Jones Lang LaSalle Inc (JLL) 2011 Q4 法說會逐字稿

Good day and welcome to the fourth quarter 2011 earnings release conference call for Jones Lang LaSalle Incorporated. Today's call is being recorded. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company's annual report on Form 10-K for the year ended December 31, 2011 and in our other reports filed with the SE. 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 Web site. A Web audio replay will also be available for download. Information and a link can be found in the Company's Web site. At this time I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir.

Thank you, operator. And hello to everybody joining our call today. I'm in Singapore, where it's 7 AM. This is one stop on a five week trip that will take me around each -- eight of our Asian markets. With me this morning is the CEO of our Asia-Pacific business, Alastair Hughes, who will comment on market conditions and our successful achievements in this key strategic region where were doing so well and I'm sure he would be happy to take questions from you later on. Lauralee Martin, our Chief Financial and Operating Officer, also joins us. She's in Chicago and she'll be discussing our financial results in greater detail in a few minutes.

So first, to put our remarks into context, here are the headlines on our performance and some comments on the market environment in which we achieved them. We're pleased with our 2011 results. Revenue totaled a record $3.6 billion for the year, up 23% from 2010, and the product of double-digit year-on-year growth in all of our operating segments. Full-year net income was $154 million, or $3.70 a share. Adjusting for certain charges, net income was $215 million, or $4.83 a share, a 29% increase from $166 million in 2010. Performance in the Americas was led by our leasing and capital markets business, improved results in Europe, benefited from integration of our King Sturge merger and from our strong capital market results overall. Asia-Pacific delivered record revenue of products, helped by continued growth in our market-leading businesses in India and China. LaSalle Investment Management delivered strong investment performance to its client, earning increased incentive fees. So all in all, we completed 2011 in very good shape, and we're well-positioned to generate continued growth this year.

Turning to current economic market conditions, IHS Global Insight forecast 2012 global GDP growth at 2.7%, down marginally from the 3.7% in 2011. The world's three largest economies, US, Japan, and China, are all expected to grow. With relatively favorable economic news coming out of the US recently, various projections of 2% a year, given lingering euro zone debt issues, it's not surprising that economic risks are still skewed to the downside in Europe. Asia-Pacific is expected to grow as a region at 5% in 2012, with China leading the way and solid growth also predicted for Japan, continuing its recovery from the earthquake and tsunami. Despite lingering economic uncertainties, key real estate indicators for Q4 2011 showed that most major markets continue to progress steadily through the recovery cycle. Investment volumes have generally held firm, although there is evidence of continued slight to quality assets to protect against downside risks. Most markets are seeing positive net absorption, declining vacancy rates, and modest prime rental growth. To summarize, the current market condition as we posted slides on the investor relations page of our public Web site, www.joneslanglasalle.com.

Slide 3 shows the general investment sales clock, which presents capital values in world markets at the differing stages in the cycle. You can see that compared to a year ago, growth in capital values continue to accelerate in most major markets, however, growth has begun to slow in others. And capital values have started to fall in Hong Kong and we anticipate Singapore will also move through the top of the cycle this year. We also believe that this is a temporary correction, however, with value growth probably returning to both markets in 2013. Direct real estate investment into commercial real estate globally totaled $411 million in 2011, a 28% increase on 2010. Investment markets are proving to be resilient, as real estate continues to attract capital from domestic and increasingly cross-border investors.

Volumes were up nearly 60% in the Americas in 2011 to $155 billion, up 20% in Europe to $165 billion, and Asia-Pacific investment volumes increased by 6% to $91 billion. However, these increases were made in the first three quarters, and in the fourth quarter investment volumes showed a single digit decreases over 2010 in all regions. All that euro hesitancy. Prime office yields held steady in most major markets during the fourth quarter, rates were maintained on the back of two ongoing trends, attractive spreads on the one hand, and continued investor demand for high quality core assets.

Turning to slide 4, we see a similar story in major office leasing markets, which remained resilient in the fourth quarter. The US net absorption totaled 10.6 square feet in Q4, up 10% on Q3. For the full year across 15 major US office markets, gross absorption increased to more than 150 million square feet, up 7% from the prior year. The tick up in Europe during the fourth quarter totaled 31 million square feet, nearly unchanged from quarter three. For the full year, gross take-up was 5% of our 2010 levels. In Asia-Pacific there were higher volumes of gross lending activity in India and still steady levels in greater China and Australasia, and lower activity volumes in Tokyo, Singapore, and the emerging Southeast Asian markets.

Office vacancy rates continue to reach downward in all regions. In the US at year-end total vacancy rates dipped to 17.6%, that's 20 basis points below the third quarter and a whole 90 basis points below the prior year picture. Europe's vacancy rates fell 30 basis points to 9.9%, and Asia Pacific's vacancy rates were 10.4% at year end, down 1% from the prior year number. Prime rental growth slowed in the fourth quarter, growing by less than 1% across 24 major world markets. Beijing was more than 9% rental growth in the city, plus 6% on the quarters strongest performance. However, Singapore, Hong Kong, Chicago and Washington DC both moved negative in our view, a temporary supply demand imbalance. And we expect to see a return to positive rental growth 2012.

So if you summarize all those trends, what you see globally is a continued cyclical recovery in demand for both rental space and investment sales properties. We're seeing a slight hesitancy in Q4, but a good demand based progress in 2012. With that, to discuss our own results in more detail, I'll pass the call to Lauralee.

Thank you, Colin. Before I begin my prepared remarks, I want to note that a portion of our earnings information was somehow accessed and posted publicly about an hour prior to our intended release time. As soon as we learned of the situation, we immediately contacted the New York Stock Exchange, which briefly halted trading in our stock until we were able to fully disseminate our full earnings release through all public channels. We are investigating how it happened to ensure that it does not happen again. Now, back to my formal comments.

Echoing Colin's comments, particularly given the global economic challenges we faced during 2011, we're very pleased to have finished the year with strong performance across the major majority of our service lines and geographies, which resulted in 23% revenue growth and 29% adjusted net income growth for the consolidated company. In the America's region, annual revenue increased 21% to $1.5 billion. This growth was delivered across all service lines, led by our transactional businesses. Our leasing businesses delivered double-digit revenue growth in each of the four quarters of the year, and capital markets and hotels, revenue increases of 38% for the fourth quarter and 62% for the year reflects the continued successful expansions of our capital markets platform in the US, as well as in Brazil and hotels. With our strong fourth quarter performance, we improved our full year operating income margin, as we said, to with 1% of the prior year. Heading into 2012, our transaction pipelines for both leasing and capital markets look solid, and we are well-positioned to continue to improve on our margins in the America's.

Turning to EMEA, the positive impact across the region of our King Sturge acquisition becomes more apparent with each successive quarter. We moved quickly to integrate our businesses and consolidate our platforms, and the effectiveness of the integration is evident by both the top line and the bottom-line results that the region delivered in the fourth quarter. As we noted on our last call, our presence is largest in those countries that are best positioned to manage through the euro market challenges. That being the UK, France, and Germany. And our revenues in each of those countries, as well as in Belgium, Russia, and in Central Eastern Europe, were all up significantly in the fourth quarter against the prior year. For the year, EMEA revenue increased 34% to $974 million, and operating income adjusted for King Sturge amortization approximately doubled to $39 million.

Regarding the King Sturge integration, we recognized charges in the fourth quarter of approximately $21 million and $43 million in the year for staff retention, lease exits, severance and other transaction costs related to the acquisition. Of those totals, $8 million in the quarter and $16 million in the year was part of the purchase price that the King Sturge partners paid as retention to their non-equity partners, although we account for those amounts on our books as part of the transaction costs. Apart from the King Sturge integration, we also took action and incurred additional restructuring charges in the fourth quarter to respond to uncertainties in the economic environment across Europe, taking costs out of the business in places where market recoveries remain challenged.

Our Asia Pacific region completed a year of strong performance despite the impact on its capital markets and hotels revenue of decreasing investment volumes in the broader market in the fourth quarter. With particularly low hotels volume in the quarter. Revenue across the region was up 20% for the full year to $816 million, while operating income increased 34%, to $66 million. Revenue growth was balanced across service lines, including increases in leasing, and also annuity revenue streams from property and facility management. Our improved full-year results benefited from continued strength in operating performance led by our teams across greater China, India, and Australia.

Turning to LaSalle Investment Management, we completed a second year in a row with approximately $5 billion of net capital. Both our private equity and our public securities businesses benefited from the capital rates activity, which was spread across geographic regions of the globe. We put over $4 billion of capital to work during 2011, in new investments for funds, and separate accounts, also across all geographic segments. Furthermore, we completed sales activity in excess of $2 billion worldwide, generating positive returns for clients and incentive fees and equity earnings for the firm. And last but not least, our investment performance for clients was at or above benchmarks during the year for all business segments. While some shakeout in the industry continues, LaSalle Investment Management consistently proves its competitive strength through its leading investment performance, it's capital rate ability, and the resulting steady base of advisory fees.

Regarding our overall financial position, we continue to maintain our investment grade balance sheet and benefit from low interest expense. We reduced our full-year interest expense to $36 million from $46 million a year ago, of which our cash interest in the fourth quarter was only $3 million. In the fourth quarter we completed acquisitions in Singapore, Indonesia, and the Pacific Northwest of the United States, while also reducing net debt by $184 million during that period. Our balance sheet remains a differentiator with our clients and an important priority in positioning ourselves to be able to respond to market opportunities in a consolidating industry.

In summary, we are very proud of the performance our people delivered in 2011. We've completed the year in a stronger operating and financial position than where we began. We continue to take market share, and we're well-positioned to continue increasing the strength of our business in 2012. I'll now turn the call back to Colin.

Thank you, Lauralee. Let's look now at the business which drove those results. If you turn to slide 5, you'll see a few examples of recent significant business wins. Starting with our corporate outsourcing business, in 2011 we won 62 new assignments, started our relationships with 38 clients, and reviewed 41 contracts. Our local market level corporate solutions business, which serves mid market corporate clients, won another 51 assignments in 2011, up from 35 in the prior year in a rapidly growing area of our business.

In terms of specific corporate wins, GlaxoSmithKline selected us as their single real estate provider for its 18 million square foot global portfolio. We've supported GSK since 2001, working alongside other service providers, and we will now be the lead provider for this top pharmaceutical and healthcare comedy. In the Americas, AMC Theaters retained us to deliver project management services for 4 million square feet of remodeling projects, and UBS reappointed us real estate advisors in 27 countries across Europe.

Turning to investment sales activity, in Seattle, we completed the $77 million sale of 1800 9th Avenue. The transaction marks the first closing of the investment sales professionals who joined us in our October merger with Pacific Real Estate Partners, to which Lauralee referred a moment ago. In the UK, we advised legal and general companies, and LaSalle Investment Management, GBP312 million of a UK logistics portfolio. That was a major hotels transaction completed during the quarter, they include the $295 million sale of the W Hotel in London. Leasing and tenant representation transactions and management assignments completed during the quarter including -- included representing DirecTV, a lease of 630,000 square feet of space in El Segundo, California which was the largest office transaction in Los Angeles in the last 10 years. And in Slovakia, we negotiated two leases with 460,000 square feet of logistics base of Tesco International Clothing. Alastair, move on to Asia-Pacific?

(Inaudible) -- the world's leading exporter of data products, which bids in New Zealand, retained us to provide project management services in China for a production facility with total land area of over 4.4 million square feet. In Singapore, we sold a commerce office building for $161 million and in the years largest office leading transaction in Seoul, we exited max with entire 700,000 square feet (Inaudible) to SK Engineering.

And finally in the funds management area, where industry changes continue, successful businesses like LaSalle Investment Management continue to do well. In the fourth quarter, LaSalle raised $750 million of separate account capital commitments and at year-end LaSalle's performance exceeded benchmarks for all of its business segments. Assets under management totaled $40 billion at the year-end. Finally, investors, advisors and financial institutions continue to confirm LaSalle's position as an industry leader with the honors they included, Euro Moneys 2011 best global investment manager. The third consecutive year in which LaSalle has won this prestigious award.

So, let's turn to consider the all-important near-term prospects for real estate markets worldwide. Our current projections call for 2012 direct real estate investment volumes to match 2011 levels around $411 billion, with upside potential in the Americas. If you look at slide 6, you'll see that we expect dollar volumes in the Americas to increase by 10% to 15% this year, hold steady in Asia-Pacific and softened by 5% to 10% in Europe. Higher quality, well leased commercial buildings in major city centers around the world will remain an attractive asset class for long-term investors and in terms of LaSalle, we expect to continue to take market share in this environment.

If you turn to slide seven, you'll see our projections for changes in rental and capital values in the prime office sector for this year. Total, we expect increases in capital values to slow in 2012, but nevertheless remain positive overall with an average increase of about 5%. We see a large range of growth prospects on a market-market basis however, from 20% or more in Beijing and minus 5% to 10% in Singapore and Hong Kong. Property yields will remain generally unchanged in most markets this year, with current levels supported by continued investor demand for core assets. One exception to the flattening trend is the US prime office market, where we expect yields or cap rate, the top four product to continue to see downward pressure boosting capital appreciation. Global leasing volumes in 2012 will be similar to last year's levels, corporate balance sheets are strong and confidence is growing, sustaining corporate occupier activity. The rental value outlook for 2012 shows most major markets expecting to see positive growth, with Beijing, Toronto, and San Francisco emerging as the strongest performers. And Alastair, some comments on Asia-Pacific?

Thanks, Colin. As you said, the economies of Asia Pacific are forecast to grow again this year and with the exception of the big international banks, we are seeing this reflected in the real estate growth plans over multi-national and domestic Asian clients. We have deeper levels of demand for space and there is a healthy level of supply in most markets, and these two factors will support two levels of leasing activity. There's not a lot of Western money coming into the Asian investment market right now, but there are a lot of Asian buyers and we expect investment volumes to be about the same as last year. Geographically, the fastest growing markets will be China, India and Indonesia. We have leading positions in each of these markets and our teams will be very busy helping our clients to grow.

Great. While broadly we see three trends playing out this year, firstly corporate outsourcing world is going to continue to grow and particularly in Europe, as companies search further efficiencies to deal with the local issues that they're facing. Second, and as I've already said, we expect the US markets to see solid, cyclical growth and Asia-Pacific to see those cyclical and fundamental growth in real estate activity. Europe, market growth will be generally flat. And thirdly, institutional money and emerging market high net worth money will continue flowing steadily through real estate globally, as property continues to be viewed as a safe haven against long-term inflation and possible short-term dislocation in Europe.

In our own business we're staying positive about our prospects for the year across all markets. In terms of actions for headlines, we'll continue to focus on our clients success in markets around the world, we will maintain our financial strength and flexibility so that we can continue to respond to opportunities, and also to handle any unexpected challenges. We'll continue to manage our costs aggressively, working to our long-term margin targets, we will also continue to invest selectively and strategically in future growth and profitable market share.

We are always proud to close these remarks by talking about some of the awards which we've received, honors which we believe reflects our commitment to superior client service and which underscore our leading position in real estate services and investment management. In Europe, we swept the highly regarded and Euro Bill property awards for central and eastern Europe. We made all four of the main agency categories. UK, we won three awards at the Hermes responsible property investment awards in 2011. In the US we won best places to work towards in seven major markets, and we also won the Australian Facilities Management Associations service provider excellence award.

And if I may, Colin, given the conditions which our people in Thailand contended so diligently last year, from floods to (Inaudible). I'd like to highlight two honors we received there. First, we were named best property management company in the Thailand property awards 2011 and [super venue chip] our business in Thailand was awarded in countries multi-business person of the year award, which recognizes individuals who have made outstanding achievements in both their working and private lives.

And to finish, certainly a fitting recipient for that honor. Thank you, as well to all of our staff in Thailand for seeing our clients through the recent flooding and thanks to all of our people around the world for their continued commitment to our clients and the dedication to Jones Lang LaSalle. So with that, we'll move on to questions. Operator, could you explain the process, please?

Yes. (Operator Instructions). Your first question comes from the line of Brandon Dobell of William Blair.

Wanted to focus a little bit on how we should think about the cost structure for 2012 and I guess maybe a two level question. One, it felt like some of the charges came a little faster than we had thought this quarter, so A, how should we think about how those flow through the P&L during 2012 related to the King Sturge acquisition and retention efforts? And then how do I think about cost -- savings or cost containment efforts in the different regions relative to where you finished off the year? Thanks.

Let me take that in pieces, Brandon.

Okay.

First of all, we've taken -- of the $56 million of restructuring charges we've taken, $13 million of that was for non-King Sturge. We've taken actions in order to position ourselves in markets for whatever the economic environment is. So, the balance of that was King Sturge. And the principal pieces of that was to consolidate offices and to do some backroom activity. So, between all of those, that sort of a run rate savings payback of about $12 million a year, with $6 million of it coming from King Sturge, synergies and the balance of it from right sizing.

Okay.

And then relative to the balance of we have left, we spent about two thirds of our retention that we talked about, so there'll still be more retention. The amortization, again, we pretty much are through the backlog, so we will have two quarters where the amortization runs about $2 million a quarter and then it drops down to where it's a little bit less than $600,000 a quarter, so that amortization will run off here fairly quickly going into the new year. We do believe we have about $5 million plus, it's less than 10 but more than 5, of further consolidation for King Sturge that principally runs around backroom and technology, so there'll still be some one-time charges potentially, mostly done in the first quarter that will get us through that.

Okay.

Broad picture, Brandon, this year as we said, we'll be very cautious on adding new hires. We pretty much got a hiring pause on until we at least get through quarter one and we can see what's happening around the euro issue. The exception of that is global. The exception to that will be some of the more obvious momentum areas like China, parts of India. We will be -- we are adding people because the market demand continues to be very robust. We will not be adding new offices this year with the exception of our usual gross to China, where we're moving across at a rate of two or three offices a year.

Great. And maybe a follow on to that, you briefly mentioned the longer-term margin targets, maybe narrow that down to what your definition of long-term would be or if there's any change in terms of what you think those margin targets should look like now that your past the King Sturge acquisition?

We haven't backed off of our margin commitments, which breaking them down, the Americas is 12% to 14%, EMEA, 8% to 10%, Asia Pacific 10% to 12% and then LaSalle runs about 20% with an upside on that for incentive and transaction fees. We'll continue to move towards those goals through this year in the Americas and Asia Pacific, so our goal is to get there in sort of the next 18, 24 months. EMEA is dependent on the euro situation.

Okay.

We're making fairly good progress towards those numbers in Q1. Q2, we've already got harder and then after that you'll see the way the euro kicked in last year really had a significant effect.

Okay. Thanks a lot. Appreciate it.

Your next question comes from the line of David Ridley-Lane of Bank of America, Merrill Lynch.

When I think of the leasing -- US leasing volumes, and I look at the slide that has the change -- projected change in 2012 rentals, what kind of difference or -- it looks like most of the cities in the US are between 0% and 10%. How does that compare to 2011 rental volumes? What I'm trying to get at is how much will rent increases benefit your leasing volumes in 2012 versus 2011?

Yes. We think the overwhelming impact will be on leasing volumes, rather than the rental levels, David. Overall, broadly we think the market activity levels will be flat. That's our planning assumption for this year. What we are seeing, you'll see in last year's numbers, even in relatively flat markets, across the US, and I'll claim it internationally as well, even in relatively flat markets, we're able to pick up market share very helpfully. So for us, flat markets are just fine. We'll continue to grow off the back of the available business.

Just very general, the assets of business confidence in the US is really quite good, almost as though it's ahead of what you're reading in the press. Quarter four GDP numbers in the US were 3%, 3.5% growth and that was happening against all of the misery that was going on in Europe, so despite the unsettling economic news, the US grew quite robustly in Q4 and you see it come through in some of the employment numbers as well. Our sense is there is actually a bit more underlying momentum in the US than perhaps forecasters and even our own forecast give us credit for.

Okay. And just maybe one follow-up, in this quarter, we saw operating expense growth slightly below revenue growth. Can the Company continue to grow costs more slowly than revenue if we see revenue growth decelerate through 2012? Thanks.

Well, that's the aim. As you heard, we are pausing hiring in Q1, we are very focused on the margin issue. If for no other reason than the uncertainty around where the euro ends up, certainly affects Europe and has a knock on effect, secondary effect in the other major regions at LaSalle, so we're being very cautious on the cost base, we're focusing strongly on that first quarter and half of this year. We're expecting to see good results from that.

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

Hi, good afternoon. Couple of follow-up questions. First, I guess the two sort of go hand-in-hand. One was curious, if you can comment a little bit more debt targets. I know first quarter typically has some stuff up as presumably we have some catch-up for payouts and bonuses. But where you think debt will be maybe on average for the year. And then part two, feeling at this stage on acquisition landscape and would you -- are eyes still open, would you be comfortable still doing something that or would you pause on that as well as you pause on hiring?

Let's let Lauralee talk to debt and I'll pick up the acquisition point.

Great. Thanks.

Our priority at the moment, as we think about cash, is things that grow the business. So, that would be if there are acquisition opportunities, which Colin can address. Our CapEx, we ended up a little bit less than $90 million, and so a touch more than the $85 million that we told you, but we think we'll be down in the $85 million or less next year, and co-investment at about a $45 million level. So, we had a very strong year end. You can see the receivables on the balance sheet, which we aggressively go after collecting.

We do pay our bonuses in the first quarter, but we feel very good about this powerful cash flow that we have for this year. We also have very little in the way of deferred payments for our acquisitions this year. The bigger payment comes next year. So, there's a modest call on that. So, we'll be weighing all of that. But at the moment, it's a progressive down on the debt level.

As a bridge from that to your second point, David. We are expecting the euro situation to kind of be managed through this year, and there be no major further disruptions. Nevertheless, we do have our contingency plan, and in doing that, are doing stress testing on our own forward projections which are more stringent, even than our usual ones, we're holding more cash against liquidity issues. Resulting from euro disruption. So, we are being very cautious.

That then means that in the acquisition area, we'll continue to maintain an even higher level of prudence around our balance sheet, we've got to keep that investment grade rating preciously intact through the year. And within that context, our approach to acquisitions is going to be very, very cautious, if we do anything, it'll be relatively small-scale. If it gets funded, it will be strategic, it will be targeted. But we are looking at opportunities, looking out for opportunities across the regions and in LaSalle investment management. Again, all of that against the backdrop of extreme caution around our financial structure.

Got you. One other. Lauralee, would you be able to give us a sense for how much the acquisitions done through the year contributed to the fourth quarter?

We -- even with King Sturge, we no longer have that as a separate operating entity because as soon as we can consolidate, we do that. What we do know is you can see the market share gains as we performed above market levels, in Europe, in the US, and all of those are part of those acquisitions. So no, I can't give it to you explicitly, but I think the momentum clearly is there.

Got you. Perfect. Thank you both.

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

Just a question, maybe we can follow on that for Lauralee. The out performance on the capital markets side in the US and Europe, would it be possible to try and break out what the King Sturge impact was in Europe and then what the acquisition impact would be in the US?

Again, we don't have that. King Sturge brought us a very robust capital markets capability, so the fact that we've had the performance that we had broadly, they obviously integrated well with our teams and were big contributors. In the US, where we added early to staffing, not just in '11 but back in 2010 to be well positioned, clearly you can see that in our results, we had also very strong performance in Brazil. As you know, in the first quarter of 2011, we talked about a hotels acquisition that we had to run through comp, and clearly had very strong hotels activity in the Americas in the fourth quarter, so we feel good about those decisions.

Then what we've also done is picked up the capability and a lot more product types where we had historically been, primarily if not solely office-focused where today we have retail, industrial, multi-family, as well as our debt and investment banking capabilities, so all of that is either acquisitions or acquisitions of teams and new people joining us. So, it's a robust decision on our part to have gotten in early in that cycle, and I think you're now seeing the payback.

Okay. And then somebody had asked this question earlier, but at least in the US can we expect that the early expenditure on acquiring talent, that maybe the margin impact is now done and the potential we could see some margin step up for the capital markets business in the US?

Both the capital markets business, where we have indeed this year tracked the margin and seen it move very helpfully forward, when we are expecting further progress in the course of 2012, but also more broadly across the US business, as we move to improve margins through cost control and just building the business volume off of a relatively fixed cost base. We did add a large number of brokers early in the cycle. We continue to do that, but in a very much more restrained way as the cycle proceeds. It becomes harder as the cycle goes on to pull people out of competitors. Simply because they are locked into business flow, it just becomes hard for them to leave it behind.

Okay. And I know, Colin, you mentioned that no new offices outside of maybe China and India, but is there a broker focus that you're looking to hire? Is it still in the US? Are there any markets or segments that you're looking to expand in?

Yes. The broker folks in the US, clearly we've said we are building our capital markets business strongly. That's a strategic priority for us, as we've said showing good results. Our broker business continues to add selectively, where we find really good people, and generally we'll add the best and remove the less good. So, our net is less than our gross hiring. And that process is largely focused on the cities where we're currently present. So, we're not looking to expand hugely short-term in terms of the number of cities in which we are operating in the US, it's more adding people to existing bases, which is, of course in terms of margin accretion, an efficient process.

Okay. Thank you, guys.

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

I wanted to first focus on investment management and the AUM was down slightly in the quarter, but you continue to raise capital, I assume it's a figure we would expect to grow in 2012?

The answer is yes. We did have a slight decline in our securities business. But we had more than that offset in terms of separate accounts and our funds. We have announced that we will be exiting one of our funds in Asia during 2012. But for the assets going off as that sale occurs, we would be growing our business with new capital raises and investment dollars against that. So, in terms of advisory fees, relatively -- I don't want to say flat, but not a high growth year as we replace those assets going forward.

And are there some meaningful incentive fees associated with that?

We are expecting both equity earnings and incentive fees in 2012, incentive fees most likely not until the third quarter. Equity earnings possibly first quarter, maybe second, depending on the timing of everything.

While we are out raising new money, we're seeing great success with separate accounts, not only people who are prospecting our fees for new bid value, but also continuing to take over selectively from other managers. In the funds world, it's obviously been a very quiet period for the last two years plus. We're out with a couple of funds currently and getting better reception than we expected and certainly a lot better than 12, 18 months ago. So, that market field are those beginning to warm up where we have a track record. It's very much around the points we've made about the out performance which all our businesses are showing against benchmarks, is obviously hugely helpful in going out and talking to limited partners about new fundraising.

Thank you. A few other things. One, in the first question, you were discussing the restructuring charges. Can you just, in total, tell me what is left? It sounds like it's weighted towards first quarter?

We have about $5 million of restructuring to go. We would have amortization next year of about $6 million, give or take. We're two thirds through our retention, so I think the total was about 26 and we've taken about 16. And other than that, it's probably this and that. If that's helpful.

You've taken 16 of 26, so about 10 left?

Yes.

Okay. On APAC Lauralee, you mentioned that with the -- investment sales or capital markets, one of the reasons for the decline was the hotel business. It was a pretty meaningful decline. Is that the sole reason or I think Colin had mentioned that single-digit declines for the industry?

Yes. Hotels in Asia was a factor, but obviously there were some broader Asia Pacific issues in capital markets.

There were significant margin volume decline in Q4. Probably because there's very little distress in the system, so the sellers are holding firm for the prices but buyers are a little bit twitchy because they are getting depressed about the euro. And that slight standoff meant the volumes decreased in Q4. Our revenues didn't decrease as much as market volumes, because we were picking market share. And we were also involved in a couple big transactions that didn't happen in Q4, but will happen, we think, in Q1. And generally speaking, we expect market volumes in Q1 to be pretty healthy across Asia Pacific, and we've got very strong pipeline as well.

Okay. Thank you. If we look at further into 2012, broadly speaking, Colin or Lauralee, is the first half of the year a tougher comp than the second half?

It is. For obvious reasons. Q1 last year, generally we're talking a clear global cyclical upswing. That came -- sort of hit the flashpoint in media, both in the US and in Europe for sort of domestic fiscal reasons. And then Asia, as Alastair has kind of indicated, got jittery as well. So, the half one in 2011 was relatively stronger than half two. Get when you get into next year, we're coming off of a weaker relatively second half into relatively strong first half comps.

So yes, that's sort of the pattern we would expect relatively second half of the year to be easier just reversing the trends I've described. But that's one way of looking at it. Our perspective is simply that we feel we've got good momentum, we've indicated we are feeling good for the year, as a whole. We're looking to pick up on the business -- on business growth quarter-by-quarter throughout the year.

Thank you. One final big picture question, on margins, if we look at the ability to grow the margin in 2012, it seems as if the comp and benefits line has stayed pretty flat the last few years. In terms of margin -- or as a percentage of revenues. Should we look at that as not really an area of savings and rather the operating administrative of another line instead?

Yes. I would say that, that's probably a pretty steady number. We will look to leverage our support staff for our business producers as much as possible as our growth comes through. And that -- as we do that, that's a mix of some compensation, though a small part of that total piece. And then also, just the overall spend that goes with that. But generally, that's not going to move that number significantly. So, it's mostly going to be out of G&A.

Okay. That's all for me. Thank you very much.

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

My question was answered. Thank you.

That was quick.

Your next question comes from the line of Mark Biffert from Bloomberg Research.

Colin, I was wondering if you could comment on the CMBS maturities that are expected to mature in Europe, I think the estimate is around $100 billion? And just in terms of how your capital markets business and your outsourcing business could benefit from a lot of banks trying to push that off of their balance sheets in 2012?

CMBS maturities, in the US -- so the biggest maturity debt worldwide is US bank debt in 2011 and 2012. And the CMBS peak is 2014 and '15 from memory, and in all of those next four years, it will be $300 billion a year to be refinanced. That's going to have significant crowding out effects on new lending in the US markets. That's also going to challenge refinancing capacity as well. That against the background where the US CMBS market last year struggled to get to $35 billion against hundreds plus five years ago. So, there's quite significant refinancing page coming through the pipe the next two, three years. That is in turn beginning to drive the reverse effect, although the reverse side of that refinancing medal, which is met refinancing cord, which is a level of sales of distressed assets, notes sales, banks are selling off debt and dusting purchase by funds which are being formed -- have been in place for several years to pick up activity.

What has happened to date has been that in both Europe and the US, there's been relatively little pressure to deal with these distress issues or poor financing structures. We see that beginning to change, and it's being changed because banks regulators are forcing extra activity and indeed, banks balance sheets have now been rebuilt, particularly in the US, to the point where they can take the losses to deal with the issues. Having said that, it's not a tsunami. It's a stream of activity. It sort of supports the numbers which we've described as our total capital markets projections for the year, so overall flat with some slight ups in the US and some slight downs possibly in Europe. So, it will contribute to the activity, but it isn't going to produce any increases above the numbers we have projected for markets as a whole.

Okay. And then just lastly, I'm just wondering if you could provide some color around what you're hearing from decision-makers for commercial real estate investors in terms of fund flows, making decisions based on any kind of currency movements? I think the Financial Times had an article that talked about how do Japanese were being pulled out of the Brazil market because of the depreciation of the yen and some of the regulator -- because the Japanese regulators are looking at those markets more closely. And there's concern given the amount of inflows that we're seeing into the US market, that, that might -- last year, that, that might cause some outflows potentially that the Japanese yen has been depreciating against the US dollar. Are you seeing any of that or hearing anything on those type of decisions from real estate investors globally?

Well, overall picture, we're seeing money continue to slow into real estate and core assets in particular, still not a lot of taste for high risk activities. So it's core and core plus that people are looking for. That makes some of the bigger European cities and the big deep liquids US markets obviously attractive because of those characteristics. Same would go for Tokyo.

In terms of where money is coming from, we're seeing a lot of money flowing from Asian and Middle Eastern sources of capital, and that's sovereign wealth, it's high net worth, and some corporate money and it's flowing into the US and Europe. We're seeing money, as Alastair said, within Asia, investing a lot in Asia, so those flows are established and robust. We are not seeing a lot of American -- sorry, not seeing a lot of US money to go outside of the US at this stage of the cycle, it's domestically focused. And as for the currency of this issue, people don't really invest with that front of mind, although in real estate, it tends to be over a sort of five to seven-year plus whole cycle where people really have trouble taking a position on a currency. What we have heard -- I have heard just the last two days in Asia-Pacific, is German funds investing in Asia, and saying, please don't worry about hedging the euro. In other words, their bearish on the euro and they're quite happy to see their exposure unhedged and take any appreciation they see through Asian currency exposure against the euro.

Great. Thanks for the color.

I would just add to that, that I totally agree with Colin. It tends to be right -- just one other factor. So, if you look at all the Asian money from Malaysia, Indonesia, Singapore, Hong Kong, (Inaudible) market, the reason they explain their desire to buy there is there are five different reasons, and right at the end it is and sterling looks like reasonable value. It's just another reason but it's not the driving reason.

Okay. Thanks.

And there are no other questions in queue at this time.

Thank you all for that. We'll close today's call. Thanks, all of you, for joining us again today and for your interest in Jones Lang LaSalle. And we look forward to speaking to you again at the end of the first quarter. Have a good day.

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