Jones Lang LaSalle Inc (JLL) 2012 Q2 法說會逐字稿

Good day and welcome to the second quarter 2012 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 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, operator, and hello. Welcome to everyone joining this review of our results for the second quarter and first half of 2012. Joining me on the call today in Washington DC is Lauralee Martin, our Chief Operating and Financial Officer. Lauralee will review our performance in detail for you in a few minutes.

To summarize our results we recorded a steady performance in a cautious market environment. Second-quarter revenue totaled $921 million, up 9% in US dollars and 13% in local currency from the second quarter of 2011. Year-to-date revenue increased to $1.7 billion, 13% higher than the first six months of 2011 and a 16% increase in local currency terms. For the quarter we reported adjusted net income of $51 million, or $1.13 per share, compared with $50 million or $1.12 a share one year ago. First half adjusted net income was $73 million, or $1.63 a share compared with $51 million, or $1.15 per share for the first six months of 2011.

Before Lauralee discusses those results in detail, let me first put them in context by talking about conditions in the global economy and in real estate markets, in particular, around the world. Prospects for growth in the global economy weakened during the second quarter as Eurozone problems in particular continued to weigh. According to IHS Global Insight, the global economy is now expected to grow 2.4% in 2012, marginally below earlier estimates. As deleveraging continues, growth in advanced economies is expected to be 1.3% for the year. Prospects for emerging markets are lower than last year, but growth is still projected to be at 5% year on year.

Turning to global real estate markets, the investment market rebounded in the second quarter following a relatively quiet first quarter. And office leasing activity also improved seasonally compared with the first three months of the year. Both, however, are being affected by caution, driven by economic concerns so the tone of the market is less confident than six months ago. To summarize conditions in global real estate markets, we've posted slides in the investor relations section of our website. Jones Lang LaSalle.com.

Slide 3 shows the Jones Lang LaSalle investment sales clock which depicts capital values in major world markets at different stages on the real estate cycle. Global investment volumes reached $108 billion for the second quarter, up 24% from $87 billion in the first quarter of the year, with all three regions seeing a seasonal rise in transactional activity. Year on year, however, second-quarter volumes were down 9% in the Americas, and 7% in Europe. Asia Pacific volumes increased by 30% year on year, led by Japan where investment sales activity was up nearly 300% on the back of the recovery from the March 2011 tsunami. For the first half of 2012, however, Asia Pacific volumes were flat year on year.

Capital values on prime assets rose across 25 major office markets and increased at an annualized rate of 5.4% at the end of the second quarter. Rates of annual capital value growth have been gradually slowing from 18.1% a year ago, to 12.6% six months ago and 7.7% three months ago. We believe that by the end of 2012 year-on-year capital value growth will be in the region of 3% to 4%.

Turning to slide 4, we see a picture of conditions in leasing markets worldwide. Office leasing activity improved in all regions during the second quarter compared to the first. That year on year, second quarter volumes were 11% lower in the US and down 14% in Europe. Our second-quarter leasing revenues increased 9% year on year in the US and were up 10% in Europe. Increasing indicating continued market share gains. Office rate vacancy rates continue to decline. The global office vacancy rate across 94 world markets now stands at 13.3%, down from 14% a year ago. Regional vacancy rates range from 16.2% in the Americas, to 9.8% in Europe, and 10.4% across Asia Pacific. The sharpest fall in vacancy were recorded in brick markets; Beijing, Moscow and Sao Paulo.

Prime rents across 25 major office markets increased by 0.4%, a marginal increase in the first quarters 0.1% growth. Beijing continues to show the strongest quarter-on-quarter rental growth at 8.8%, while San Francisco at 6.8% led North American markets. Modest growth was recorded in Tokyo, Los Angeles, New York, Chicago and Tokyo. By contrast, Hong Kong and Singapore continued to register rental declines, and rents also fell in Washington DC, Madrid, Paris and Sao Paulo. So all in all a hesitant economic environment contributing to cautious market sentiment. Nevertheless, as Lauralee will now explain, our new business pipelines remain healthy and our results indicate that we continue to take market share from competitors. So, with those opening remarks, I'll turn the call to Lauralee.

Thank you, Colin and good afternoon and evening to everyone on the call. As Colin mentioned, our consolidated results for the second quarter demonstrated the firms stability in the midst of a hesitant economic environment. We grew fee revenue by 11% on a local currency basis over a strong 2011 second quarter. We had solid performance from each of our annuity businesses and our Real Estate service segments across the globe. The investments we have made in our platform over the last several years increased transactional revenue in key markets, significant improvement in operating income and EBITDA margins in EMEA reflect more efficient performance and the cost take outs we completed in prior periods. In total, we are well-positioned with our balance sheet and our year-to-date results to have a productive second half of the year.

In the Americas, fee revenue increased 13% in local currency from the second quarter of 2011. The most significant local currency increases were in capital markets up 37% and in property and facility management up 15%. These increases demonstrate continued achievement of payback on the hiring decisions we have made. The 10% local currency increase in leasing revenue reported in the quarter compared favorably with year-over-year decreases in the overall office market volumes indicating we have continued to make market share gains. Operating income and EBITDA margins for the quarter each increased by 50 basis points on a fee revenue basis.

Looking forward, transaction pipelines in America are still healthy and we will continue to manage our costs base in recognition of the market risk. In EMEA, fee revenue increased 23% in local currency from the second quarter last year, with significant contributions across all service lines and from many countries. Strength in transaction pipeline such as we highlighted in England and in Germany last quarter, are beginning to convert to revenue though markets remain challenging and uncertain.

The benefits of the cost takeouts actions we've taken over the last year or so can be seen contributing to margin improvements. And given market dynamics we have continued to take cost actions in the region beyond those anticipated in the King Sturge merger. Of the $17 million of restructuring and acquisition charges recorded in the quarter, roughly half related to the merger retention and IT costs that we discussed previously. And the balance related two more recent decisions to rationalize office space and headcount in the regions in order to reduce our cost base going forward.

In Asia Pacific fee revenue increased 1% in local currency in the second quarter, and increased 6% year to date. Our annuity businesses, property and facility management and project and development services both produced double-digit fee revenue growth in local currency in the quarter. Reflecting continued expansion of our high-quality platform for corporate occupiers, both local and international, while providing you steady base of annuity income for our results in the region. Transactional revenue in leasing and capital markets declined against a very strong second-quarter 2011 that was well above our normal seasonality.

To refresh to last year, our Q2 2011 capital markets revenue in the region grew 71% in local currency over the Q2 2010. Driven by our hotel's business making it a challenging comparable to this year. The subsequent quarter three and quarter four revenues were lower, demonstrating the quarter two 2011 seasonal deviation. International client activity levels and the transaction markets continued to be lower than in prior years. But we are offsetting this slowdown with success in local markets with local clients, several of them Colin will highlight shortly.

LaSalle Investment Management completed a relatively quiet quarter in terms of transaction fee and incentive fee activity but maintained advisory fees in line with the first quarter of 2012 levels despite the significant Asia Pacific portfolio sale in quarter one. Looking ahead, additional incentive fees in the low double digits of millions are anticipated during the third quarter after finalizing all calculations related to the first-quarter portfolio sale in Asia. In total, the second-quarter results reflect a baseline level of activity to be expected from LaSalle Investment Management, with future enhancements to the results to be driven by its capital-raise abilities and continued delivery of its leading investment performance.

With respect to the Firm's financial position, we pay down debt in the quarter, we continued to reduce our interest expense against the prior year and we've maintained our investment-grade rating, all of which reflect the continued discipline management of our balance sheet. Combined with second-quarter results which reflect solid growth in our annuity businesses, increase in market share, and focus management of our expense base, this demonstrates stability and positions us to continue increasing the strength of our business in 2012. Let me now turn the call back to Colin to discuss some of our recent business wins.

Thank you, Lauralee. Turning to slide 5, this shows a few examples of new business wins which contributed to our second-quarter results. Beginning with our global corporate outsourcing business, we've won 28 new assignments to date this year, expanded our relationship with a further 21 clients and renewed 22 contracts. Three of our largest long-term clients, Procter & Gamble, BBVA Compass, and Bank of America extended their relationships with us during the quarter, validating our leadership position in the corporate outsourcing market. Which itself continues to grow with European corporate now increasingly embracing the outsourcing trend.

Activity in our local market level corporate solutions business which focuses on mid-market corporate occupiers also continue to grow. To date this year, we have won 29 new assignments totaling nearly 60 million square feet of activity. In second-quarter investment sales activities, we represented the New York branch of EuroHypo to close the sale of $760 million in loans secured by portfolio of office, retail, industrial and multifamily assets in major markets across the USA. Major leasing turn of representation and property in asset management wins in the quarter included being selected for asset management services of the 930,000 square foot Mirae Asset Tower in Shanghai, expanding our relationship with career based Mirae Asset. The new assignment underscores our growing success of providing services within the region to major Asian companies.

During the second quarter, LaSalle Investment Management was focused on new capital raising efforts with investors who are increasingly favoring individual mandates and tailored advice over co-mingled fund vehicles. La Salle's assets under management were in line with the previous quarter at $47 billion. Looking ahead to the second half of the year we anticipate continued caution amongst investors and corporate tenants. We do see some bright spots however. For example, while our first-half investment sales volumes were 7% below the first half of 2011, we project year-end volumes for markets as a whole to exceed $400 billion, broadly matching 2011 levels.

Even if investors sentiment has seesawed in the first six months of the year, we continue to see serious interest in quality real estate assets globally, with prime yields still looking attractive compared to many other asset classes and our pipelines worldwide are generally robust. While relocations and consolidations continue to support leasing activity, cautious corporate occupiers and weak job growth are expected to contribute to reduced leasing volumes for the year, at around 10% below 2011 levels.

In the US, demand, driven by the technology and energy sectors in western and southern US markets is being offset by weakness in the financial and government sectors in the East. Central and Eastern Europe contain the region's most dynamically seen markets. But Europe's two largest markets, London and Paris, remained subdued. And forecast gross take up in the region for 2012 to be around 10% lower than 2011. And in Asia Pacific we expect overall leasing demand also to be 10% below the level of last year.

Asia presents a good example of the varied market conditions we are seeing this year. The region as a whole continues to generate positive growth but the picture is very different on a country-by-country basis. China's growth is slower than a year ago but at a government projected 7.8% this year, still very healthy. Domestic consumer spending is partly compensating for challenges to the countries export sector. The greatest uncertainty in the region, however, lies in India where slower export growth and investment spending coupled with the domestic policy uncertainties are constricting growth. And you'll see today 640 million people without electricity in the rush hour.

In the funds management sector, institutional investors continued to commit new capital to real estate in a careful and focused way. In this environment, LaSalle Investment Management will remain focused on raising capital and winning new mandates this year. As a firm, we continue to concentrate on converting our business pipelines, recording additional market share gains, while maintaining continued cost disciplines and increasing our productivity.

To close these remarks, we would like to introduce some of the awards we've received which reflect our commitment to client service and our leadership position in real estate services and investment management. During the quarter, we were named to the Global Outsourcing 100 for the fourth consecutive year. Diversity MBA Magazine recognized us as one of the 50 outfront companies for diversity leadership. We moved to the top of Europe's annual top broker list published by Property EU. In Germany we were voted the top real estate sector employer in Immobilien [Wien] annual survey. We were named Russia's consultant of the year for the eighth time in nine years.

We received a total of 12 awards in international property awards of Asia Pacific, including best property consultancy awards in 9 country markets. We are ranked the number one investment brokerage in Asia Pacific in 2011 and recently data from--according to recently released data from Real Capital Analytics. And finally, we won the Superbrand award in Thailand for the fifth consecutive year, the only real estate services firm to receive Superbrand status.

So with that, let's now move on to your questions. Operator, would you please explain the Q&A process?

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster. Your first question is from David Gold with Sidoti. Please go ahead.

Hi, good afternoon.

Hi David.

I was hoping you could speak a little bit more on the Americas. The only significant change, if you will, in your projections was for the Americas to be down 10% -- and from what you were thinking previously. I was curious, I know you commented the government was a part of it. But can you give us more color around that? I mean is it only government or are there other areas where you are seeing similar slowing?

Well, as you know from the past, with 1.5% GDP growth we're not really creating any jobs in the US, so just broadly there is a relatively low-level office demand, space demand as a whole in the US markets. Within that, as we said, the tech sector and the energy sector have been showing positive absorption and growing the use of space. [Lost] in the East, the government focus around DC has been a problem all year. But the financial services sector is clearly also still contracting and that's hitting particularly the New York markets.

Okay. That's helpful. Thanks. And then, one other. On the cost adjustments taken in the region, that's something -- are we largely through it or is there more sort of office rationalization and whatnot to be done there? Should expect continued restructuring charges from it?

The cost piece was in Europe, David and we still have through the end of the year a little over $5 million of retention between their people and our people. So that's just with our original plans and we still have another $1.5 million to $2 million of IT still part of our original plans. The big change has been some of the severance we've taken this quarter and some of the previous that was over and above for the region and then lease activity. I think we are through almost all the lease activity. There could be $1 million or $2 million more by the end of year but other than that we're pretty much through it.

Okay. And then one last --

Sort of summing that up -- it means it could be sort of total $7 million to $8 million between now and the end of the year for still King Sturge and those activities.

Combined?

Yes.

Okay. And then, just one last if I might. I was curious from essentially on market share perspective -- the comment on market share gains, is that largely -- is that entirely looking at the declines in the markets versus your growth? Or are there some other metrics that you can point to there?

No, it's either our own research numbers on markets -- total market stats, or numbers from independent groups. We've referenced RCA going through the tax of our script, so it's a mixture of the two. So, it's our own performance relative to market performance.

Perfect. Thank you, both.

Thank you, David.

Your next question is from Brandon Dobell with William Blair.

Hi, good afternoon. I wanted to ask about the leasing business. I guess in particular in the Americas and the EMEA and the tie between property management and leasing. So is there a way to think about how the leasing business has acted in recent quarters if you take out the tie between those two different segments? A deal was done for properties that you are managing or even deals done that investment management has under their purview?

And now you are referencing most of the Americas, Brandon?

Yes America's and the EMEA, in particular were those two.

Okay, first of all of our leasing we are still predominantly on the occupier side. So, if we look at last year we were about 15%-plus agency and the balance occupier. So in that sense, most of our leasing has been driven really by either growing into the agency side or the fact that we've just been expanding our market share in the tenant rep. I would say generally speaking in Europe they are pretty detached in terms of leasing and property management. It's just sort of not market practice but it ties that closely together. It's a different model. The growth that you are seeing in our property and facility management is primarily coming from our corporate side which would be the facility management side.

Okay. Fair enough. Then as we think about second half margins, in the Americas combination of headcount and marketing costs and things like that. Did the first part of the year play out like you thought it would as you stood there back on the -- through the third or fourth quarter calls from an expense point of view? Are you happy with where you are right now or has the market not cooperated from a revenue point of view? So you need to take a second view at how the Americas cost structure looks?

No, I think we are pretty happy with our cost structure. We tend to have more seasonality in our margins, so that each progressive quarter the incremental contribution comes through with the strongest in the fourth quarter. And, we're ahead of last year. Both each quarter we were a head and in year-to-date we are ahead. So we expect to continue to make nice progress barring a disruption in the marketplace but we think we're on track.

Okay. Then as you look at the EMEA pipeline and the transaction businesses, as you finished out of the quarter. How would you characterize both the pipeline as well as the mood around the pipeline in the EMEA heading into the third quarter?

Yes. I think you can take three cuts of that. The mood in Europe is so universally hesitant. And that is -- you would expect and is undeniable. The numbers we are actually producing are really better than the mood would suggest. And we are pleasantly surprised with that. But we are pleased with that momentum as in our business and we expect that momentum to continue. The pipelines are actually even stronger.

But the challenge, or the question is at what pace will pipelines be converted. Because pipelines times velocity will give us the actual revenue numbers and the signs are that the velocity is a challenge that people are hesitant in getting on and signing leases. There hesitant at completing transactions and due diligence is taking longer and they are being more careful. But we expect with good solid pipelines in both transactional business areas to see decent second-half trading.

Okay. Great, thanks a lot.

Your next question is from Will Marks with JMP Securities.

Thank you. Good afternoon, Colin and Lauralee. A couple of quick questions just to avoid reading the transcript I may have missed -- I know I missed. You said leasing volumes for the industry is down 10% in the Americas and the US? What was EMEA?

Year-to-date is about the same.

About the same, okay. An expectation for about the same? For the full year?

We think, yes, you could be slightly more optimistic. Our focus is actually slightly more optimistic for the full year. In fact I misspoke. Our numbers -- the market for the year-to-date is down 14% in there and expect the full year to be down about 10%. A slight improvement on the performance to date.

Okay. And then, Lauralee did you say at King Sturge, remaining integration costs $7 million to $8 million? Was that the $7 million to $8 million you -- ?

Yes, that's correct, with about half of that being the severance, which is being paid by them and some to our employees. And then we have IT just wrapping up and we may have a touch more lease excess.

Okay. My only other question really is on margins. Last year at around this time, or maybe it was a quarter later, you started talking a little bit about your goals for the margin for the year. And maybe in the context of that 14% to 15% medium-term target for EBITDA margin. One, does your new accounting or your change in compensation structure impact that medium-term target? And two, how should we be looking at this full year? Last year you were around 11%. Could this year be a flat year which would actually be an up-year if you took out those additional costs?

What you are referencing is our elimination, what we call our share ownership plan out of our bonuses, which is really a timing. So no it does not change our targets. It will have a modest impact for this year. What we said is you can kind of look at what the number was last year which was, give or take, about $10 million. And what will happen is we won't have that amortized then and to the next year we'll have another year where we won't have it deferral but will have less of an amortization. And by the time we get out into the third year, there's no impact. And relative to the benefit of shareholders it significantly lowers the dilution so therefore ultimately it a benefit to shareholders overall.

So it doesn't change our medium targets, there will be an impact this year. We're driving hard to not have it impact us materially and get close to our goals. A lot of it depends on how the economy supports activities in the balance of the year.

You provided additional disclosure on the margin for some of your management services this quarter, which is helpful, but that's not a sign that there's any change in this in terms of margin goals, is it?

No we're not signaling any change in our commitment to the margin goals for the business for the medium-term goals which we set out.

Okay. And just a final question on that. What does medium-term mean in terms of time frame?

Well, we had set out to be a normal market (laughter). That has been a little bit harder to find. So, what we've said is we've been driving very nicely in the Americas and Asia. We have not yet had a recovery in capital markets in Europe, which is a big piece of it. But we haven't slowed our activities there taking advantage of scale but the combination of the King Sturge and our operations in London in particular, but in other parts of Europe. So we're driving through that but there's no question some of it is impacted by a still significantly below normal level of capital markets.

Okay. Actually my final, final question on looking at the third and fourth quarters individually. Is there one quarter that faces an easier comp than the other?

I think other than the second quarter that we had in EMEA last year, which was very abnormal in pretty much all the areas but particularly in capital markets, we generally had a seasonal trend that was pretty consistent in EMEA and the America's.

What we will have in EMEA is, in the second half of the year, a true like-for-like because we will now have -- the King Sturge came in as of June, so the second half will be a like-for-like but everything else was a normal seasonal. I would say the US was normal seasonal and the balance of Asia last year was a normal seasonal when you kind of just drew a line through it. I don't think there's anything that you'd want to call out.

Okay. Thank you very much.

You next question is from David Ridley-Lane with Bank of America Merrill Lynch.

Sure. I have a bit of a hypothetical question. If you were to see a change in sentiment for whatever reason in EMEA, in the second half at what would it be too late for you to receive the benefit in terms of capital market transactions and leasing transactions in 2012? So for instance as things got better in September, and October, would that lead to better fourth-quarter volumes? Or would that change in sentiment, it would just be too late in the year to really get deal signed?

Well, it's encouraging, David, that you think the change of sentiment could be in a positive direction. Most commentators (laughter)are the other way out. But I share your point of view that it's very interesting that Europe is trading as well as it is. Not just for us but for the markets as a whole seem to be holding up. Business is carrying on and I think what's happened is that the business world has begun to get used to the uncertainty they are dealing with. So while numbers are not euphoric neither up in many markets, people are getting on with life. So, if you go back to our comments on pipelines we're really pleasantly surprised that the pent up activity that is there, and this sentiment point you refer to is the entire issue.

If the sentiment turns bullish than we could see a quite sharp uptick in activity and the reverse is also true and the velocity will slow even further. But anytime before the capital markets activity -- anytime before September, October you could see transactions which are underway suddenly accelerate and complete by year-end. It's hard to get through from a standing start, a transaction in three months so most of these activities are kind of underway in some form or other. So sentiment goes bullish, we're not starting from a standing start. But it's very finely balanced at the moment and you make a good point that it could be positive as well as negative.

Great. And then -- at least relative to my estimates I was a bit surprised on -- into the comp and benefits line there was about 100 basis points of leverage in the first quarter. It was flattish in the second quarter. Would you expect to see leverage on that line in the second half?

Well, if you even those two out it's 50 basis points of leverage. And I think that makes the point that year-to-date we're doing pretty well. And this first half was relative to the cost base slightly stronger than the second half. The second quarter, if you seasonally adjust, we were very happy with where we are for the first half and we'd expect that leverage to be continued into the second half of the year.

And remember, we did have about $4 million that feeds into the comp line in the year-over-year comparison and actually was somewhat a reversal of the first quarter when we changed our shared ownership program that would feed into that. So, you need to look at that with that adjustment, which again is a timing. It's not a long-term change in how we pay anybody.

Understood. Thank you, very much.

Your next question is from Michael Meuller with JP Morgan.

Hi, I think in the press release you referenced a tougher comp in Asia Pac as being part of the reason why the capital markets business was down significantly. Number one, can you kind of remind us what it was if there was something very chunky that pushed last years up specifically? And then, outside of that tougher comp, just how did you look at the business that quarter? Does it feel like the market-share gains you were thinking about were coming through the expenses? How would you size it up outside of just bumping up against the tougher comp?

Let me just give you the data because you can pull it from our slides. And this is going from Q1 2011 through for capital markets in Asia. So Q1 was $17.7 million, Q2 was $33.8 million, Q3 was $21.3 million and Q4 was $22 million. So when we got to Q1 of this year, it was $21.6 million and now this year Q2 $23.8 million. So you can see there was a real seasonal deviation in the second quarter of 2011 and we had some significant hotels activity in that quarter.

Our hotel's business globally has seen that just the dynamics of hotels in general are improving. There rev pars and so forth that -- all of our businesses talk about having very strong pipelines and are feeling quite confident about the second half of the year again barring some confidence change. But again I think there was that significant change or significant amount of activity in the second quarter of 2011.

With respect to market share in Asia, which I think you referenced specifically, we'd expect for the full year to see continued growth in our market share across both capital markets and leasing activity. We have in Asia raised salaries, and that's a deliberate managerial decision to ensure that we retain our good staff. And so that year-on-year weighs in the cost base. And we also in the second half of last year continued to hire people and so they will be in the cost base of the second half.

We've actually stopped hiring for the balance of this year. Nevertheless, those two factors will weigh in half two. But we expect on balance the growth which we are expecting to see in our revenue line for the remainder of this year to balance out those expense increases and would expect to see a full year, which is roughly comparable with last year in Asia Pacific.

Okay. Great. And then thinking about investment volumes, we've seen a lot of impact from just core product trading hands, but are you seeing signs that there's a pickup occurring in middle market -- the non-prime markets at this point?

Not really. It's very marginal. There's a lot of talk about if you are a real estate professional investing and you see cap rates in the 4%s and 5%s, it does make people start thinking about moving to secondary markets, be they secondary assets category or secondary pitches in suburbs. And some of the more opportunistic investors are beginning to go out along that particular path along the risk curve. But in general the book of money certainly from institutional investors, from high net worth across regions, is looking for secure, safe cash flows and they are seeing 4% and 5% yields cash cap rates, was actually pretty darn good compared to the 1%s, 2%s and 3%s they're getting from bond yields.

So it's a comparative place still and we talked in our prepared remarks about further, continued cap rate compression towards the year-end albeit much less steeply than we've seen in the last few quarters. So attractive markets for core -- lots of demand for core assets supply generally limited because sellers have got little attractive re-investment option for their money. And the secondary markets are beginning to pick up. I think confidence has to recover globally speaking a little more before you see a real solid move towards secondary markets.

Okay Thank you.

Your next question is from Todd Lukasik with Morningstar.

Hi. Thanks for taking my questions. The first one I may have missed. I was wondering if you gave the estimated organic growth rate for EMEA absent King Sturge?

We didn't. We are very merged now, we tried to re-create a like-for-like. If we looked at sort of them and us prior to being together, we think we will would have been down approximately 5% in revenue.

Okay. Would that be on a US dollar basis?

Yes.

Or local? Yes, okay. And then, my other question. I was just wondering if you could give sort of an updated view on what I would call debt driven property sales. So a few years ago I think there may have been a feeling that as loans that were made on purchases at peek prices, at high loan to values came due, that they may be either non-refinanceable in the current environment? Is that something that is playing out or is that something that still may play out in future quarters or given lending practices or maybe the rise in asset values, something that is likely to not play out?

All of the above (laughter). Every single permutation combination you could think of. In Asia, there isn't really much, you're talking about (inaudible) distress driven by financing structures put in place and better years. There isn't very much of an issue in that area across Asia. Within Europe, there's everything happening because you've got some countries where the banks have got sufficient capital, and the governments have got sufficient regulatory authority to push them to stop taking write-downs on debt structures which were put in place in better times. So I think Germany, some are France, but you've read what's happening in Spain.

The banks aren't able to deal with (inaudible) issues there. The continued progress in Ireland is being stymied by total level of debt between the banks and the country, and the country, of course, owns that. So you've got certainly a good still levels of distress in Europe, grew the pace of dealing with it is very variable. And where it's being dealt with, some of it is extended, some of it is new debt with haircuts, so it's deadening taking possession of the asset and refinancing or selling. There's all sorts of permutations going on.

And generally the pace is not as rapid as everyone always thought three years ago. The debts with the recession when recovery was beginning. Same comment in America, it's a control process. Can still being put down the road through refinancing and haircuts but it's not the principal driver of activity in the market still.

Okay. But it sounds like it may be something that could contribute to a larger degree in the future?

Yes, albeit that the financial markets are continuing to gradually heal and in doing so, their capacity to refinance is improving. And they're also continuing to discover new ways of handling these distressed structures when they do come.

Okay. Great. Thanks for the comments.

(Operator Instructions)

It sounds like we're through, Operator.

That's correct. We have no further questions.

Okay, with no further questions let's conclude the call. Thank you, everyone for participating and for your interest in Jones Lang LaSalle. We look forward to talking to you again following the third-quarter results. Thank you and good evening.

Thank you, everyone for joining today's conference call. You may now disconnect.