Jones Lang LaSalle Inc (JLL) 2015 Q3 法說會逐字稿

Welcome to the third quarter 2015 earnings conference call for Jones Lang LaSalle, Incorporated. As a reminder, today's call is being recorded. A transcript will be posted in the Investor Relations section at JLL.com. 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 fiscal year ended December 31, 2014, and in our other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. Now I will turn the call to Colin Dyer, Chief Executive Officer, for opening remarks.

Good morning, everyone, and welcome to this review of our results for the third quarter and first nine months of 2015. Christie Kelly, our Chief Financial Officer, joins me on the call today and will discuss details of our performance in a few minutes.

To summarize our results, we completed another record third-quarter with fee revenue of $1.3 billion, up 17% in local currency from the third quarter of 2014, which is up 9% in US dollars. Year-to-date fee revenue totaled $3.5 billion, 20% year-on-year increase in local currency, 11% in US dollars. Adjusted earnings per share reached $2.52 in the quarter, 11% above the third-quarter 2014 levels. And this, despite a 23% negative foreign exchange impact. For the first nine months, adjusted earnings per share totaled $5.47 per share, 27% above the same period a year ago.

To put our current performance in context, the quarter's revenue and adjusted earnings per share match the double-digit compound annual growth rates we've maintained since 2010. That is to say, 12% on revenue and 21% on adjusted EPS. We've also maintained our focus on disciplines strategic acquisitions. To date this year, we have announced, or closed, 15 transactions with a combined value of more than $420 million. Our new business pipelines remain strong in the fourth quarter which is typically our most active. And finally, our Board of Directors increased our semiannual dividend to $0.29 per share. So a very strong quarter in what continues to be active and very healthy global real estate markets. Revenue growth was broad-based across service lines and geographies. And LaSalle Investment Management delivered excellent performance for its clients, earning significant incentive fees and equity earnings in the process.

These results came in an environment of steady economic progress. Global GDP is projected to grow by 3% this year, rising to 3.4% in 2016. We have posted slides in the Investor Relations section of JLL.com, which summarize current conditions in global real estate markets. Slide 2 shows trends in capital markets and leasing volumes. In general, leasing market growth rates continue to catch up to strong and active capital markets.

In the capital markets, real estate investment continue to move higher during the first three quarters of 2015. Third-quarter market volumes reached $173 billion, roughly in line with the third quarter a year ago. Currency fluctuations continue to understate the true level of activity by about 10%. Year-to-date transactional volumes were 3% higher than last year at $497 billion, but up 13% if you use fixed exchange rates.

In the Americas, US capital market volumes stood out with 18% growth in the first three quarters, even as the third quarter itself was flat versus a year ago. Other markets in North and Latin America declined, however. Germany had a very strong quarter. And China recorded a 45% increase in transaction volumes compared to the first nine months of 2014.

High investor demand for real estate continued to compress yields or cap rates for core office assets in primary markets. Brussels, Paris, Stockholm and Sydney all saw yields reduced by 25 basis points in the quarter. Capital value appreciation on prime assets across 26 markets stood at an annualized rate of 7.9% in the quarter. The strongest growth came in Madrid, Paris, and London. While Los Angeles, San Francisco and Boston also outperformed.

In global office leasing markets momentum continued to build, with volumes up 12% in the quarter and 7% year-to-date, compared to the same periods a year ago. Worldwide corporate occupiers are generally optimistic about near-term prospects and many are actively planning for growth. European office leasing volumes continue to strengthen during the quarter, up 29% year-on-year. Asia Pacific volumes increased 27% compared to the third quarter of last year and were up one third year-to-date. And while US Q3 volumes increased by only 2%, pent up demand in the market has yet to be satisfied. Vacancy rates also continue to trend lower to 12.3% across 98 key global markets. Rents on prime office assets in 26 major markets grew by 2.5%, with particularly strong growth in Hong Kong, London and Sydney.

So globally with very few exceptions, we see sustained investment sales trends and increasingly robust demand for lease space. These trends are well entrenched, with no signs of any break in market momentum. To discuss our performance in these positive markets, I will turn the call over to Christie.

Thank you, Colin, and welcome to everyone on our call. As Colin shared, our Firm reported another quarter of excellent performance. We delivered double-digit, third-quarter key revenue growth over last year. Our performance continues to reflect the broad strength and diversity of our platform that starts with our brand, and is realized each day by our people, who remain focused on delivering results to our clients and investors. We continue to see the benefits of increased recurring revenue, investments, acquisitions, our productivity focus and financial strength.

As Colin also noted in his introduction, we closed the third quarter with record consolidated fee revenue of $1.3 billion, up 17% over last year and adjusted earnings per share of $2.52 on adjusted net income of $114 million, up 11% over last year, despite a $0.23 or 10% negative impact due to currency translation. It is worth noting that we achieved approximately a 26% increase in adjusted EPS growth for the quarter when normalizing for business performance for [outside] LaSalle incentive fees and equity earnings.

All of our geographic segments and service lines delivered year-over-year double-digit increases in revenue for the quarter and year-to-date. LaSalle also performed well against a similarly outstanding quarter last year. In capital markets and hotels, we have outperformed the market across all geographic segments year-to-date.

Focusing on the third quarter, fee revenue increased 26% on a local currency basis, led by strong results again in EMEA and in Asia Pacific. Our leasing business has also outperformed the market year-to-date and for the third quarter, during which fee revenue increased 19% on a local currency basis led primarily by the Americas. Project and development services fee revenue increased 21% on a local currency basis led by EMEA and Asia Pacific.

Our annuity-based property and facility management business revenue grew steadily at 14% for the third quarter and 12% year-to-date in local currency over a strong comparable last year. Our corporate solutions business continued to demonstrate strong progress in the quarter with an 18% increase in fee revenues on a local currency basis.

LaSalle Investment Management grew advisory fees, recorded excellent incentive fees and generated substantial equity earnings from performance on behalf of our clients. LaSalle also continued its successful capital-raising track record in the third quarter raising an additional $838 million of equity commitment bringing year-to-date capital rates to $3.8 billion and ending the quarter with $57 billion of assets under management. Overall, the continued impressive and steady broad-based growth is a result of sustained investments aligned with our 2020 strategic goals as well as a focus on cross-selling.

Adjusted operating income margin calculated on a fee revenue basis was 10.8%, up 50 basis points on an exchange adjusted basis compared to 2014, driven by broad-based performance across our platform. Additionally, year-to-date adjusted operating income margin calculated on a fee revenue basis increased 100 basis points to 8.5% on exchange adjusted basis as we continuously focus on capturing margin enhancing opportunities by driving profitable revenue growth and productivity initiatives. Productivity ideas are sourced internally by our people, who work to deliver superior results to our clients. We continued to advance over 100 productivity initiatives that focus on people, process and pricing goals to deliver enhanced revenue and margin performance as well as client experience.

We will begin our review of the segment results with the Americas where third quarter fee revenue increased 16% in local currency over 2014 as momentum from the first half of the year continued. Revenue growth was driven by gains in leasing, which had a 17% fee revenue increase, property and facility management with a 16% fee revenue increase, as well as a 15% fee revenue increase in project and development services.

Our capital market business grew revenue moderately year-over-year for the quarter against a strong comparable last year and has maintained robust activity that has again outperformed the market. We continue to expand our leasing business organically with 74% of the growth originating with brokers who have been with the firm at least three years, while investing in new hires in both our leasing and capital markets businesses. The growth in our business was driven again by strong leasing performance in the majority of our US markets including New York, Los Angeles and Atlanta. We also doubled our capital markets revenue in the Northwest, DC and Boston. Our 15% revenue growth this quarter in our corporate solutions business was driven by notable wins and expansions across our platform, which Colin will discuss in a moment.

In addition to the financial results, our Americas team continues to demonstrate strong engagement. One recent example is our Americas Women's Summit, led by our Women's business network. Our annual gathering again, welcome 60 of our women leaders including our Chairman, Sheila Penrose. They addressed such topics as winning in business through inclusion and diversity, business principles of success, and examples of leading men and women in our workplace. We're focused on continuing the momentum created by our talented people.

From an investment perspective, the Americas continued to capitalize on industry disruption to attract and develop top talent. We also invested in our capital markets platform as announced earlier this quarter with the acquisition of Oak Grove Capital, which is anticipated to close within the next week. Operating margins in the Americas were up in the quarter 120 basis points to 10.4%. Operating margins year-to-date increased 80 basis points to 8.7% and adjusted EBITDA margin increased 100 basis points to 11.6%. We continue to plan for future growth in the Americas by capitalizing on our strong brands and market momentum. Our pipeline of activity remains robust across all of our businesses as we move toward the end of the year.

In our EMEA business third-quarter fee revenue increased 25% in local currency over 2014 and was broad-based across service lines and countries. EMEA leasing revenue for the quarter was up 23% in local currency and capital markets and hotels increased 35%. Capital markets and hotels performance was supported by continued momentum across European investment markets, particularly in the UK, Germany and France. Product and development services fee revenue for the third quarter increased 27%. We see opportunity for growth in our Tetris business enhanced by acquisitions this quarter to acquire Bluu in the UK and CMM in Germany, as Colin will touch on.

Russia also showed year-over-year improvement in a challenging economic environment. EMEA's fee-based operating income margin improved 240 basis points for the quarter to 7.9% and 180 basis points for the year to 6.1%, excluding over 50 basis points of currency impact. Adjusted EBITDA margin also improved 170 basis points for the year to 8.1%. We continue to invest selectively for profitable growth and welcome people from our acquisitions across the region in the quarter.

Our EMEA business also driving solid organic growth supported by our strong brand, market-leading position, engagement and focused productivity initiatives. For the quarter, our engagement agenda included a luncheon with over 15 leaders focused on delivering diversity and real estate for our firm, and clients in order to attract and retain top talent. Productivity measures continued as we progressed our shared services capabilities to support profitable growth. The sentiment across our EMEA business remains positive and pipelines are strong as we look forward to the remainder of the year.

Moving on to Asia Pacific, third quarter fee revenue increased 20% in local currency over 2014. Our annuity business is growing steadily and the broad recovery in corporate confidence is demonstrated across the business, despite uncertainty arising from the slowdown in China. Leasing revenue for the quarter was up 19% in local currency. Overall, domestic demand for high-quality space in Asia Pacific remained strong especially in Australia, China, India and Hong Kong. While demand for second tier space continues to lag. Capital markets and hotels revenue for the quarter increased 48% in local currency with market activity levels in region expected to remain steady through the remainder of the year and where we continue to capture share.

Operating margins in Asia Pacific were lower in the quarter primarily due to 60 basis points of negative currency impact. Excluding this impact, operating margins on a year-to-date basis increased 20 basis points to 5.1% and adjusted EBITDA margin increased 30 basis points to 6.8%. We continue to invest in technology and to recruit, develop and retain top talent to drive continued profitable growth across our business. Our Asia Pacific team has a strong pipeline going into the remainder of the year and remains confident in realizing the momentum created.

LaSalle investment management had an outstanding quarter with local currency growth and advisory incentive fees that performed well compared to a strong 2014, as well as significant equity earnings. Capital values are rising in most areas which drives accelerated and higher sales prices that generate incentive fees and equity earnings. The business generated $69 million of incentive fees during the quarter as result of strong investment performance across all geographies, particularly in Asia Pacific. If markets remain stable and the pace of asset sales continue, we see potential for additional incentive fees as mature funds continue to liquidate over the next several quarters.

Assets under management expanded $1.3 billion for the quarter and $4.2 billion year-over-year, despite higher than average asset sales that have driven excellent returns for LaSalle clients and our firm. Over the past five years, our team has built an increasingly stabilized platform based upon annuity advisor fees where the assets under management for core and core plus strategies has increased from 37% to 62% of our total assets under management, complemented by opportunistic pipeline strategies primarily within Asia Pacific. We continue to deploy capital in a market where demand for quality assets outweighs supply and the momentum in our LaSalle business remains strong.

Regarding our investment grade balance sheet; we decreased total net debt $87 million from the second quarter of 2015 to $435 million, while we also continued to invest in the business. There have been no changes to our plans to finance recently announced acquisitions using our bank facility capacity, while maintaining our leverage profile over the long term at 2X debt to EBITDA or less. We remain focused on retaining our investment grade ratings of Baa2+ and BBB+ from Moody' s and Standard & Poor's respectively, which recognized our operating discipline as well as the increasing strength of our annuity businesses and overall global platform. The increase in our semi-annual dividend to $0.29 per share, payable on December 15, represents a 7% increase from the June 2015 dividend and reflects our confidence in cash generation and profitable long-term growth on behalf of our shareholders.

In summary, we had an excellent third quarter and feel that our strong platform and pipelines position us well for the seasonally strong fourth-quarter. While the momentum continues in 2015, it's worth noting, we could see roughly an 8% negative currency translation impact for the full year, compared with 2014 if the strength of the US dollar continues. As we look forward, our outlook remains positive.

And before turning the call over to Colin, I would like to express my sincere appreciation to my JLL colleagues around the world for their values, collaboration and continued contribution. I'll now turn the call back over to Colin.

Thank you Christie. To provide a sense of how we produced these results, slide 3 in our deck offers a sample of recent business wins across service lines and geographies. Across our corporate solutions and services business, we have run 93 new assignments this year, expanded existing relationships with another 44 clients, and renewed 21 contracts. These 158 wins total nearly 520 million square feet across all regions and our overall win rate increased to 74% in the third quarter.

In Europe, we won a global contract from the Thales Group, the French defense and heavy manufacturing company, to provide a range of services across 15 million square feet in 56 countries. Nokia appointed us for project and portfolio management services globally, while Aon retained us for facility management of its 2.6 million square foot European portfolio.

Other global wins include providing services for the Harris Corporation 13 million square feet, and for Matthews International 5 million square feet of space. Brookdale Senior Living selected us to provide integrated facility management services for 95 million square feet in the Americas, while IBM re-appointed us to provide facility management for its 17 million square foot Asia Pacific portfolio. And Telstra renewed our contract for its 7.5 million square feet of Australia footprint, complementing another major contract for the Australian government.

Across our corporate business, clients are demanding increasingly sophisticated data management and analytics capabilities, which are becoming key drivers for outsourcing decisions. In this environment, we're receiving very enthusiastic responses for our new integrated data and analytics platform, both from existing clients and in successful new business pursuits.

Turning now to the capital markets; in New York we secured $725 million in construction financing for 111 W. 57th St. In Ireland's largest ever acquisition we advised Allianz Real Estate on the EUR1.9 billion joint venture acquisition of a major retail portfolio. And we advised on a $940 million sale of the InterContinental Hong Kong, the largest single asset hotel transaction on record in Asia Pacific.

In leasing, highlights for the third quarter included a 15 year lease for the 660,000 square foot, built to suit National Science Foundation headquarters in Alexandria, Virginia. In Moscow, a 215,000 square-foot lease for the Adidas Group, the markets largest Class A office lease in more than a year. And in Beijing, we represented Hyundai Motor Finance on a 167,000 square foot relocation.

As Christie noted in her comments, LaSalle Investment Management delivered another strong quarter for its clients and for our firm. In addition to good current performance, we continue to build sustainability, improve productivity and high-value ongoing earnings into LaSalle's business. As Christie mentioned, most of LaSalle's recent capital raise has been in core open ended products that produced sticky and profitable annuity-like long-term advisory fees. Since we've already completed the platform investments to drive them, the incremental AUM these generate is highly accretive to margins. The quality of LaSalle's earnings is excellent today and with continued strong investment markets, significant valuation increases virtually across the board and steady momentum in capital raise, we see LaSalle continuing to out perform over the next several years.

During the quarter, we continue to invest in businesses that complement and extend our comprehensive position globally. We announced or completed five acquisitions. Christie mentioned two, which strengthen our European Tetris design and build out footprint. Bluu is a leading UK based design and fit out company making our UK business the country's market leader. And CMM Projekt and Office Solutions, strengthens Tetris in Germany. Additionally, we bought AGL, the highly regarded real estate financial services business in Sweden. We added Propell National advisors, Australia's largest privately owned and integrated valuation firm. And importantly, Oak Grove Capital, the top provider of debt financing for multi-family and seniors housing real estate in the US, will play a very important role in driving our strategic priority of building our Americas capital markets business.

Since 2014, we've announced or closed 25 transactions with a total valuation of more than $500 million. Our approach in every case has been to acquire selectively and with rigorous due diligence. We are examining finances, operating risks, and strategic and cultural fit and importantly, client fit. We maintain pricing discipline and focus on high profit and high-margin opportunities. We minimize operational overlap that can destroy value and we plan for and manage integration very carefully. This approach has served us well.

Small and medium-sized transactions add new capabilities, which we used to create additional long-term growth across the company. They have the additional benefit of low risk. And as a measure of our success we have taken no write-offs for the 78 transactions valued at more than $2.2 billion, that we have announced foreclosed over the last decade. We have the industry's strongest investment grade balance sheet plus ample unused borrowing capacity and the full confidence of our partner banks. So we can move quickly and confidently when [presented] by opportunities, large our small, that meet our current criteria. With a robust forward pipeline, we anticipate continued M&A activity throughout 2016.

So looking ahead, our research projections for investment sales and leasing volumes show current trends continuing through the year end and onto 2016. For 2015, we are maintaining our full year forecast for overall investment market volumes at $750 billion and the market could surpass that to set new records. 2016 should be another very active year for investment activity with volumes about this year's levels with very large amounts of capital continuing to chase property and further [quantify] anything projected for the Eurozone in Japan.

In global leasing markets, total 2015 gross volumes will be up 5% to 10% on 2014 levels, with the greatest increase in select Asia Pacific markets. This trend, too, will continue into 2016 with 5% growth and up-side potential. Demand is increasingly being driven by growth plans rather than cost containment, consolidation and just [released] renewals. The deal pipeline is full, particularly in the US. And what has previously been a technology led story, 2016 we'll see demand across as much broader spectrum of industry sectors. Finance, professional services and insurance just a few examples. We expect robust space demand in the US, UK, Continental Europe, India, Australia and China.

Let me make a few comments about China, since it has captured a lot of headlines recently. Despite currency and stock market volatility, commercial real estate activity has remained steady in the country's tier 1 cities. Third-quarter capital markets volumes increased 81% year-on-year to $7.3 billion and leasing in both Shanghai and Beijing recorded double-digit increases in the quarter. In addition, the shift from a manufacturing to a consumer and services based economy plays to our strength in the service sector and our strength in tier 1 cities. The shifting growth to services is producing some challenges in tier 2 and more so in tier 3 cities. We however, continue to do well in China as a whole, where we remain clear market leaders with fee revenue growth in Mainland China of 17% for the quarter and 20% year-to-date.

Our view on China is that the government overshot and it worked to slow the country's economy in 2013 and 2014, and then responded by re-stimulating it this year. We see the effects of those moves kicking in next year. And finally, with 2016 GDP growth predicted to be near 6%, second only to India's 7.5%, we see continued long-term growth both in China itself and in our position there. As result, we will keep to our plans to open one JLL office in one new China city each year.

At JLL and LaSalle we will continue to build on our performance through the fourth quarter and into 2016. Our outlook remains very positive, our pipelines are deep and strong across geographies and service lines and our balance sheet enables continued investments in our platform. Finally, we see solid confidence and momentum across our Firm and in most markets around the world.

Before Christie and I take your questions, I'd like to mention some representative awards our colleagues have received from industry groups and independent third parties during the quarter. They underscore our industry leading position in real estate services and investment management globally. The India Institute [of Directors] awarded JLL its 2015 global award for Excellence in Corporate Governance.

In the annual Euromoney awards we came first in 45 categories including 21 wins within EMEA. They included being name best overall real estate advisor in Central and Eastern Europe, Italy, Poland, Russia, the UK and Turkey. Euromoney also voted us the number overall real estate advisor in Asia. LaSalle Investment Management was named Euromoney's Investment Manager of the year globally. And in the US, in California alone, we earned Best Place to Work award in the Bay area, Los Angeles, Orange County and San Diego.

So with that, we will now take your questions. Operator, could you please explain the process.

(Operator Instructions)

Mitch Germain, JMP Securities.

Good morning and great quarter. Colin, I know your research team puts out that market volume and outlook report. I'm just curious about the US capital markets. It declined from last quarter which was 20% to 10% to 15%. Is that in your mind, is that just a function of the third quarter, or is there a bit of a carry-forward about your expectations in the fourth quarter, as well?

I think the third quarter with slightly more muted than they had expected. And so they just downed there numbers slightly because of that. And of course, now we are in November we will getting a clearer view fully active, full-year numbers.

Pipeline still seem pretty

Nothing dramatic and no implied trends there or flattening of marketing activity.

Great. So your pipeline still remain pretty robust in the Americas, in your mind.

As they do across the world. Yes.

Great. Great. In the capital raising and LaSalle, 800 million or so, was that a function -- what was that of function of? Is it maybe just lesser product offered this past quarter. I know that have seen pretty robust activity there.

No. The quarter one numbers were Q2, $2 billion, Q1, $1 billion, in line with the Quarter 2 picture. Again, nothing sinister. We are still seeing large volumes of capital come into the firm, both separator accounts and into the funds we have been raising. We closed during the quarter at one of our US opportunistic value-add funds. The prior quarter we had a closing on our Asia opportunity fund. It is just a steady progress in capital raise and broadly across the business geographies, as well.

That's all for me. Let's get some insight in the Oak Grove transaction. I know it's probably one of the bigger deals that you have announced over the last couple of years. Was that a space you wanted specifically focus to expand on? I'd love to get some insight from you, please.

We've had a strategic priority to build our US Capital Market's business. As a measure over the last six years its grown from $30 million to over $300 million of revenue. It's been a successful growth both in adding organic individual teams, but also by acquisition including Oak Grove. We been talking to them for something like 18 months before this transaction concluded. So we have got to know each other well.

We see that area of multi-family finance across the broad sweep of activity both with the semi government-related guarantee organizations, but also independently, through banking organizations as an important and integral part of building a balanced US capital markets business. Indeed, if you look at our major competitors in that area, they will have significant service lines doing the same thing.

Thank you. Great quarter. Go ahead please.

The only thing I was going to add; when you take a look at all of our acquisitions together with Oak Grove. I mean, it really kicks off all the things that Colin had mentioned in terms of cultural fit, accretion to our shareholders, as well as, overall in alignment with our growth objectives and our strategy.

Thank you.

Brad Burke, Goldman Sachs.

Good morning. Congratulations on the quarter.

I wanted to ask a follow-up question. Just looking at the macro picture in EMEA and Asia Pacific, follow-up on your comments Colin. The comments he made on China were, obviously, positive. Russia, I think you said, were up in the third quarter and to say that those results are exceeding the macro news flow would be a bit of an understatement. And I think what is even more surprising, is that I general think about your capital markets businesses as having the most macro sensitivity and those are the businesses that seem to be performing the best.

So I was hoping you would help me to close that disconnect. Is there not as much macro sensitivity in this capital markets businesses as we had anticipated? Or is the macro picture in EMEA and Asia Pacific maybe better than what the in the headlines would indicate? I think you touched on this with your comments on pipeline, but is there any reason that we would expect there to be a big drop off in capital markets activity within your businesses in the near-term?

Well, you put a lot of questions in there Brad, so I'll just talk for while and if I don't address any one of them you will come back at me

Yes. I'll do that.

I think Europe, is a paradox of Europe, within that you have the paradox of France. Because both Europe as a whole and France has been performing particularly well, even in an environment where economic growth is 1%, tops. And so, it did not ought to be, but it is. I think what's going on in Europe is that actually within the business environment, and in particular, within the real estate environment, activity is much more intense than the overall GDP numbers would suggest. We've been seeing that. You look at our numbers, we've been seeing that for the past few years.

The demand across Europe, with the exception of Russia, I'd have to say, it is strong in both the fundamental areas for the leased space where people are beginning to expand and certainly upgrading their space. And there is a lot of demand in Paris -- London in particular, Paris, German cities, for quality space and that's why we're seeing against a relatively limited new products supply pipeline, that's why we're seeing rents now beginning to increase with increasing momentum. Fundamentally, demand is good across the office, industrial and to a lesser extent, retail throughout Europe.

The capital markets picture, which was the focus of your question, again has been anomalous to what you might expect from the market economy -- economic growth picture again since 2010. And the reason is that the European environment as a whole, in particular the major Gateway cities, are seen as being safe havens for international capital and offering solid returns and generally deep liquid markets, should investors wish to sell their assets at sometime in the future. And against that background of attractive investment markets, we've seen then this global upwelling of investment of equity capital trying to find its way into quality real estate. So you've got a huge volume of equity, adequate debt availability at sensible levels of underwriting against a relatively limited supply of quality space in the major European cities. And the two together have just driven these year-after-year record levels of activity.

To close out with where we are all going, fundamental space demand is good. So that will help to drive up rents. Pricing in the major markets for quality assets is probably somewhere near its peak. We didn't see much cap rate compression in London last quarter for example, where we've seen it consistently through prior quarters. So that probably is coming to an end. So what drives demand and value from here on in? With less capital appreciation for cap rate compression, the next driver will be this increasing level of rentals in the office markets in particular.

So put it all together, lots of capital, adequate levels of sensible debt, well underwritten, no drop-off in the capital availability, both from wealth and private equity funds are all continuing to look to invest across Europe. If there is a trend, it is a way from some of the major cities to where the pricing is full and perhaps to lesser cities; so Birmingham, Lyons, Stuttgart, instead of the capitals in each country. And we have seen some move toward, let's say, peripheral B Class assets in the major cities.

On Russia, I think the story there is the activity level is quite low in the market as a whole. But the news isn't getting any worse. In other words, the situation in the Ukraine is stabilized and Russia's sanction situation is stabilized. But there is still not a lot of confidence.

I spoke yesterday to the former head of Moscow, who has just moved to Paris, to run our French business. He was saying that the general sense is that both local and international business are beginning to lift their heads above the ground and begin to get on with activity again. It's muted, it's hesitant. But nobody is leaving. The international business is there. As we mentioned in our expose of taking more space and taking commitments for the medium term -- nobody is leaving. It is just that the level of activity is slow and GDP will continue to decline this year, around 4%.

Okay. That's helpful. But there is no -- there's no reason that we would think that capital markets businesses may be just acting with a delayed reaction to some of the negative news flow that we're seeing, and that would manifest itself in weaker results over the next few quarters?

No. There is so much capital. There's still is keen to invest. And it's not skittish. Let's call the international geopolitical issues and security issues with some of the noise around what was in the Chinese domestic markets; do not seem to have impacted this tremendous -- people call it a wall of equity -- tremendous level of demand for level for capital.

If you look the inflows into private equity, this year, by quarter in Q2, there rose from $80 billion last year to something like $130 billion this year. And that money hasn't yet been put to work. So that will be going into the markets in 2016 and beyond. Then again, nothing less suggest this is about to -- we are watching it very carefully obviously, we're watching transactions, we're watching the speed of the transaction and the number of bidders. Nothing yet suggests that any of this is slowing up.

Okay, that is helpful. In staying with capital markets may be touching on share gains, up 25% over the past three quarters in EMEA, in US dollars. Up 29% in Asia Pacific. And your own research would say these markets are going to be flat to down 2015. It looks like you're taking an incredible amount of shares. I was hoping that you could elaborate on what would be driving the share gains.

As I mentioned in the long answer I gave to the last question, the real equity, the real large sums will be looking for major assets in major cities. That's our sweet spot. We are strong along with some of the other global brands at just those sorts of assets. And so that is where the bulk of transaction activity has taken place. Put that together with the fact that the first two quarters -- three quarters of this year, over 45% of investment in commercial real estate globally has been cross-border money. And that again is our sweet spot.

We have dedicated people who spend their whole time helping capital to find its way across borders in both the services business, but also within LaSalle. So it's about concentration of large assets and quality buildings. It's about using people buying those buildings, using reliable brands to do that work for them. And it's about our global network helping with this increasing levels of international capital flow.

Okay. And then one last one for Christie on your equity income from real estate investments. You've earned about, over $70 million over the past four quarters, and obviously had a very strong result this quarter. If I look at the GAAP asset value of your investments in real estate ventures is just over $3 million in the third quarter. So it looks like over a 20% yield on the value of those real estate investments. So, I wanted to get your thoughts on how your thinking about the outlook for your real estate investment income and what we might be thinking about as reasonable long-term run rate for equity income.

I think Brad, if you'd take a look at the long-term you can really expect our business to revert to the steady stream of historical performance. We've had some outside equity earnings here in the past six quarters. And we're expecting that to continue here for the near-term, as I mentioned in my remarks. But after the next couple of quarters, I think you can expect that to revert more to historical performance.

Okay. Thank you.

Thanks, Brad, take care.

Michael Mueller, JPMorgan.

Yes, following up on the last question, Christie, what would you say is that long-term historical level for the gains?

We've historically had Mike, about $20 million of equity earnings. So we can take you through that if you need a little help carving through that off-line.

Okay. And then thinking about the incentives, anything you can point us to specifically for the fourth quarter, and then how should we be thinking about that trending in 2016 as well? Is there anything you could point us to in terms of the number of funds where they come up where you can potentially get an incentive fee from that? How that compares in 2016 to pull those funds versus what we're seeing in 2015, or vintages or anything to help us get a little more visibility on that?

Will I think, Mike, probably the best way to answer your question is that from an incentive fee perspective, we have been experiencing outside incentive fees given where we are in terms of lifecycle of various funds. And we are expecting to continue to experience a higher incentive fees here over the next couple of quarters.

As you know, timing is really difficult to pinpoint and we have tried to give everybody an indication of the fact that we do expect this to continue here for the next couple of quarters and then revert again to historical averages, which have been over the past 10 years around $40 million. The specific timing I can't really help you with. I'm not trying to be vague. Is just we can't call specifically when assets are going to be sold.

Got it. Okay. And then in the Americas you had a $4 million to $5 million equity gain. What did that relate to?

The $4 million to $5 million equity gain, we'll take that off line, I think, Mike. Nobody has really got that top of mind here.

Got it. And one last question. Thinking about Oak Grove, can you talk a little bit about maybe some of the high level economics and the seasonality of that business?

So high level economics, you know Oak Grove, we said is accretive. From the perspective of the business you can expect it to conform better than some of the publicly traded companies who are similar space. Because of the fact that it is a more local, regionalized player with very strong pricing and credit underwriting discipline. And from the viewpoint of the growth going forward, you know it's had healthy growth through the cycles, including during the great financial crisis. And you can expect that to grow similarly going forward in keeping with the agency-related businesses. So strong growth. Strong margin profile. Earnings accretive to our shareholders and from the perspective of the complement to our capital markets business -- you know quite strong.

Okay. And then just the seasonality? Anything we should be cognizant of there?

Nothing really. Nothing really Mike of note. And too, we also posted a lot of information on our investor website in regards to Oak Grove. So, I think you'll find a lot of what you need there, as well.

Okay. Okay thank you.

You bet.

David Ridley-Lane, Bank of America Merrill Lynch.

Sure. Colin you mentioned pent-up leasing demand in the US, could you expand on that particularly since we did see a slowdown in US leasing in the third quarter?

Yes there is a little bit a seasonality there that it's just their own pipeline and there is an awful lot to close in Q4 to above prior year levels. So our sense is, that maybe for whatever reason, stuff shifted from Q3 to Q4. The expression is really to say that there's no drop-off in demand there and we're expecting to see our forecast show, continued buildup in activity. What's the dynamics, are also quite important.

The US cities in general, actually across Europe and the US cities, are projecting to deliver not much more than about 2% to 3% of their existing stock over the coming two years. So the level of development work speculative, or for purpose, is very low by historical and in the global standards. And against that -- against that relatively low level of supply, you've got increasing levels of demand as companies clearly are ramping up their expansion plans. That suggests that there will be -- can sustain rental increases across large swaths of the US office market. And that again is going to put the pressure on corporations to get moving with their space needs to think them through actually act swiftly because the balance of strength here is shifting clearly towards the landlords point.

Got it. And then within property and facilities, your wins and expansions year-to-date are about double what they were this time last year. That may not be the best metric to sort of track it. I'm wondering.

There is reason for it, which is particularly in the US. We've heightened the collaboration between our various departments so with the property and facility management people into the broader areas of our nested services in the individual markets, has helped the property management business. And in the facility management area, we've been reporting seeing sustained winds of new space and that is beginning to come through in the pipeline. That is been throughout late last year and early this. As we look forward we are expecting a similar picture to repeat itself.

In terms of the contract that you've signed, is your visibility today -- you know, better than what you had in the signed contracts a year ago?

Yes. And the forward picture of what we have coming along to bid on we think is also robust. As I mentioned in my comments, we're seeing great success by deploying our technology platform to get a competitive advantage, particularly in the banking and financial services sector. We've worked hard and invested a lot of money over the last 2 to 3 years and it is now bearing fruit.

Got it. And then if we do see cap rates start to stabilize for the tier 1 cities in 2016; if you had to disaggregate your year-to-date performance and capital markets between price action and units, or some sort of unit number of buildings sold, what's that rough split this year?

I'm sorry, could you make it a little bit clear David?

Sure. In your capital markets business, what percentage of the fee revenue growth is the result of cap rate compression and pricing action versus philosophy?

Yes. I can't give you the split. But this year and last year, this year in particular, we've earned a very healthy incentive fees. In other words, where we have taken a mandate for sales -- when we hit a particular price in that sales process, our fee increases if we surpass that level and there are potentially also tier increases beyond that. So we've had a very good year for incentive fees.

The likelihood is that as you've indicated, that will moderate next year both because cap rates -- the reason you kick through in the season, of course, is that in the course of six months sale process the pricing goes up because the cap rates have come in. Going forward, you're right, that cap rate compression across places like London perhaps, will not be as pronounced as it has been. Because there will won't be that automatic uplift in the markets. But also the sellers are getting use to this dynamic and they are beginning to put caps on the incentives that pay us for these investment sales deals.

Got it. That is it for me. Thank you very much.

Mitch Germain, JMP Securities.

Hello. It's Peter on for Mitch. Christie, if you could comment on the current hiring trends over the last year, what you're seeing and how should we look at that going forward? That would be great thanks.

Sure Peter. Over the last year we have added to our capital markets and leasing teams, you know 10% year-over-year on average. And we have been doing that consistently throughout the year. And together with that, which I think is really important to understand, is because of our focus on driving productivity, best practices of the value of our Business on really driving collaboration, as well. We've been able to also improve while adding folks, our revenue per head, which is shown very nice productivity both on the leasing and capital markets from a leasing and capital markets perspective.

Great. Thank you. Congratulations on the quarter.

Thank you so much, Peter.

Thank you showing no additional questions in the queue I like to turn the compass back over to management for closing remarks.

Thank you operator. And I would like to just thank everybody who has taken the time today to listen to our call. Thank you for participating and thank you for your continued interest in our Company. We look forward to speaking with you again after the fourth quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.