Corporate Outsourcing business, we won 15 new assignments during the quarter, renewed 9 contracts, and expanded our relationship with 9 further clients. These totals do not include activity in our local market level corporate solutions business, which serves the needs of mid-market corporate clients. In Quarter 3, we won 11 new assignments totaling 37 million square feet of space in this growing business area.

In terms of specific corporate wins, we renewed, expanded and won new business from HSBC in all 3 of our global regions. We renewed our service contract in the US, expanded the relationship to include the Banks Canadian portfolio, and HSB has also selected us to serve a strategic property partner in the Middle East, North Africa and across the whole of Asia Pacific. Also, adding to my earlier comments about growth prospects in Indonesia and our recent acquisition there, during the quarter we won facilities management assignments of a 2 million square feet portfolio of Pertamina's Indonesian government-run oil and gas company.

Turning to investment sales activity, in the US, we closed the $144 million sale and also arranged $123 million of financing for 1700 Market Street in Philadelphia. In the largest investment transaction to date this year in the City of London, we advised Legal and General on the GBP305 million acquisition of the Rolls building, and in Australia, we acted for Abacus to structure of $628 million joint venture with the Heitman Group. The quarter's major leasing and tenant representation transactions and management assignments included representing Met Life in the US for 276,000 square feet of lease in lower Manhattan. In Europe, we represented AXA to lease 538,000 square feet at the capital in Brussels. And in Japan, AIG Edison Life awarded us the management assignment for 1.9 million square feet of portfolio of office buildings.

Moving next to LaSalle Investment Management, as Lauralee mentioned, LaSalle has raised nearly $5 billion in net new equity to date in 2011. Assets Under Management now total $48 billion, up from $41 billion at the start of the year. Investors are maintaining their allocations to real estate, but are focusing on core strategies and on real estate securities, both of which play to LaSalle's strengths. Managers such as LaSalle, with proven performance, who are stable and have a strong platform will continue to gain market share in this environment. As for the Trinity acquisition, we will continue to strengthen LaSalle's ability to attract and invest capital globally.

So let's now look forward to consider the near-term outlook in real estate markets. Our current projections for 2011 direct real estate investment volumes indicate a range of $400 billion to $440 billion for the full year, and that will be up 25% from last year's $320 billion. Globally, we expect hiring, yields and cap rates to remain broadly stable, with some tendency and weakness in those Euro markets were sentiment is poor. In global leasing markets, 2012 net absorption levels in Asia Pacific will be positive despite some softer demand. In Europe, we project overall leasing volumes in 2012 to run about the same level as this year, and in the US the pullback in sectors such as finance and government do point to lower leasing market volumes over the next few quarters even though other sectors, including technology and energy, continue to register strong positive activity.

Rental growth expectations for 2012 remain positive. With most major office markets expected to register at least single-digit growth over the next year. However, Hong Kong and Singapore, where growth has been long and strong, may see some softening in rentals. To sum up, global real estate market fundamentals are probably now on a firmer footing than for several years. Prime Western leasing markets are fairly tight with no major oversupply looming. There is a substantial equity capital looking for real estate, and with healthy balance sheet, corporations are well placed to make capital investments. We would expect a cyclical recovery reflected in our Quarter 3 numbers to continue unless the Eurozone debt situation further damages business confidence.

In our own business, we continue to keep a careful watch on market conditions, and we're focusing closely on managing our costs effectively. But we also continue to see healthy pipelines, we are clearly gaining share and we are investing judiciously in productive resources. Our fourth quarter is typically our strongest, so we are approaching the end of the year with some confidence.

We would like to close these remarks by mentioning some of the awards we have received and which reflect our client service focus and reinforce our leading position in real estate services and investment management. In the prestigious 2011 Euromoney Real Estate Awards, which are voted on by clients and by industry peers, we won a host of global, regional and country awards, 64 in all. They included, top Global Real Estate Advisor and Consultant, worldwide; number one overall advisor in Asia, Central and Eastern Europe and the Middle East and North Africa; and top advisor and consultant in the Global Research and Valuation categories. So some very comprehensive wins.

So with that, we will now move to your questions. And, operator, would you please explain the procedure?

(Operator Instructions) Your first call comes from the line of Sloan Bohlen.

Good morning. Just a question, Lauralee, I'm not sure if you can do this, but I was wondering if you could break out the numbers for the EMEA ex the King Sturge acquisition, just to try and get a sense of what the same-store growth would've been in the different segments?

What we did is we provided you the revenue which is about $60 million, and then we provided you the change in the growth accounting for our property and facility management was about $10 million. So, if you actually look at the balance, it was not very robust, that's the best I would put it. We're extraordinarily pleased that we got the timing right on King Sturge, it's filling in some of the holes. We think as the markets continue to recover, we will just take advantage of all that consolidated position.

Okay, is it fair to say that the $60 million, is it tilted toward capital markets more than it is leasing?

Yes. The strongest position is in capital markets.

Okay. Switching gears maybe a little bit. Colin, you talked a little bit about Asia potentially maybe looking slower next year, it sounds more like it is just tougher comps off of some very strong years we have had recently. But can you maybe talk about the potential for slower growth rate in China? What impact that may have in your different regions in Asia?

China actually had a very strong quarter, 20% plus growth numbers in revenue. The general market position in Asia is interesting, you are right, they had an early, strong bounce coming out of recession, leading the world you'll recall. But from quarter to onwards, our sense has been that the Asian market operators have become very sensitive towards what's going on in Europe. And in fact the first time we heard noise about Europe affecting investment sentiment was from our Asian people in the course of quarter 2. And if that Asia phenomenon where the investors and corporates there just have always been extremely sensitive to market conditions, so they go hard when conditions are good and they slam on the brakes when things are poor, you have that traditional cyclicality. Particularly, in the major centers of Hong Kong and Singapore where money flows and business flows are so volatile. So what you've got there in the moment is a basic underlying strength of economic growth across the region, including India and China, we'll come back to that.

With this kind of worry around what are the implications for the world financial systems and therefore for Asia, of whatever happens in Europe? On China and India, what you've seen there is the government through the central banks trying to rein in the rate of inflation. Principally in food stuffs because they are concerned about inflation hitting the popular, or the mass markets and they are affecting people's income levels of the max level of the markets. So they're raising interest rates to try to choke off inflation, and that has had an impact on the cost of and availability of capital in the broader business sectors. But, so far at least, as I have just reflected on China, with 20% plus growth rates for us in the quarter, it really has not had a marked impact on activity. We are still seeing good strong pipelines in both leasing and capital markets in our broader management business. Still so far we can't see anything that would indicate that rate of business growth and rate of economic growth would be negatively impacted. Like everything else in the world, we've made the point, everyone is watching Europe, and sentiment is sensitive to that.

Okay. And then maybe just one last question, coming back to Europe. Lauralee, you hinted at taking a look at some costs, maybe could you talk a little bit or more or elaborate on what your view is as to what you could do for costs and how we should take a look at how to see that in your numbers?

Well we are currently working through the integration of the King Sturge acquisition, which is basically around central costs, which will happen here in the fourth quarter. But as we go into our budget process which is now going to commence, clearly everybody is going to take their outlook, going to take a look at what they think their opportunities are, and that is really going to determine how aggressive we need to think about costs as we look at next year.

Okay, and that is outside of the King Sturge acquisition? It sounds more like it is kind of tied to what level of activity you guys projecting in Europe?

It would be across the board.

It will be a struggle to focus on the cost growth in Europe, we were anticipating further growth in the revenue line, it is just a question of tightening up the control on the cost side.

Is there a good target that we should look for whether it be your EBITDA margins, or how we should think about how you are thinking about trying to manage at least some target?

We manage both to the operating income margin and the EBITDA margin. If we look at the third quarter, and exclude the King Sturge acquisition, which really impacted Europe about 2% on the actual numbers, so they would have been up sequentially over last year, it would've been 6.2%, versus last year's 4.4%. So, they are clearly focused on margin as well, and we will be looking at, we have not backed down from our medium-term targets anywhere in the business.

Okay, great. Thank you guys.

Your next question comes from the line of David Gold.

Good morning. Was curious if you could give a little bit more color on the upbeat, or confident fourth quarter outlook? As far as pipelines and then conversations that you're having with clients. Basically, if you could sort of give some color around that - -. Obviously, you've just come out of a tough period where you performed well but basically sounds like we don't see much anything being pushed off into next year, so to speak?

Well, we're very careful about forward-looking statements, and so we have given you as much as we can give you on the position, pipelines are good and strong. It's our strongest fourth quarter and we are feeling good about it. In terms of how we get from here to there as it were, yes, pipelines are strong, but we will be watching very closely the rate of closure of transactions, both in the leasing and the capital markets area. It's obvious that in Europe, in particular, the secondary markets, it's becoming harder to close transactions as debt availability is reduced with the banks deleveraging and shrinking their own balance sheets. But transactions are getting closed, people are finding access to debt to matchup with a very considerable levels of equity that is still there. So, we just anticipate that there will be a normal closure rate and these pipelines will be converted into revenue in a normal, healthy way. And that is the basis of the statements that we made.

I was just going to also add, David, capital markets is the 1 place where things can change rather quickly. But, as you know, we have significantly reduced, we haven't, the market has, the percentage of that as a total of our revenue. And the balance of that revenue when it is in the pipeline, it is pretty hard to slow a leasing transaction when you are this deep into the process and so forth. Part of it is what we have done with the mix of revenues, more annuities, knowing those pieces of it. And even on the capital markets side, seeing that places where we might have thought it would drop off, having focused on distressed debt and that core markets, it is still performing pretty well.

I will use your question to expand a little bit on sentiment. I said in the Q2 call, the basic mindset of investors and corporate at the moment, is they want to move forward. They're not looking to go into recessionary lock down. They're looking to move forward. If anything, restraining them and causing them to be cautious is the whole situation around Europe. Fortunately, the US has kind of gotten better than it was in the summer with the debt crisis, at least for the short-term, put aside.

But the European situation is certainly giving investors and corporates pause for thought. If that were removed, I think we would be in a very strong market position across corporate and investor markets worldwide. It is just the uncertainty that's holding - - and the news flow which flips around on a daily basis, which is holding people back. Nevertheless, even in that environment, we produce the revenue growth that we did, so you can see that we've - - I think in many cases, business people have sort of gotten used to what's happening. It is getting cause to be cautious, but they are finding ways to move forward. That's reflected in the sort of growth numbers that we have produced.

And then just one other if I might? On the release on market share gains, I'm curious if you could add a little bit there about what geographies you see that? And then also if you could give a sense of, where is it coming from, larger competitors or smaller competitors, or somewhere in between?

It is across all geographies and most business lines. With an ongoing process, which is not a short-term thing, it is a decades-long process of consolidation, which is not just people buying people in our industry, it's clients seeking advice from bigger, and more professional firms on a continuous basis. Which is why you're seeing the larger firms growing and smaller firms, particularly little-size smaller firms, having difficulties.

If you add to that, the increasing cross-border nature of many transactions where investors and corporates both are looking for service providers who can deal with it across multiple geographies in a consistent way. But also helps with the process of market share gain. And if you want to look for the sort of negative side of the whole picture, you can see some very large competitors in both the US and in Europe, who have very large and public issues around their potential for continuity. That is also obviously driving business and operators towards our platform. So, you put it all together, and you can do a side-by-side with the obvious numbers from some of our competitors and see some shake-down against that as well. That is the basis for our statement.

Perfect, thank you both.

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

Yes. Advisory fees as a percentage of assets was (inaudible) this quarter. I think advisory fees were down year over year? What drove that?

I'm sorry, could you say that one more time? I didn't quite understand that.

In LaSalle Asset Management, advisory fees were down year over year I believe in the third quarter?

As I said in my comments, we have been advising every quarter on our call, that we had 2 maturing funds, and they did in fact mature at the beginning of this quarter where we were earning advisory fees on committed amounts. And we have obviously released those committed amounts with the funds now maturing. So we have said that our goal was to actually maintain to a level in totality to last year, and we have proven to do better than that. We are very pleased with where we're going and we're making that up really by growing the Assets Under Management elsewhere. Relative to those 2 funds, we are back now out in the market in capital-raise mode, and clearly we'll be hopeful to be announcing success at that, probably in the first quarter of next year.

I think your Assets Under Management are reported with a 1 quarter lag?

That's correct.

Can you give us a rough ballpark for the size of those?

The total Assets Under Management was $48 billion as measured at the end of Q2. The securities business met marks on a daily basis so that is the only exception, that will be the end of Q3 number. We have been in addition to the capital-raising for funds, we have been out bringing in new clients with some significant mandates from those new clients and large mandates from existing clients on both sides of the Atlantic.

How does your outlook impact your own appetite for acquisitions, going forward?

Pretty much as we laid it out I think. We said that we are positive, we liked our earnings, we've got a great balance sheet with significant capacity for the debt if we choose to use it. We are, yes, looking at acquisitions, we've continued to invest in external growth, we will continue to do that. But we have been very duly cautious about what is happening in the world as a whole. So we think about our forward planning, we are ensuring that our balance sheet can take some very significant stress tests, which applied to it. So we'll stay very well clear of our covenants ceilings in any forward cash planning.

I know you are hesitant to give forward outlook, for the Americas adjusted EBITDA margin to be down 100 basis points in the fourth quarter, if we look out past the fourth quarter of 2011, is 2012 going to be a year of flattish margins, or could we see potential leverage in that region?

Our goal is to get to the medium-term margin, and that business has done a combination of having a lot of growth and a lot of investments this year. They're proving that they're getting performance on all of that. So you can see that we are now translating that into sequential, better operating margins. Plan to do that in the fourth quarter and get to our medium-term margin as soon as possible.

Thank you very much.

Your next question comes from the line of Joseph Dazio.

Good morning, guys. On the leasing volumes, particularly in the US, I was wondering if you could tie together the comments about the pipeline looking really strong with, I think you guys mentioned that in 2012, you could see volumes down a little bit due to the services slowing. Do you think there is any shot that the fourth quarter of 2011 could see some declines? As I recall correctly, I think fourth quarter 2010 was a pretty strong quarter. Or do you think you have enough visibility that you will still see growth in volumes there year over year?

Leaving the market aside, our visibility on pipelines in the leasing area in the US gives us confidence that we'll see growth year over year. How much we won't venture to say at the moment, we clearly have our plans but we won't put them out there. As the market as a whole, we made the comment about 2012 which you can assume starts now, is a picture of hesitancy and the government sector that was previously strong and the financial sector which has shown some bounce over the bottom. That is temporary and at least will come to a halt, but there are other sectors which do continue to move ahead strongly. We mentioned tech, advertising is another, the market as a whole will be determined by the balance of the activity in those sectors. But our own numbers, our own position, we feel pretty good about.

Okay, and then really quickly on the acquisitions in the quarter, particularly those in Asia and in the Pacific Northwest. Is there any detail that you would be comfortable sharing there in terms of just order of magnitude? And business concentrations?

They are all modest. That is why you don't see the numbers. I would say that one that we talked about the residential business is very modest in size, very important strategically. King Sturge entered us into the high-end resi market in London, which is very much a global activity, and particularly, with sources coming out of the Asia market. So to connect our already good flow there and add to that was really the importance of that strategic acquisition as well as then making sure King Sturge continues to be better and more successful with us than they were on their own. Small, but strategically important.

Again, we talked about the Procon, it is a smaller market, so it is a smaller acquisition, but it made us the market leader by quite a large amount. The Pacific Northwest is probably the larger in terms of all of them, though still very modest, but focused on that Northwest corridor picking up Seattle and Portland, that gets into the ports and logistics, the tech space and all of that, that again closes out the strategic pieces that our clients tell us are so important to them. But all relatively modest.

Modest in Lauralee's definition means sub $25 million revenue.

Great, thank you very much.

Your next question comes from the line of Will Marks.

Thank you. Good morning, Colin. Good morning, Lauralee. First, I want to ask, the $60 million from King Sturge, do you have a comparable number for last year?

It was about flat, which we view as very positive given the disruption of coming in, joining us and all of those things. So they clearly have not disappointed us when we think about we purchased a trailing EBITDA, and we've continued to have that be delivered to us.

Great. And then, in terms of King Sturge integration costs in the fourth quarter, what should we expect? And anything next year?

Again, we have most of the amortization rolling off sort of by third quarter of next year. There will be a tail after that. We are going to have some severance that will now be done mostly in the fourth quarter. We have given you the $25 million number so we are sort of $16 million into that, of which - - we have given you a $50 million number including the King Sturge's piece and our piece of the $25 million, $16 million that we talked about to date. $6 million of that was actually into the King Sturge $25 million. So you can take the $9 million that we have into our $25 million and sort of get an idea of what is still left, most of which we would like to get done sort of by the middle of next year.

And then on the balance sheet, can you break down that you have the deferred business obligations? How much of that is King Sturge versus Staubach?

Well, the King Sturge acquisition was a little over $300 million, of which we paid 50% up front. So, and Staubach has the remaining $150 million, and then the balance of those are a series of other acquisitions that we have done, because our pattern is to have a deferred amount to really keep retention and focus of the people that come across.

Those are discounted back, correct?

Yes, that's correct. And then they [acreet] in until the point in time that they are paid. I talked about the 6% interest rate that we had on the Staubach transaction, because of where interest rates are today, the King Sturge is actually lower at a 4% level. So, again, they get adjusted. But all of them tend to be higher than the cost on our own credit line.

A few other things. Do you break down anywhere that LaSalle Investment Management transaction fees versus incentive fees?

We did not, but the number I can tell you is about $15 million of it was incentive fees, and the balance of it was transaction fees.

Americas hiring in the past few quarters, you have given some numbers to show how many people you have hired. Can you expand on that?

In terms of brokers?

In terms of brokers.

It is a relative modest number at this point in the year, a combination of, it's getting late in the year and brokers at this point in time are going to hang on and finish up their year.

On a related note, does a general slowdown in hiring potentially lead to a better margin? I know you kind of gave some margin outlook in the Americas, but on a maybe global basis, is that a reason for margin improvement in the future?

Is a clear reason for us to be confident. We know we can pull levers there. Because we are looking at strong growth, and you can't produce these growth rates without having some cost for the business. I think the question is getting the balance right between how the costs come in and how we respond to the demand growth.

Clearly, we can attenuate that back into the extent we feel the markets, growing our markets, or our revenue performance is about to grow less strongly. We will dial it back across regions. But just for the moment, the happy position we are in is without strong top line, we are able to simply apply the lever or apply the brakes to growth in costs as opposed to having to remove costs, which is a much harder activity. I should say as we look at that, we are not taking a blanket across-the-world approach, one-size-fits-all, we are looking by country, by business line, at how we should be setting ourselves up for 2012, which is our customary approach.

Couple of other things. One, the cash flow in the quarter looks as if it is lower than 3Q 2010.

Very good observation. It is interesting, the last day of the quarter happened to be the last day of the month. And so we had an unusual payroll run in the Americas, and I'm sure if you want to country by country, probably around the world. Which means we will get the benefit of that in the fourth quarter just because of the timing of that. We had 1 additional payroll run that is normally not there in a quarter.

Without that do think there would've been cash flow growth?

Significant, yes.

Just my final question. It kind of has to do with market share. I look at your reports that you put out for your clients, I know they are not really for Wall Street, but public reports on for example, you have a US report that shows the US leasing volumes down 26% in the third quarter. And an industry note, yet your leasing was up 20% plus. Some of that is just revenue versus volume, and some of it is market share. Maybe you could just talk a little bit about the differences and also as it ties to, when you discussed 2012, I know you're talking about the industry and volumes - - could higher rents and more square footage take and impact things as well?

First of all, that drop we've noted in the report was around office, and our numbers are a mixture of office and residential and retail and industrial. So different market sectors. In addition to which, we are focused in obviously better markets, so kind of in the larger markets, so the number that you quoted was our number for the Americas as a whole. And we did say that the drop had been concentrated in the non-top markets, the secondary and tertiary cities and secondary and tertiary districts and cities.

So when you get to the better-end and the concentration of bigger cities where we tend to operate, the picture was more positive. So, that is point one in terms of the market background. And point two, well, again, we believe we are still taking share. Those numbers tend to support that belief. That's the basis in which we make that statement.

As to the outlook, the general comments I made around sentiment on business apply to the US. If you put a hierarchy of how people seem to be affected, the European's business people are obviously most impacted by what is going on, they're living it on a daily basis. The US and Asia less so because it's a relation from a distance, but they are intending to get on with things. So we feel fairly good about business sentiment next year, unless things take another big stride downwards. We've made the comments about this sectors and the US market, office market in particular, which we believe will grow and those which will be pressured around Wall Street and Washington.

Okay, thanks for the thorough answer and that's all for me.

Our next question comes from the line of Eric Prouty.

Just a couple quick questions going back to Europe. Could you do a scene kind of sector or end market analysis over in Europe as you did in the US where you are seeing strength and weakness from a end market standpoint?

Again, we made some reference in the script to some of the things we are seeing. In general, if you take the biggest single market in Europe which is London, you will see rents going up and you will see vacancy rates extremely low in the West End. But when you get to such a broad market with a broader base of demand. When you get to the city, there are levels of vacancy and there is some softness in the rental picture because the demands there is less strong. Same in the investment sales side of that particular market.

You've got a lot of demand, lot's of action on properties on the West End and you've got significantly less interest in city properties at this particular point. Again, these sentiments can bounce around quite rapidly. Get outside of those 2 markets and things drop off pretty rapidly in the rest of the English market. If you go to Paris, you will see quite strong demand and quite strong capital market activity. Outside of Paris, it's slower. Germany is fairly broad in terms of demand in both sectors. And then we mentioned strength in Eastern Europe, the Nordics and Russia, which is again going very strongly in both investment sales and demand for space. Those comments are mostly office-based comments, I haven't got anything in light of the details to give you in the industrial retail sector.

Great, and then maybe also just a little bit of commentary on, it doesn't sound like you have seen anyone pushing off projects, or whatnot. So, are we not building up any potential pent-up demand if the European debt crisis gets solved? Or do you think there is a little bit of hesitancy out in the market that could get released?

There could be a little bit of a kind of a small wave of activity which people have held back on, both in Asia and the US. There could be a much larger wave potentially in Europe where we have seen some drops in demand year on year. If you want my personal opinion, don't hold your breath and expecting the European crisis to get solved any time soon. It could take many quarters of activity. And if you talk to your banking analyst friends about what is happening in the banking markets in Europe, that is quite an interesting conversation.

Thank you very much.

There are no further questions at this time.

Okay, well thank you, operator. And thank you to everyone who listened in today for your interest in the Company. We look forward to talking to you in 2012 about our fourth quarter results. Thank you very much.

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