Jones Lang LaSalle Inc (JLL) 2016 Q3 法說會逐字稿

Good day ladies and gentlemen and thank you for standing by. Welcome to Jones Lang LaSalle Incorporated third-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder this conference call is being recorded.

I would now like to turn the conference over to Grace Chang, Managing Director of Investor Relations. Please go ahead.

Thank you operator.

Good morning and welcome to the third-quarter 2016 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 these 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, 2015 and in other reports filed with the SEC.

The Company disclaims any undertaking to publicly update or revise any forward-looking comments. Now with that I would like to turn the call over to Christian Ulbrich, Chief Executive Officer for opening remarks.

Thank you and welcome to this review of our results for the third quarter and first nine months of 2016. I'm joined by Christie Kelly, our CFO, who will discuss our detailed financial results in a few minutes.

Since this is my first earnings call as JLL's CEO I would like to start with a few general comments. First I'm honored to have been asked to follow Colin Dyer and lead this great Company. Colin served us as an exceptional leader throughout his 12 years as our CEO. He helped create a truly global Company, lead and nurtured our 2020 strategy for focused growth, and championed priorities ranging from data and technology to diversity and sustainability.

As a result our Company is in strong shape today and we have a bright future ahead of us as we move toward 2020 and beyond. We have the industry's leading platform, a comprehensive balanced and resilient mix of businesses across all three JLL regions and at our global LaSalle Investment Management business. We enjoy deep and trusted relationships with top investors and corporate clients around the world.

Our strong balance sheet allows us to continue both our progressive dividend policy and our investments in new growth. And we have the most talented people in our industry who live our values of teamwork, excellence and ethics every day. In future we will keep doing what we do well, investing in and developing top talent. Leveraging the JLL platform to maintain our focus on new growth, further enhancing our corporate and investor client base.

But as we continue to focus on traditional strength, we are also committed to what I call thinking beyond, especially in embracing the digital revolution, big data and new ways of working. New technology apps and data applications are already a big part of our working lives, but the greatest digital opportunities for real estate still lie ahead. So we will fund continued investment to make JLL the clear digital leader in real estate services, while adding to our existing strengths. These are exciting times for all of us at JLL and I look forward to the future.

Now to summarize the third quarter, we delivered record fee revenue of $1.4 billion for the quarter, 15% above the third quarter year ago in local currency. For the first nine months, fee revenue totaled $3.9 billion, 14% higher than last year. Adjusted net income totaled $65 million for the quarter, or $1.42 per share compared with $116 million, or $2.56 a share for the same period a year ago.

For the first nine months, adjusted net income totaled $190 million or $4.17 per share, compared with $254 million or $5.59 a share last year. In August we closed the acquisition of Integral UK, the UK's leading provider of mechanical, electrical and property maintenance creating exciting new capabilities in that key market. Finally, the JLL Board of Directors announced a 6% increase in our semi-annual dividend to $0.33 per share.

Now to put our results in a broader context, let's turn to economic and real estate market conditions. The global economy has continued its trend of steady growth. World GDP is expected to increase by 3% this year. A slight improvement is anticipated for 2017 to 3.4% and then 3.5% growth in 2018. Asia-Pacific will remain the principal engine of global growth, despite slowing momentum in recent years, particularly in China.

Political uncertainty continued to dominate the headlines in the quarter, ranging from the US Presidential campaign to impending both in France and Germany. The latest news on the UK signals even more concerns of moving toward a hard Brexit.

Turning to the world's leading commercial real estate markets the slides we have posted in the investor relations section of JLL.com, summarize current market conditions. Slide 4 shows that investment sales were solid in the third quarter, helping the market recovers some of the ground lost during the first half of the year. Global investment activity reached $165 billion in the third quarter, 4% below the third quarter of 2015.

JLL's capital markets and hotels revenue increased 10% for the quarter. Year-to-date investment sales activities stands at $450 billion, 8% lower than last year, but an improvement on the 10% decline recorded the first half of 2016. JLL again outperformed the market with 3% revenue growth in capital markets and hotels for the first nine months.

The weight of capital looking to invest in real estate has continued to compress yields in several markets including Paris, Sydney and Toronto. Overall however, the quarter saw the weakest yield compression since 2012. While leasing activity remained steady during the third quarter, at close to 108 million square feet global leasing volumes were probably in line with the second quarter, but were down 7% versus a year ago.

Year-to-date global leasing volumes were 4% lower than in 2015. By contrast JLL's leasing revenues were 8% higher for both the third quarter and the first nine months of the year. The global office vacancy rate currently stands at 12.1% unchanged from the second quarter. Growth in prime office rents across 26 major markets slowed to 3.8% in the third quarter, compared with 5.3% in quarter two.

Too sum up, one month into the fourth quarter historically the most active three months of the year in real estate markets globally, we have a positive outlook about our own prospect for the full year. We have continued to outperform the broader market; we have continued to pursue our long-term strategy of investing in growth. We are monitoring market conditions closely, turning the information into superior advice for clients, and finally we continue to find that clients turn to JLL in uncertain times as we currently see in the UK, taking advantage of our experience and advice.

With that I would turn the call over to Christie to discuss our performance in detail.

Thank you, Christian.

I also want to begin by recognizing Colin's exceptional leadership over the past 12 years. He put our business in strong shape and left us with a bright future. For the third quarter JLL delivered strong operating performance in the Americas, Asia-Pacific and LaSalle, partially offset by short-term EMEA challenges, particularly in the wake of the Brexit vote.

Results in real estate services reflect diversified double-digit revenue increases in all geographic segments and an increased proportion of annuity revenues. LaSalle had another robust quarter of annuity revenue growth and capital raising with assets under management reaching a record level.

We finished the third quarter with record consolidated revenue of $1.7 billion, up 17% over the prior year. And as Christian noted, fee revenue of $1.4 billion, up 15% over the prior-year, both on a local currency basis. Adjusted earnings per share for the quarter were $1.42 on adjusted net income of $65 million. The acquisitions we completed since 2015 have been instrumental in driving our profitable annuity revenue growth and accounted for a majority of our quarterly and year-to-date growth.

On a consolidated basis, property and facility management fee revenue grew a record 49% for the quarter up 27% year to date. Projects and development services grew 25% for the third quarter and 29% year to date. Advisory and consulting grew 22% for the third quarter and 17% year to date. Combined these businesses generated nearly 80% of the third quarter and year-to-date real estate services revenue growth.

In our transaction businesses, all in local currency, leasing revenues grew 8%, as Christian said both for the quarter and year to date, outperforming market growth absorption, which was down 7%. A good portion of these revenues are recurring. For the quarter, capital markets and hotels revenue grew 10% year-over-year.

We performed exceptionally well, compared with an overall decline in global transaction volumes and a tough prior year comparable of 26%. Our out performance in leasing and capital markets reflects our strong brand and our teams ability to continue to capture market share in uncertain times.

Moving onto margin performance, adjusted operating income margin calculated on a fee revenue basis, was 6.1% for the quarter at constant rates compared to 11% in the prior-year when we had strong LaSalle incentive fees. This quarter's margin also reflected the reduction in transactional business and our strategic priority to grow annuity income.

Combined these factors contributed approximately 75% of the decline in quarterly margin performance versus last year. The remaining 25% of margin contraction resulted primarily from a few isolated one-time factors, including the wind down of a non-core business in the UK, a nonrecurring UK capital markets performance fee, and reserves for receivables in Turkey that went past due because the effects of the political upheaval on our clients.

Adjusted EBITDA margin on a fee revenue basis was 8.4% for the quarter on a constant currency basis. This primarily reflects the normalization to historical levels of LaSalle incentive fees and equity earnings, which we discussed with you previously. As well as the shift in business mix as recurring revenue growth outpaced our higher-margin transactional businesses, primarily in EMEA and specifically in the UK.

Regarding M&A activity, year-to-date we have closed 25 business acquisitions, including Integral UK, a transformative recurring revenue business that will continue to expand our EMEA integrated facilities management platform, as Christian mentioned. Since 2015, we've completed 45 acquisitions, representing a total valuation of up to $1.3 billion. Over 70% of these acquisitions will contribute to a more stable earnings foundation to complement our higher-margin transactional businesses.

Consistent with their growth priorities and commitment to an investment-grade balance sheet, we continue to manage our leverage profile and liquidity position proactively and prudently. As reported last quarter, we expanded our credit facility from $2 billion to $2.75 billion and extended the maturity date through June 2021 with improved pricing. Our balance sheet at the end of the third quarter reflects total net debt of $1.3 billion, an increase of $300 million from the second quarter of this year and $900 million from the third quarter of the prior year, primarily as a result of our acquisitions.

Consistent with our capital allocation strategy, our Board of Directors declared a semi-annual dividend of $0.33 per share, a 6% increase from the June 2016 dividends, as Christian mentioned. During the segment results, all in local currency, third quarter fee revenues in the Americas increased 23% over third quarter 2015.

We delivered strong performance across businesses and markets with accretive contributions from acquisitions. Capital markets generated 50% year-over-year revenue growth against the backdrop where total market volumes were essentially flat.

This quarter's impressive out performance reflects over 50% of growth generated from M&A, including the Oak Grove multifamily finance business we acquired during the fourth quarter of last year and the balance reflecting our team's ability to capture overall market share gains. Our leasing business outperformed the market with growth of 13% over the prior year, particularly notable given the US leasing market decline of 2% in growth absorption volume.

Property and facility management, project and development services, and advisory consulting all turned in impressive double-digit revenue growth for the quarter of 21%, 36% and 23%, respectively. Driven by progress on the data and service-based solutions we delivered to our clients, while we also increased cross-selling. Drivers of the positive growth include our recent acquisition of BRG, a best in class technology consulting business and Big Red Rooster, a leading expert in brand experience and facilities design.

Significant US wins drove growth for corporate solutions where collaboration and teamwork is a differentiator. This coupled with technology investments such as RED and the acquisition of Corrigo, a digital facilities management solutions, have led to nearly 100 important wins, expansions and renewals this year.

We also delivered solid performance outside of the US with Latin America and Canada delivering growth across the business. Adjusted operating margin for the quarter was 8.6% on a fee revenue basis, down 140 basis points from the prior year. This primarily reflects investments made in technology and the targeted growth of annuity businesses, including within specialized segments, such as healthcare and public institutions. Most recently we acquired an affiliate of Integra, creating a strategic foundation for valuation services in the US, while further expanding our global capabilities.

And the acquisition of ATG makes us the real estate partner to help healthcare providers fully automate and productively address industry requirements. Looking forward, our America's team is focused on delivering another strong year by leveraging our expertise to drive value for clients. Turning to EMEA, this quarter's topline results reflect the tough comparable from the prior year and the continued slowdown of UK transactional activity, combined with a shift in business mix towards more stable recurring revenue.

Total revenues for the quarter grew $76 million, or 28% over last year and fee revenue grew by $44 million, or 24%. Capital markets performance reflects the slow down in investment sales activities and softer investor sentiment.

Revenues in the third quarter declined by 15% year-over-year, impacted by a significantly slower UK market and outsized performance fees last year. And other parts of the region, France, Germany, Switzerland, and Portugal delivered favorable year-over-year performance.

Leasing revenues declined 8% year-over-year, reflecting performance in line with an overall market decline of 7% in growth absorption volume and a tough comparable from prior-year growth of 23%. Property and facility management fee revenue grew by 174% primarily due to the acquisition of Integral UK and 10% on an organic basis driven by new client wins and expansions. Project and development services fee revenue increased 9% for the quarter reflecting organic growth in France, Spain and the Netherlands, as well as M&A related growth in Germany and Finland.

This quarter, EMEA region delivered adjusted operating margins of 0.7%, a change of 760 basis points from the prior year. About two-thirds of the margin decline in the quarter was attributable to previously mentioned one-time items, including actions taken to wind down a non-core UK business, receivables reserves in Turkey, and a reduction in UK performance fees.

Margins also reflect the deceleration of UK capital markets and leasing revenues combined with a meaningful increase in annuity earnings from the successful Integral acquisition. The significant growth in annuity revenues positions EMEA with a more stable, lower margin mix of business.

Moving on to Asia-Pacific, total revenues grew by $50 million or 16%. Fee revenue increased by $39 million or 14%. Leasing revenue across Asia for the third quarter grew by 3% year-over-year, outperforming a total market that was down 22%.

JLL had exceptionally good performance in India, Hong Kong and Singapore. Financial and technology firms were key demand drivers across many office markets, while oil and gas companies continued to down size. Capital markets and hotels saw revenues increase year-over-year by 4%, consistent with market volume growth and despite a tough year comparable of 48% growth driven by a single marquee hotel transaction. The performance in the quarter was driven by excellent execution in Japan, Singapore and Australia.

Cross-border investors remained active and accounted for 16% of the regional market volume, while institutional investors remain focused on Hong Kong, Singapore and Australia. Another Asia-Pacific highlight was the continued double-digit revenue growth of our property and facility management, project and development services and advisory and consulting businesses, with increases of 14%, 20% and 44%, respectively.

Growth was driven by greater China, Japan, Hong Kong, and Australia. Recent acquisitions drove the increase in advisory and consulting revenues. Adjusted operating margins of 6.3% for the third quarter were up 80 basis points over the prior period, primarily driven by organic growth. Our Asia-Pacific team remains well-positioned with healthy pipelines of work in progress throughout the region.

LaSalle Investment Management had a solid operating quarter and an excellent year-to-date. Third quarter advisory fee revenue grew 12%, in line with a new record high of $59.7 billion in assets under management. As we said before, the decline in incentive fees and equity earnings this quarter reflects LaSalle's planned transaction for maturing funds into a new series of funds. Capital rates continues to be strong with $1 billion of new equity raised this quarter, bringing the year-to-date total to $4.8 billion.

Adjusted operating margin, excluding equity earnings calculated on a fee revenue basis, was 10.2% for the quarter compared with 31.4% in the prior-year. The margin contraction is largely the result of anticipated lower incentive fees and the timing of deferred compensation. On an operating basis, LaSalle continues to outperform with ongoing efforts to expand margins on recurring advisory fees and deliver superior risk-adjusted returns to our clients. In summary, we had a strong quarter in the Americas, Asia-Pacific and LaSalle and took actions to strengthen our EMEA business.

Looking ahead we anticipate 2017 will be characterized by growth in our annuity businesses, which provides stable earnings albeit at lower margins than our transaction businesses, M&A integration and a continued focus on increasing operating leverage across our global platform through investments in technology and data. LaSalle's incentive fees and equity earnings should revert to normalized levels.

We remain confident in the future. I would like to thank my JLL colleagues for their teamwork, values and contributions to our Company. As we approach our busiest time of the year, I wish them continued success and time with family and friends during the holiday season.

And now back to Christian for closing remarks.

Thank you Christie.

Slide 12 lists a few recent business wins across service lines and geographies. In the first nine months of the year, our corporate services business won 95 new assignments, expanded existing relations with another 53 clients and renewed 26 contracts. These 174 wins totaled 497 million square feet across all regions and represent a 68% overall win rate.

In capital markets the quarter's highlights included the $273 million sale and $240 million acquisition financing of 275 Madison Avenue in midtown Manhattan, the sale of the Statoil headquarters in Oslo 419 million euros, and in Canada, the CAD225 million sale of the Four Seasons Toronto Hotel. Key leasing and management transactions included helping the People's Insurance Company of China, a state-owned Fortune 500 Company, secure 80,000 square feet of space in Shanghai. And we were awarded property management responsibilities for the 2.5 million-square-foot World Trade Center complex in Mexico City, one of Mexico's largest and best known mixed use projects.

As Christie noted, we are pleased that LaSalle Investment Management increased assets under management to a record $60 billion during the quarter. Increasing its underlying base for fee earnings and laying the foundation for further growth in management fee revenue. Looking forward how do we see real estate markets performing to the end of this year and on into 2017?

For the year, investment sales and leasing volumes are likely to be 5% to 10% below 2015's exceptional levels, but still close to the highest in history. JLL research projections for full-year investment sales volume remained steady at $610 billion to $630 billion,10% below 2015 levels. In 2017 we anticipate that volumes will rebound closer to the $700 billion level we saw in 2014 and 2015. Our current projections for full-year leasing volumes shows them completing 2016 at about quarter 30 million square feet, 5% lower than last year.

In 2017 we see leasing volumes at levels similar to this year. These market projections indicate continued robust market conditions for our transaction business into 2017. Also corporate outsourcing trends continue to be positive and our win rates demonstrate our success in this segment.

In institutional fund management, investors continue to increase allocations to real estate, given the lack of attractive alternatives in other asset classes. So we see capital continuing to flow to real estate and particularly to proven managers like LaSalle.

So where do we see JLL in this market environment? As Christie discussed in detail we delivered strong revenue growth for the quarter in a slower transactional market. Our margin decline reflects changes in LaSalle incentive fees, which we anticipated. Our changing business mix which was driven by the acquisitions we have completed and isolated bad debt provisions and contract related losses. We have accounted for all of this and we are responding with the right plan managed by the right people.

So we remain very positive about our own prospects in the current market and economic environment. We are taking market share from competitors. We continue to win business from corporate occupiers looking to outsource real estate services. LaSalle is well-positioned for additional growth and strong performance and we continue to enjoy the financial strength and flexibility to keep investing in our business.

To conclude our prepared remarks, we would like to mention a few of the awards that our colleagues around the world have earned recently. Such honors reflect our leadership position in real estate services and investment management. Just recently we won CoreNet Global prestigious 2016 Global Innovators award and were recognized specifically our innovation and product development platform. We earned first-place in Corporate Responsibility's Magazines 2016 list of America's most responsible companies in the financial, insurance and real estate sector.

We have been listed on the Dow Jones sustainability Index for North America, we were named Asia-Pacific's Facilities Management Company of the year by Frost & Sullivan, the global growth consulting company. And we won Proctor and Gamble's excellent business partner Excellence Award. I want to thank and congratulate all of our people who contributed to these and other awards and recognize the excellent teamwork and client service that produced them.

With that let's turn to your questions. Operator will you please explain the Q&A process?

Yes, sir.

(Operator Instructions)

Our first question or comment comes from the line of Mitch Germain from JMP Securities.

Good morning and Christian, welcome.

Hey, there, Mitch.

I wanted to talk a bit about the outlook in slide 13. You talk about the focus on integration of M&A. Should I imply you guys are taking the foot off the accelerator a bit with regards to deals?

Yes, that's the right assumption.

Okay. I'll take that. With regards to your 2017 outlook, Christian, I know you are headquartered in the EMEA region, what are you seeing on the ground in the UK? Obviously a lot is going to depend on whether it is hard Brexit or what is determined there, but are you seeing any build up in activity or pipelines there?

It is just a mixed picture. From a continental European perspective there is tremendous concern around what will happen to the UK. As you know I think the political leadership in the UK doesn't really know themselves what they are aiming for and they are still trying to get their picture together.

The further you move away from the UK and particularly to Asia, the Chinese, the Malaysians, the Indonesians who have been investing heavily in the UK they are not too concerned about the UK breaking away from the EU. So their interest is still very, very strong. I would put the Americas somewhere in the middle of the two with regards to their interest. It is still a bit early to draw final conclusions. We have quite a strong interest still in investing in the UK.

We have a bit of hesitation around signing up lease agreements from the corporate side because they want to know what they are signing up for. So I would say it is a mixed picture. It is still a very healthy market environment, but it is clearly not as strong as we have seen in the previous years and I think this uncertainty which is laying over the UK for the time being will continue until we know the results of the negotiations between the UK and the EU.

Great. Two more for me. With regards to, you talked about Christian, embracing the digital revolution a bit. I know your capital allocation strategy used to be around $0.50 on every $1 in M&A. Now that you guys are looking at a lower amount of activity how should we think about that strategy going forward?

As every industry, the real estate industry has to focus very much on becoming much more technology minded industry and we are proud of leading that trend within that industry and so we have a tremendous focus on how we can digitize every single process within our organization. And then if you think about what is happening in all the buildings we manage and we lease, we are collecting a tremendous amount of data and we are turning that data into valuable business analytics for our clients.

And this is all not coming for free, so indeed it takes quite a bit of investment, but I can't give you the detail of how much of what we have spent in the last two years is now moving into technology spend. We are still actively looking at what is going on in the M&A space and so I don't want to rule anything out at this point in time. But as I said earlier, we are starting the year 2017 with the assumption that we will take it slower on acquisitions.

Great, the last for me is operating, admin and other. Christie, about a 30% year-over-year increase and a pretty substantial sequential increase in that business line. Is there a way to provide a breakdown of what's really driving that increase?

Yes, sure Mitch, just from the perspective of the significant add in the annuity businesses year over year, a majority of that is the driver of more stable income that we've invested in combined with the investment in technology and our people as we've stated going forward.

Thanks.

Our next question or comment comes from the line of Jade Rahmani from KBW.

Thank you, very much. I was wondering if you could give a little bit more color on the EMEA margins. For example on the capital markets and leasing brokerage businesses, how do compensation structures compare to the US? It's my understanding that there's a greater fixed component that gets amortized through the year and so there is a lot of negative operating leverage when we see volumes decline as they did in this quarter.

Yes, that is directionally true. We tend to have EMEA a higher fixed comp which is then complemented by a bonus component. So we usually don't see any commission-based brokers in the capital market space in Europe.

When there is an unexpected decline in volumes and I would call what we have seen in the UK this year a bit unexpected, the extent of the decline, it is hitting our revenue per head and then margin profile of that business is going down. But I would like to enforce that the overall margin of our capital markets business in EMEA is still very, very strong. It's still our most profitable service we're offering in EMEA.

Okay. In terms of the sequential decline in margin, can you say what the impact of the Turkish receivable charges that you took were?

Sure, Jade. In total, that was a little over $5 million just to give you order of magnitude.

So putting that aside is the main driver in sequential margin comparison the Integral acquisition as well as the headwind with respect to the way compensation is paid out on the transaction business in the EMEA?

Jade, maybe I can jump in there with a little clarity. As I mentioned in my prepared remarks, a majority of the margin decline year over year in EMEA is really due to the one-time items. First is the wind down of non-core UK business. Second, is the Turkey receivables situation that we talked about and then thirdly, is a nonrecurring performance fee associated with business that we did during the third quarter last year that didn't recur this year.

So when you take a look at the EMEA business I think a couple of things that you can expect, which is where I think you were going on this, is from an overall performance perspective, we've worked really hard to complement our EMEA transaction business that we have built over the years with annuity-based business. And to that point have the Integral acquisition as well as some other acquisitions that we have done on the continent and you can expect a lower margin profile, but going forward very stable, very robust is our expectation.

And what would you say the normalized adjusted EBITDA margin for the EMEA segment?

Jade, we don't give guidance, but if you just really took a look at the fact that a majority of the impact year over year was the one-time items I noted and really then just extrapolated the service oriented mix to EMEA, I think you would come up with your result in your models.

Did you give the dollar out of the wind down of the non-core UK business?

We gave just generally overall being two-thirds of the driver.

Okay.

Jade, I would say to help you a little bit, I mean, between those three items that we talked about a majority -- you can just split it one-third, one-third, one-third between Turkey, the wind down and the performance fee.

The UK Integral acquisition, was that accretive in the quarter?

Say that one more time, Jade?

Was the UK Integral acquisition accretive in the quarter?

No, it was not accretive in the quarter. Just because of the fact of the timing of margin at a lower margin business, as we've talked about. So overall the acquisition itself is profitable. Performing along with expectations, but it is an annuity-based business and as we said when we announced the transaction it is a much lower margin business profile. So not accretive to the overall performance of average margins in EMEA, accretive as an acquisition in and of itself and something that we are excited about and welcoming the folks from the Integral team.

In terms of the broader property sales business, it seems like you guys have had some prominent big wins recently. Can you talk to interest level in transactions? Maybe give some color on bid lists? Just trying to understand what the investor appetite is and if you're seeing any moderation or if you think that moderation has been mainly on the larger deals side?

I think it's fair to say that the overall interest is slightly less than we have seen in previous quarters and that has been a trend during the year. We still have strong enough interest to get to as we have mentioned to new record levels, low yields in many places around the world. But the list of interests is slightly shorter.

As I mentioned before, you have I would say an even greater importance towards the Asian investors on big deals out there than we had before, particularly when we talk about UK investment. But also in some other places they play a more important role than they have played before.

Okay. Just finally with the moderation in M&A, how do you think about appropriate financial leverage in 2017 or on the normalized basis?

Hi there, Jade. We haven't changed our viewpoint on keeping a very sound and investment grade oriented balance sheet so we are managing our profile to under two.

Thanks very much.

Our next question or comment comes from the line of Brandon Dobell from William Blair.

Thanks. Actually maybe leveraging off of Jade's questions in the EMEA region, how do we think about, I guess, the margin trajectory within the Americas region based on what we saw this quarter? I know there's going to be some accelerated investments in technology and such, but is there anything to call out that we need to think about as we model Q4, but more importantly going into 2017 relative to this quarter's performance in the Americas?

I think Brandon we have been pretty clear about our focus on driving annuity-based income performance and specifically two coupled with our investments in primarily technology and the benefits that they are also providing. To that point, I think you can model as we've said in the past strong operating performance in the Americas as we enter our strong fourth quarter. But to that point as it relates to anything looking to the future, that's your prerogative. We don't provide guidance.

As you look at the interplay between the annuity businesses and the transaction businesses, maybe if you look at this year versus last year third quarter to date, how much kind of cross sell bundling larger contracts that involve multiple service lines do you see coming in? Are you having success on annuity contract renewals, linking in transaction businesses or vice versa? Just trying to gauge a cross-sell momentum that you guys have between the different service lines.

I think I will start with the question. I think overall there is a demand from our clients to receive solutions and not a service and with that demand that they expect solutions from us it implies that we have much more bundled services which we offer to them. And so that they really get a holistic offering from us and so that cross selling is becoming increasingly important so that we sell a variety of services to the same clients not only within one country or one region, but across the world. And that is what we are really good at and what we are trying to accelerate in our offering. Christie do you want to add on that?

The only thing I think I would add to that, Christian, is as I commented, Brandon, in my remarks we are seeing some really strong cross sell opportunities that we are winning. In our corporate solutions business as a result of our investment in Corrigo, as well as BRG and Big Red Rooster. So they're another example. We also see great cross-selling happening in our countries where we've invested in our Tetris business and all in alignment with underwriting assumptions, as we embrace our new colleagues through acquisition.

And to that point it seems like based on your comments you've probably got the right compensation structures or incentive structures in place, but do you anticipate having to make any changes to how people are aligned or how they are paid based on how you guys see either technology cross-selling or technology utilization or the different service line bundling working?

I don't expect that we need to make any specific changes. I would only say that there is an underlying trend in not only our industry to move part of the compensation to a bit more long-term and that is what we do as well and what we drive. And so especially the most senior folks within our organization are more and more aligned to the overall result and not only to their specific P&L they are working for, but also to the longer term success of the Company. A Company with our long tradition of more than 250 years needs people who think long-term and who are supporting that growth long-term.

A final one for me, maybe Christie. As you think about full-year capital needs 2016, where do you guys expect to come in on CapEx and capitalize technology investments? And then is there anything major that we should think about for next year that is not going to recur or is there a step-up in some area of the technology investments that would change how we think about the capital needs in the business?

I think I can offer a couple of things there, Brandon. I mean first, if you just take -- there is nothing significant in 2016 and if you just take the third quarter and strike that on a general run rate basis, I think you'll be fine. As we move forward and as we've talked about as it relates to our capital allocations strategy, we've invested over the past three to five years 50% on M&A and one-third on technology. And as we've talked about we may see that adjust a bit as we move forward and really drive for increased technological solutions on behalf of our clients.

Thanks a lot. Appreciate it.

Our next question or comment comes from the line of Anthony Paolone from JPMorgan.

Thanks and good morning everyone. Just trying understand, not to beat a dead horse on the EMEA margins, but just to understand if I look at your roughly $11 million of EBITDA in the quarter, it sounds like from your comments, Christie, that if you didn't have the one-timers that would be closer to about $25 million or $26 million, is that kind of the right take away?

I think that's fair, absolutely Tony.

Okay, so then if I think about that from a margin point of view is about 300 or so Bps from the same quarter last year. Should we think about that given the mix in the post Brexit impact as being sort of the way forward over the next few quarters as you comp against, I guess, what was a pre-Brexit world?

I absolutely think that's a really sound way of looking at it. The only thing I would add is just make sure to incorporate as we've shared the Integral mix impact.

Okay. In the Americas leasing you're up 13% and sales you're up 50%, can you give those numbers ex-acquisitions and just trying to understand also if you have those numbers ex-acquisitions, do you the think you picked up share organically are not?

Yes, we absolutely picked up share organically, Tony. So if you take a look for example at our contributions for capital markets in the Americas, excluding the Oak Grove acquisition, the Americas still outperform the markets substantially. We were up 21% year over year and continue to gain market share, thanks to all the hard work of the team, as you know. And I think you asked about leasing too, we would say the same thing about leasing, sorry.

Okay. The last one on the competitive landscape, can you just talk about that a bit and where you are seeing it most competitive in terms of people by either region or business segments?

I would say we have a normal environment at the moment with regards to our competitors and the fight for talent. No outstanding situation in quarter three. I think we are faced with people trying to attract our talent mostly in the regions and in the countries where we are the clear number one in the market.

It tends to be very often in Asia-Pacific and the major European countries. Where people try to attract our talent, but it's nothing which would draw major concern to me. It is all course of normal business, what we're seeing it goes both directions.

Okay, am I allowed one more?

Sure.

You mentioned as you look out into 2017 a more normalized levels of equity earnings and incentive fees, can you give a sense as to what normalized is?

Tony, I know you are just trading hats here on coverage, but we've said over the past year, even longer than that, normalized levels are $40 million have been historically in incentive fees and $20 million in equity earnings.

Okay, and where do you think that comes in for 2016?

We've said that as it relates to 2016 we don't give guidance and previously during the second quarter I had said that based on our performance year-to-date and together I also said in the first quarter that our incentive fees and equity performance will be front loaded. Meaning front loaded in the year.

Okay, thank you.

Our next question or comment comes from the line of Brad Burke from Goldman Sachs.

Good morning, guys. A follow-up to Brandon's question on the Americas margins. I realize the annuity mix was a headwind to EMEA among some other things, but in the Americas you actually saw the transactional revenue grow more than the annuity revenue and you still saw pretty substantial year-over-year decline in fee revenue margins. So I am just trying to understand what would be driving that, as mix didn't appear to be the issue?

I think I said the substantial portion of the 140 basis points decline, Brad, was in investment and that includes technology which we've been pretty clear about and it's really helping then to drive wins in the corporate solutions business and that also included people.

Those are non-capitalize technology investments?

Yes.

And I guess just as a follow-up on the Integral acquisition, you said that it wasn't accretive in the quarter and I assume you mean it wasn't margin accretive because you funded it with your revolver. Is it right to assume that Integral was accretive to overall EPS in the quarter?

Yes, that's correct. From a margin performance percentage base, year over year it's a lower margin business as I know you know.

Thank you, very much.

Our next question or comment comes from the line of Marc Riddick from Sidoti.

Good morning. I did want to touch a little bit on the pace of business in the Americas and maybe if you could put a little additional color on maybe what you are seeing there trend wise that drove growth there? Whether or not there's a flow of funds or what have you? If you could add a little bit of color on Americas growth please?

I will give the stats here, Marc, and then we can follow specifically with some of the trends that we are seeing, but when we take a look at the Americas, the Americas had substantial outperformance. From an overall perspective, the Americas driven by the United States, was up 50% on a local currency basis in capital markets and that's essentially really driven as I said 50% by acquisition and 50% by organic growth because of the hard work of the team. And then from a leasing perspective our markets business also significantly outperformed.

When we take a look at year over year up over 13% versus an overall market that was down. In terms of specific trends, I mean the business is hitting on all cylinders. We are seeing nice growth around the major markets. Nothing specific of note in terms of major capital flows or anything like that we can really point to. As you heard in the highlights for the third quarter, but I will pass it over to Christian a bit just to comment on what we are seeing around the globe, because I think that is really relevant.

Overall we will see going forward an environment which I would call more of the same. We are in a pretty healthy environment for the type of services we are delivering even if it is not a record year from volumes in most markets around the globe. It is still on a very high level and therefore I think we are pretty confident on our ability to continue to drive growth and to take market share.

Okay. Actually that kind of touches on things and some of the other questions I had previously have already been answered, so I will jump back in the queue. Thank you.

Thanks, Marc.

Our next question or comment comes from the line of Mitch Germain from JMP Securities.

Hey, Christian, any decision on your part to possibly institute a policy regarding providing some sort of guidance for the year other than the market level outlook?

I have such as smart CFO sitting next to me and she told me no guidance so how could I contradict her?

Actually Mitch, we've talked about that a lot. From the perspective of the market level guidance together with historically how we run this Company for well over a decade, guidance isn't something that we are looking to do going forward.

However I think that you can see in the remarks over at least the past couple of years to the extent that there's something significant that would be of interest to our investor and analyst communities, such as we communicated with LaSalle incentive fees and equity earnings, then we look to do that and provide that during our quarterly remarks. I hope that's helpful.

Thank you.

Our next question or comment comes from the line of Anthony Paolone from JPMorgan.

Yes, thanks. I understand the desire and need to continue to invest in the organization through a cycle, but how do you think about that as it just gets late in the cycle? Do you feel like there's anywhere in the system to institute cost savings or if things really turn down more globally like how those investing plans might change?

Of course, Tony. You have known me for a long time. From the perspective of investing through the cycle we are committed to investing through the cycle. That is something that has really provided our Company with significant strength, especially the opportunity to take advantage of a downturn. But the other point of that is in ensuring we have the appropriate balance, appropriate balance for our Company, appropriate balance for our shareholders.

And we are very focused on providing that appropriate balance and taking the actions where we need to. As we articulated with the unprofitable businesses that we closed a couple of years ago under Christian's leadership together with the actions that we've currently taken in EMEA to make it a stronger business for the third quarter. And as we go forward you can expect for us to take the appropriate actions to best balance the business and drive profitable growth for our future.

Okay, thanks, Christie.

Thank you. I show no additional audio questions in the queue. I'd like to turn the conference back over to management for any closing remarks.

Thank you. With no further questions we will end today's call. Thank you for joining Christie and me and for your interest in JLL. We look forward to speaking with you again following the fourth quarter. Thank you all.

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