Jones Lang LaSalle Inc (JLL) 2012 Q3 法說會逐字稿

Good day and welcome to the third-quarter 2012 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 ended December 31, 2011 and in 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 welcome to everyone joining this review of our results for third quarter 2012 and for the first nine months of the year.

Before getting into the call, just a few administrative points. First of all, thank you all for joining particularly those who are in the path of Hurricane Sandy over the last two days. We hope you escaped reasonably unscathed. We as a results, as the operator just said, we will be posting a transcript of the call on our website and indeed, we will be recording this call for those of you who are unable to make it and we do have indications that there are fewer of you on the call as a result this time.

From our perspective, with respect to our clients, it's still much too early for us to tell the extent to which they have been impacted or damaged but clearly business in the New York and New Jersey area will be severely dislocated for the coming few days. But our teams have been active over the last 24 hours in coming to clients' assistance and we'll continue to do that.

Final point of administration, I got stranded in Washington, DC. Telephones are down and so you are hearing me on a cellphone. That should work well, but if for any reason it doesn't, Lauralee will take over with Plan B this call.

So Lauralee is joining me, our Chief Operating and Financial Officer. Lauralee is safe and sound in Chicago and she will be reviewing our performance in detail in a few minutes.

To summarize our results, we continued to win market share and recorded sound performance in what has remained a cautious and challenging market environment. The third-quarter revenue totaled $249 million, which is up 5% in US dollars and 8% in local currencies from the third quarter of 2011.

Year-to-date revenue increased to $2.7 billion, 10% higher than in the first nine months of 2011 and a 13% increase in local currency for the quarter. We reported adjusted net income of $55 million or $1.23 a share and that compares with $50 million or $1.12 one year ago. Year-to-date adjusted net income was $128 million or $2.86 a share and that compares with $101 million or $2.27 a share in the first nine months of 2011.

We completed two M&A transactions during the quarter, acquiring Credo Real Estate, a market leading advisory firm in Singapore, and merging operations with 360 Commercial Partners, a leading real estate services firm in Orange County, California. Finally, our Board of Directors declared a dividend of $0.20 per share.

Before Lauralee discusses our results in detail, let me put them in context by summarizing conditions in the global economy and in real estate markets around the world. According to IHS Global Insight, the global economy will grow 2.3% this year, consistent with earlier estimates as the hesitant worldwide recovery continues. Growth is expected to be 1.3% in advanced economies for the year and 4.8% in emerging markets.

Next year economic growth is expected to reach 2.6% globally developing economies slowing marginally to 1.1% growth while emerging markets grow at 5.1%. Regionally, the US is seeing steady growth around 2% with forward real estate market opportunities on the upside, (inaudible) postelection progress on government finances.

Europe continues to struggle as sovereign debt crisis still poses the most serious risk to global outlook and here risk remains weighted to the downside.

Growth in Asia Pacific is flat year on year with no signs yet of a shift from the downward trajectory which China and India have experienced in recent quarters. However, the most recent reports of accelerating industrial production, retail sales and investments in fixed assets in China during September give some confidence that the Chinese economy is stabilizing and growth rates will begin to pick up from the fourth quarter.

So all in all we see continued gradual but fragile cyclical recovery although with very different conditions, characteristics, and potential risks from one region to another. In this environment in real estate markets globally, the investment market held relatively steady in the third quarter while office leasing activity was more subdued.

To summarize current market conditions, we have posted slides in the investor relations section of our website, JonesLangLaSalle.com.

Slide 3 shows the Jones Lang LaSalle investment sales clock, which depicts capital values in major world markets which are at different stages in their real estate cycles. Capital values on prime assets across 24 major office markets increased at an average annualized rate of 4.4% at the end of the third quarter. For the full year, we expect values to increase by 3% to 4% as rates of growth continue to slow down from 24% in 2010 and 13% in 2011.

Global investment volumes totaled $100 billion for the third quarter, which is 7% below the same period in 2011. Investment volumes in the Americas were 8% above the third quarter of 2011 at $44 billion. Market volumes in Europe totaled $33 billion and that's 22% lower than in the prior period of last year and Asia-Pacific recorded $22 billion in investment volumes for the third quarter, down 5% year-on-year but relatively steady on a year-to-date comparison.

On slide 4, we project year-end global investment sales volumes at $400 billion broadly matching 2011 levels as prime properties continue to attract significant investor interest.

Turning to slide 5, we see a picture of conditions in leasing markets worldwide. Prime rents across 24 major office markets increased by 0.4% in the third quarter, reflecting further slowing in rental growth. The trend does remain positive in most markets, however. The scattering of cities between 2011 and 2012 charts shows the widely divergent market conditions that we are seeing around the world.

Office leasing activity slowed during the quarter, with year-to-date volumes in all three regions now running about 15% below the same period in 2011. Our own third-quarter releasing revenues increased by 15% year-on-year in the Americas. Our European and Asian leasing revenues were down slightly in local currency but this taken together is further evidence of our growth in market share across all regions.

Office vacancy rates continued to trend lower in the third quarter. The global office vacancy rate across 94 world markets now stands at 13.2% and that compares with 14.5% at the peak of the vacancy cycle in the second quarter of 2010. Vacancy rates ranged from 17.2% in the US, the lowest level in three years, to 9.7% in Europe and 10.6% across Asia Pacific. The sharpest fall in vacancy and therefore the most market tightening were recorded in Singapore, Moscow, Beijing, and Mexico City.

In office markets globally, cautious corporate occupiers and weak job growth are expected to contribute to reduce leasing volumes for the year around 15% below the 2011 levels. In the US, technology and energy companies end markets in the West continue to dominate demand growth while Sunbelt markets are starting to contribute to the recovery.

Across Europe, current forecasts see gross tick-up in the region for 2012 to be about 10% lower than 2011 but roughly in line with the 10-year average.

In Asia-Pacific, we expect overall leasing demand to be moderately weaker in most markets for this year, the result of slower economic growth and weaker corporate hiring.

Looking ahead to the final two months of the year and despite our healthy pipelines, we anticipate continued transaction caution amongst investors and corporate tenants. So all in all, the uncertain economic environment continues to determine market sentiment. Nevertheless, as Lauralee will now explain, our new business pipelines remain healthy. We're managing costs tightly and our results indicate we continue to take market share from our competitors.

So with those opening remarks, I will turn the call over to Lauralee.

Thank you, Colin. As Colin mentioned, our consolidated results for the third quarter demonstrated the firm's stability amid varied market conditions across the globe. We grew fee revenue by 5% on a local currency basis over the third quarter of 2011. We had another quarter of solid performance in our annuity businesses, particularly across Asia Pacific and the Americas, where each delivered double-digit local currency growth in property and facility management.

The investments we made in our platform over the last several years have increased transactional revenue in key markets and contributed to market share growth. We also have healthy new business pipelines that have positioned us for a good finish in the seasonally strong fourth quarter.

In the Americas, fee revenue increased 10% in local currency from the third quarter of 2011, led by leasing revenue growth of 15%. We continued to focus on building market strength and improving our share position and can report further progress this quarter. Our 15% growth compares favorably to overall leasing volumes, which were down 14% in the third quarter.

We have also expanded our property and facility management annuity revenue base, achieving 10% local currency growth in the third quarter on a fee revenue basis. Our capital markets and hotels business grew 8% in local currency, 26% year-to-date, and has a strong pipeline going into the end of the year. Operating income and EBITDA margins for the quarter improved 50 and 60 basis points respectively on a fee revenue basis.

In EMEA, fee revenue decreased 3% in local currency from the third quarter last year, driven by more transactional activity due to like Euro uncertainties. While leasing revenue was relatively flat compared with last year, down 1% in local currency, we have built strength with the corporate occupier clients through our corporate solutions business, which is helping to offset reduced market activity.

Capital markets and hotels decreased 9% in local currency where securing financing for deals remains a challenge. Despite difficult underlying markets, our people have a positive mindset about year-end that is the result of winning new client mandates, expanding market share, and successfully integrating the merger with King Sturge over the past year.

We have continued to be disciplined on cost and our year-to-date expansion of margin demonstrate the actions we have taken to date have proven to be effective. Included in the third-quarter restructuring charges are additional costs for downsizing in the southern Euro markets as well as additional lease exit costs which will deliver future savings in 2013 and beyond.

In Asia-Pacific, fee revenue increased 9% in local currency in the third quarter and increased 7% year-to-date. Our annuity business, property and facility management produced 17% fee revenue growth in local currency in the quarter, reflecting continued expansion of our high quality platform for corporate occupiers, providing a steady base of stable income for our results in the region. Increases were most significant in Australia, Greater China, and Thailand, where we are winning business with locally headquartered multinational corporations and large investors.

Transactional activity was down across the region, which has negatively impacted margins as transactional revenues tends to be higher margin business. The region also has been impacted by inflationary pressure across the region particularly India and China, which has increased fixed compensation costs.

LaSalle Investment Management's third-quarter advisory fees were consistent with the first and second quarter 2012 levels even after significant asset sales over the last 12 to 15 months. As we mentioned last quarter, we believe current levels reflect a baseline level of activity to be expected from LaSalle Investment Management, though we expect future enhancements to their results driven by their capital raise abilities and continued delivery of leading investment performance.

We are also pleased to report over $11 million of incentive fees, reflecting our performance for our clients as well as more than $10 million of equity earnings in the quarter.

With respect to the balance sheet and cash flows, we paid down $60 million of debt from a year ago, $35 million in the quarter, and remain committed to maintaining our investment-grade rating. Our year-to-date acquisitions spend has been modest as we focused in the US primarily on hiring individual market makers and concentrated in Europe on integrating King Sturge.

We have co-invested to support LaSalle's efforts to raise new funds and to win new separate account mandates. Our older vintage funds continue to be harvested, often with equity earnings and incentive fees.

Our third-quarter results vary by region but taken as a whole indicate solid performance across uncertain and cautious markets. Increased market share, solid annuity revenue growth, and focus on converting our strong pipelines position us for a solid fourth-quarter finish to 2012.

Let me now turn the call over to Colin to discuss some of our recent business wins.

Thank you, Lauralee. Referring back to the slides once more, slide 6 shows a few examples of the new business wins which Lauralee referred to and which contributed to our third-quarter results.

Beginning with our global corporate outsourcing business, we have won 39 new assignments to date this year, expanded our relationship with another 31 clients, and reviewed 31 contracts.

In Beijing for example, after we secured a 270,000 square foot lease for RenRen, the social networking company which is China's Facebook, we were appointed to provide to (inaudible) management and project management services for a further 410,000 square feet of space. That lease was Beijing's largest to date this year and facilities management assignment represents the first time that a Chinese corporation has engaged an integrated service provider to deliver the full scope of facility services and the [thick] out was our largest in China so far this year.

We also saw growth in our local market corporate solutions business, which focuses on midmarket corporate occupiers. To date this year, we have won 45 new assignments totaling nearly 90 million square feet in the sector. In second-quarter investment sales activities, we advised on the largest single asset sale in France since 2007, a EUR500 million sale of a retail complex on the Champs Elysees in Paris. And in Germany's biggest transaction this year, we advised on a EURO784 million sale of two landmark buildings in Frankfurt.

Major leasing tenant representation and property and asset management wins for the quarter included an 811,000 square foot lease in Calgary for Canada's Imperial Oil.

The big news at LaSall Investment Management is that on October 1, we announced a public offering to raise up to $3 billion for a nonlisted REIT. The Jones Lang LaSalle Income Property Trust or JLLIPT, is an open-ended fund with a diversified portfolio of high quality income-producing assets located primarily in the United States. The fund differs from earlier nonlisted REITs in terms of its stated pricing, improved liquidity, and lower upfront fees. We are especially pleased with the fund's distribution relationship with Merrill Lynch and their commitment to offer it through their 16,000 financial advisors.

JLLIPT is strategically important for LaSalle Investment Management and a significant step forward to expand our client base into the individual investor space. Over time we expect the fund to grow assets under management for LaSalle.

In terms of market prospects, we have already talked about conditions through to the end of this year. Looking ahead to 2013, preliminary projections show investment sales volumes matching this year's levels at around $100 billion a quarter with potential upside particularly in the Americas, where volumes could be as much as 25% higher than in this year. We expect capital values to increase by an average of about 3% next year.

We anticipate that global leasing volumes will be 5% to 10% higher in 2013, up 10% to 15% in the US, 5% in Europe, while Asia-Pacific market volumes, which have been at near record levels in 2011 and 2012 are expected to be down around 3% next year.

Prime rental growth next year is expected to broadly match this year's rates at around 3% on aggregate with most major markets registering single-digit growth.

Slide 7 shows Beijing and San Francisco will once again show the strongest rental performance while London, Moscow, Sydney, Tokyo, and Hong Kong will also register above-average growth in the 5% to 10% range.

In the funds management sector, institutional investors continue to commit new capital to real estate because it still offers attractive relative returns but they are doing so with great care and caution.

As the strong third-quarter equity earnings and incentive fees demonstrate, LaSalle Investment Management will be well-positioned to deliver superior performance to its clients in this environment.

So for next year, we anticipate markets that are not going to get worse but at the same time not improving as quickly as businesses might hope. There are encouraging signs, the UK emerging from recession and China perhaps turning around its declining growth rates. But there are also global scale issues that concern business confidence, the post-election fiscal cliff in the US and ongoing issues with sovereign debt in Europe being the two principal examples.

Most of our annuity businesses will continue to grow. Fee revenues in our property and facilities management business were up 10% year on year across our operations during the third quarter and grew 17% in Asia-Pacific. Large numbers of corporate clients will continue next year to look to outsource to manage and reduce costs, playing to the strength of our corporate solutions business globally.

And indeed, our European corporate business -- in our European corporate business -- the pipeline of new opportunities is up by more than 30%. These annuity businesses are countercyclical, supporting revenues when transactions slow.

So we remain confident that we will continue to grow next year just as we have in similar market environments this year. We are confident that we will continue to take market share, which not only contributes to near-term performance but also puts us in a very good place when the recovery finally gains momentum.

We are maintaining our discipline on costs while also working to increase productivity across our business. Finally, we can expect competitors lacking a commanding global platform to continue getting weaker.

To close our remarks today, we would like just to mention some awards we have received reflecting our commitment to client service and to our industry-leading position. Two recent examples, we were named Best Corporate Citizen by Corporate Responsibility Magazine, the only real estate-related firm to be so honored.

And in Asia-Pacific, we were selected as the number one overall real estate advisor in the region at the 2012 Euromoney Real Estate Awards, the second consecutive year in which we have received this top award.

So on that positive and happy note, I will pause and invite your questions. Operator, could you please explain the process?

(Operator Instructions). David Lane, Merrill Lynch.

A bit of a slowdown in advisory and consulting revenue this quarter. I know some of that is transaction-related and some is more contractually recurring in nature. Is there anything to read through from that 3% year-over-year decline in local currency for that service line?

David, good morning. Only that as we described in the commentary on the market, we are looking at very hesitant confidence around both leasing and investment markets and the advisory -- a part of the advisory work is very discretionary and it's the sort of work which when people feel good, they move ahead with and when they feel less good, they tend to dial back or delay on it, so it's probably principally a reflection of that phenomenon.

Okay, clearly great market share gains in the Americas leasing. I was wondering if you could maybe review the headcount additions and wondering if you are continuing to add broker headcount here as well?

Yes, we are. The pace of growth in numbers has been dialed back somewhat. It gets tougher as you go through the year to do that, it gets tougher as you go through the cycle indeed to do that as brokers at competitor countries have vested interest in deals which are well underway. So the numbers have been slowing a little bit. Lauralee, do you have a total?

I think we are up in the US about 25 year to date in leasing. In capital markets, actually nothing in the quarter, so to Colin's comment, quarter was relatively slow. And again what we have done is we are finding that as people get closer to the end of the year, they have got a lot in their pipelines and it's much more difficult to move them, so we would expect we'll start to see movement again when we open up in early 2013.

We continue to have robust conversations. People are very interested in our platform and so it's clearly one that we think has momentum but it's tougher to move people as markets get to the end of the year.

But as you commented, the actual revenue numbers are growing nicely and that's a good indication that the productivity of those people we have hired in the past year or two or three, is now coming through and growing as we would plan.

Okay, that all makes sense. What's the relative size of the additional Southern Europe restructuring and what's kind of a ballpark for the estimated savings per quarter?

Of the severance that we took in the quarter was $1.6 million for severance and other. You don't get as much of a payback unfortunately out of European as you do otherwise. So generally you will see it in 2013 but our view is it's more to offset what we think will be slower revenues than necessarily you are going to see an improvement in a bottom-line margin. It's really protection of bottom-line margin.

Okay, so will you expect a few million dollars in the fourth quarter for restructuring related to King Sturge or are we finished with that?

The King Sturge that's left is still the contractual retention, so if we think about that, that's still another little bit less than $2 million and we still are -- we have IT in progress which is about $2 million as well. So I'm guessing in the fourth quarter we could still have between the sum of the two of those about $4 million-ish kind of restructuring.

What we're seeing our European business -- Southern European business is doing, David, is in addition to the restructuring activities Lauralee described, they're also at their own discretion taking salary haircuts and bonus haircuts so they are responding to market conditions in the way that we would have hoped that they would, which is encouraging.

(Operator Instructions). Will Marks, JMP Securities.

Good morning, Lauralee. Good morning, Colin. I guess first, I wanted to ask about the equity earnings in the quarter. I don't know if that was something that -- you had talked a little bit about the incentive fee during the quarter. I don't believe we knew ahead of time there would be a big equity earnings. But more importantly, I look back and you are about double the equity earnings from LaSalle Investment Management what you've been in any year I think in your history already this year. What should we expect from this business going forward?

That was an unusual quarter, so you're right, Will, and it was broader based than what we would have thought so it's a mix of things coming out of Canada, Asia, etc., so I think what LaSalle is doing which is what we want them to do for their clients is looking at all of the vintage, taking advantage of where markets have recovered and giving the best return they can off of those vintage funds as the markets do recover.

So that's an unusual number. We were delighted to have it because it reflects performance for our clients but I would not expect something like that going forward.

Okay, I assume it's a pretty high-margin -- or they are high-margin fees?

Yes.

Going forward, is part of this because of -- if we look back at your equity earnings line it was negative, largely negative I think in the downturn and so is this part of -- do you have an ability to mark up and generate those equity earnings in the future?

You are correct. The markdown is when there has been permanent impairment and that was done through evaluating what was happening in those markets. And we cannot mark up on things where we are under that method of accounting until there is an event. And so what we have had is events which means properties are being sold, being realized at better than anticipated values, which is very good performance by our people. And then we do have the gain off of that, so there's a mix of somewhere there may have been a markdown and somewhere there was not and we've just actually had terrific performance.

Okay, great. Thank you. On your cash flow, I see you do have the table as per normal in your PowerPoint presentation. It looks to be -- because when I first saw your cash over the past year or your debt -- sorry -- net debt reduction was $60 million, it seemed low. But could you go through exactly -- or I guess maybe over a 12-month period how much you have spent on acquisitions and I guess acquisitions, CapEx, and coinvestment?

Yes, to date, our CapEx is about $55 million so we are on a normal trend as we gave you under guidance. We have used about $26 million for business acquisitions, so as we mentioned, it has been modest this year. We have been very much focused on integrating what we have already done. And then we have had much more activity in LaSalle Investment Management to rebuild some of their new activities that we've talked about and we have had between them about $95 million of cash that's gone into that. Then we get another $40 million of that back. So there's a net piece that comes through.

And then additionally, we paid $32 million for previous acquisitions that were deferred payments (inaudible) King Sturge.

We'd be happy to spend more time off-line if any of that is confusing. But I would say that the pieces -- if there's a way to summarize that for you, we are managing the pieces that you want us to manage aggressively, which is things like CapEx. We are making sure we are getting the returns off the business acquisitions that we have and are settling those down. And then we are putting the money into where we think we have the best opportunities for growth and at the moment, that's very much supporting LaSalle Investment Management as they get back into a capital raising mode to offset what's really come out of harvesting the vintage assets that they are managing.

How much were the -- I think Colin had mentioned two acquisitions during the quarter. I assume it's a nominal amount. I'm just curious if you can mention that?

Yes, the order of (technical difficulty) million.

Yes, but the cash out on those was $11 million to $12 million and the balance goes into deferred. Our typical structure, so Colin is giving you a gross number but as you know, we think it's very important for retention to have deferred payments.

Okay, and then just lastly on the use of capital, what about share repurchase? We haven't seen that in a while. What's your strategy?

Shall I go that way? We've addressed this a couple of times recently. Our main focus currently apart from the corporate management is the cash flow and the balance sheet as already described in terms of other returns to shareholders has been in dividend payments which we have maintained through the recession and indeed begun to grow back again. So our principal attention has been on moving the dividend forward. If we get to a point where in consultation with our shareholders and our Board we think it's appropriate to repurchase shares, we will do that. We don't have any plans at the moment.

Okay, that's great. Thank you very much.

(Operator Instructions). Todd Lukasik, Morningstar.

I was just wondering if you could comment a little bit more on the property and facilities management business, sort of maybe characterize what inning you think we're in in terms of rolling that out around the globe in the three different regions? And also I guess how long you think the double-digit fee growth there can continue?

I'm not sure any of the quite appropriate thing in comparison to use it. It's been a solid part of our business for a long time on the investor side of our operations where we have had very strong operations in Europe and Asia. And we have been growing it with our leasing activity in the US. That's on the investor side, so that's solid business. It's sort of midrange profitability in most places but exceptionally profitable for some Asian geographies.

The facilities management side of that, that is just similar work which we do for investors but this time for corporates. That is growing. It has been a strong franchise for us in the US with are traditionally very strong big corporate solutions business. And as its growth -- what has reflected the broader growth in our corporate solutions activity so from a strong US base, we grew it rapidly in Asia-Pacific in the 2005, 2012 period. And so that continues to show healthy growth as we referred to in the prepared remarks. The Asian corporate solutions business continues to grow and develop in those as Asian companies professionalize and we referred to RenRen in China giving us broader management activities for the first time for Chinese Corporation.

The good news and improving news is in Europe where the traditional big corporate has very much self-managed their own real estate activities and we saw post-recession a very significant wave of change in that traditional approach with the larger corporations looking to outsource many of the traditionally self-performed real estate services including the facilities. So we expect Europe to show continued healthy growth and indeed, we had one particular very healthy win in Europe in the course of Q3 which we are not able to talk about at this stage but that's counting Q4.

Okay, thank you.

David Gold, Sidoti.

Just a quick question. Essentially it seems that the commentary has been kind of mixed. On the one hand there's certainly some uncertainty in your tone given the global issues, but at the same time, there's commentary as to the robust pipeline and the healthier strong expectations for the fourth quarter.

I was wondering if you could give a little bit more color sort of on both essentially -- (inaudible) goes out basically to the extent that there could be some uncertainty as to getting transactions closed. What the hold up is, is it purely the economy? But essentially I guess -- I want to get a little bit better sense of we're building a strong pipeline but we are still uncertain about it so you might just -- if you can sort of gel the two.

I agree with all of that, David. That's perfect. You've almost answered it for us. It's a very paradoxical sort of a world. I'll give you one particular quote in a minute from my Head of Europe. But it's a world in which we see -- we believe we see that business is coming our way because of general uncertainty and hesitancy and that traditionally favors the strong brands in any market and ours is not an exception. We've always seen share growth particularly strongly during recessions for example.

So we think an effect kind of the money the business coming our way for reasons of trust and confidence, we're building share as a result and that's why our pipelines pretty much around the world at least in earning capital markets feel good, feel strong, are better than they were a year ago.

The whole challenge -- and that reflects if you like a general sense that people want to get on with business actually. The question then becomes what happens to those pipelines? How quickly are they translated from intentions to trade to actual deals? It's there that this whole question of hesitancy, people keeping their eyes on the global news feeds around the big global uncertainties from US elections to Chinese growth rates to corruption in India, to the European Euro situation, and any slight wobble causes people to be hesitant and not to move on and close the deal. So the velocity is the big challenge in how fast can we move these deals through?

We feel we are well placed. I think people feel confident, as Lauralee referred to in the European context. It's all down to how much confidence do our clients have to finally move things across the line and transact?

The quote from our European Head when we did a quarterly review from him was kind of -- he's a very cautious German, Christian Ulbrich, and he said, it's really surprising just how good our numbers look and how good our people feel and how they feel that we're really in a strong growth position against the context of everything we read in the newspaper every day. So there you are, that's about as good as we can do.

We are confident. We hope we're conveying that to you. We are positive about our own prospects in the way we are doing business but we are keeping our hand pretty firmly on the cost control and cash control levers as well.

Got you, that's helpful. I guess from the distance, somewhat interpret that there is inventory and there is transaction interest but it's taking longer for things to close and so that adds to the uncertainty.

Yes, and this is -- we're just now coming into November and December, when everyone suddenly gets their [lines] concentrated and we saw last year in particular in December, very rapid closure at the end of the year despite what was going on 12 months ago around the year, so it's sort of unpredictable. We feel good. Again, the pipelines are good. We will just watch very carefully to see how our clients' confidence enables them to move their deals across the line.

Perfect and then just one last add. Just having some trouble but I didn't quite catch, Lauralee did you give any guidance as to fourth quarter either (inaudible) of these or equity earnings expectations?

I did not comment. Whatever would occur at this point in time, I can't anticipate it because it would really just be if transactions do occur but it's not at this point anything that would rise to a level that I would be flagging it or making you aware because our people don't at this point know it either.

Perfect, perfect. Thank you both.

Will Marks, JMP Securities.

Hello, Colin. Sorry about that. I don't know what happened. I guess for Lauralee, the interest expense line seemed high for the quarter. Is it high or can you give us a little bit of a run rate for that figure?

I would say we do occasionally have lumpiness from quarter to quarter. It tends to more be because there might be movement in some of our emerging markets around that. I would go back to what you think is a normal trend, so nothing of issue in there.

I'm sorry, meaning it was a little bit high during the third quarter?

Yes, because there was just some movements in emerging markets but nothing unusual.

Okay, then on CapEx, you had mentioned that you have given guidance in the past. I know you have. Is it $75 billion or can you repeat what that is?

Yes, $75 million to $80 million and we're at about $55 million right now year to date.

Then on -- looking at the fourth quarter, last year you did give us a little bit of margin guidance and I think that's because margins had been so depressed before. But any thoughts on margin? Can you offer us anything?

It's very much dependent on how the transactional activities flow through. As you do know, each of our quarters contributes margin higher than what the year-to-date run rate is. So we have given you in our investor deck what the margin was for the full year last year and then we compared each time the year-to-date against that. We are on a trend that if we have a good fourth quarter, we would be continuing to make advances toward our goals. But it's very much transaction-dependent.

Okay, then just my last question on -- was there anything in the fourth quarter last year on the revenue side? It did seem that if there was a downturn it happened at least the beginnings were in the fourth quarter last year in terms of global revenue declines. Any thoughts on that? I guess what I'm getting at it's sort of a guidance question. Is fourth quarter an easier however you want to answer that if at all?

I would not say it's an easier comp, no. We had obviously a very good, strong fourth quarter last year, pretty broad-based and so we are working hard to have a really solid end of year.

Okay, on just one related note, I thought that was my last question but your comp and benefits line was quite low, I guess 62.9% last year in the fourth quarter and I know it does drop in the fourth quarter. Is that exceptionally low? Is that a good number to think about for the fourth quarter?

I think what you have to look at is we had not focused you on fee revenue last year as we have this year and we did have some contracts come in in the fourth quarter that on a gross revenue made that comp look lower than it would on a fee revenue. So I would encourage you to go back and look at the fee revenue comp to revenue ratio and that would give you better guidance.

Okay, perfect. Thank you very much.

At this time there are no audio questions.

Good. Thank you, operator, and thank you, everybody, for your interest in Jones Lang LaSalle. We look forward to talking to you all again in January at the end of our fourth quarter and in the meantime, thank you for your attention.

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