Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Jones Lang LaSalle Incorporated (NYSE:JLL)

Q1 2013 Earnings Call

April 30, 2013 6:00 pm ET

Executives

Colin Dyer - Global Chief Executive Officer, President and Director

Lauralee E. Martin - Chief Financial Officer, Chief Operating Officer, Director, Chairman of Global Operating Committee and Chief Executive Officer of Americas Business Segment

Analysts

David Ridley-Lane - BofA Merrill Lynch, Research Division

William C. Marks - JMP Securities LLC, Research Division

David Gold - Sidoti & Company, LLC

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Operator

Good day, and welcome to the First Quarter 2013 Earnings Release Conference Call for Jones Lang LaSalle Incorporated. Today's call is being recorded.

Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the company's annual reports on form 10-K for the year ended December 31, 2012, and in our other reports filed with the SEC. The company disclaims any undertaking to update or revise any forward-looking statements. A transcript of this call will be posted and available on the company's website. A web audio replay will also be available for download. Information and the link can be found on the company's website. At this time, I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir.

Colin Dyer

Thank you, operator. Hello, everybody, and thank you for joining us for this review of our results for the first quarter of 2013. Lauralee Martin is with me today and will review details of our financial performance in a few minutes. Lauralee has been CEO of our Americas business since the start of the year and will continue to be our Chief Financial Officer until we select a new CFO.

Firstly, some headlines. Our first quarter gross revenue of $856 million was up 6% from the first quarter a year ago. Adjusted net income totaled $16 million or $0.36 per share which compares with $22 million or $0.50 per share for the first quarter of 2012, a quarter in which we recorded exceptional equity earnings and incentive fees in our investment management business. Finally, our Board of Directors announced a 10% increase in our semiannual dividend to $0.22 per share.

Revenue growth in all regions was helped by strong Capital Markets & Hotels activity. Geographically, in the U.S., Houston and other energy and technology-based markets did well. London and Moscow led the way in Europe, while Hong Kong, Greater China and Southeast Asia saw good results in Asia-Pacific. LaSalle Investment Management showed continued stability in advisory fees and improved growth prospects from new investor mandates as it continues with its process of repositioning.

To put our results in some context, let's look at conditions in global economies and real estate markets. IHS Global Insight shows the global economy growing by 2.6% this year, similar to 2012 levels. Regional forecasts predict a 2 point -- 2% growth in the U.S., which I think is conservative by at least 50 basis points, 0.1% in Europe and 4.8% in Asia-Pacific. So generally speaking, the gradual but uneven recovery continues.

To understand the conditions in real estate markets worldwide, it helps to dig a little deeper. In Asia, for example, no single story can summarize current [ph] Growth conditions for the entire regions. Very different drivers are at play in the major economies. There is concern about local good [ph] Government debt in Mainland China and of controls on residential and now commercial markets in Singapore and Hong Kong. Business confidence is improving in India, but there's still considerable political instability. Australia has been hit by declining commodity prices, while the ASEAN countries continue their robust growth. Ergonomics [ph] has had a greater-than-anticipated impact in Japan but its long-term growth effects remain unclear. So growth is intact for Asia-Pacific at lower levels than in 2012 and 2011 and with very different dynamics in different markets across the regions.

The other big issue in real estate markets is the disconnect between leasing and capital market activity in the broader markets. In the slides that we posted in the Investor Relations section of our website, jll.com, Slide 3 underscores the distinction. In capital markets, global investment volumes had a strong start to the year, up 20% from the first quarter of 2012 to $105 billion and that's the first time in 5 years that Q1 market volumes have exceeded the $100 billion level. Global equity is freely available as increasingly is debt from multiple sources. Capital values remain stable, increasing just 3.5% in the quarter. Cap rates or yields in investment markets declined by just 5 basis points on average globally during the quarter, the greatest compressions were in São Paulo, down 50 basis points from Q4 2012 and Moscow, down 25 basis points, while the greatest expansion in cap rates was in Toronto and Beijing, up 20 and 13 basis points, respectively.

Turning to leasing statistics. Gross absorption was flat globally in the quarter compared with the first quarter a year ago. 5% growth in the U.S. marked significant drops in New York and Washington, D.C. and a big boost in some other markets, such as Houston. Markets were down 2% in Europe as a whole and 17% lower in the principal Asia-Pacific markets with big falls in major Chinese and Australian cities. This also followed a subdued 2012 in Asia when gross leasing volumes fell 20% on 2011 levels. Vacancy rates across 98 global markets stood at 13.3% in the first quarter, while prime rents increased by 1.6% from Q1 of last year. So all in all, very different dynamics in capital markets and leasing worldwide. And to cover how we performed against these market conditions, I'll turn the call over to Lauralee.

Lauralee E. Martin

Thank you, Colin, and good afternoon to everyone on the call. As Colin noted, we started 2013 with a solid first quarter. In fact, we delivered record first quarter revenue and achieved our third highest adjusted earnings per share ever for a first quarter period. We continue to generally outperform the market and gain share and that is particularly true in Capital Markets & Hotels, which was up 37% on a consolidated basis, well ahead of the 20% market volume growth that Colin referenced. Geographically, our EMEA business showed the most dramatic improvement in performance, which I will cover shortly.

As Colin also mentioned, the first quarter of 2012 benefited from large incentive fees and equity earnings in LaSalle Investment Management. To assist in analyzing the components of our year-over-year results, we have separated the adjusted EBITDA of our real estate services segment from the adjusted EBITDA of LaSalle. On this basis, the combined EBITDA of the services segment was $34 million in the first quarter of 2013 compared with $27 million a year ago, while LaSalle's EBITDA was $14 million compared with $28 million a year ago, down due to the high levels of incentive fees and equity earnings in 2012. The underlying fee earnings at LaSalle were level with 2012.

Turning to our individual business segments, I won't repeat the financial results provided in the earnings release and supplement but rather will provide some brief context for each segment. In the Americas, growth was driven by a 39% improvement in Capital Markets & Hotels. Our multi-family offering, which has achieved client recognition of our expanded capabilities, was a significant contributor as were retail investment sales and real estate investment banking services. Leasing growth in the Americas was more subdued, both in the overall market and in our business. Leasing revenue was up modestly compared to last year with varied performance by market. Growth in energy-related and tech markets, as Colin referenced, was offset by slower activity in the financial and government-related markets. Our pipelines are solid for the year but very dependent on conversion rates, which are being impacted by confidence against uncertain fiscal policy. Margins across the Americas were up in the quarter. Operating income margin calculated on a fee revenue basis was 4.3% compared with 3.7% last year, and EBITDA margin was 7.3% compared with 6.5%.

Turning to EMEA. Profit performance improved dramatically and, in fact, moved to a positive first quarter EBITDA for the first time since the global financial crisis. Our Capital Markets and Hotels businesses with strong positions in London, Paris and Germany outperformed the broader market in EMEA, with 50% revenue growth, twice the market's growth. And broadly, on certain leasing markets, which were down slightly in the quarter, we achieved leasing growth of 4%, a good result in tough markets. Our results in EMEA benefited from both the cost actions we took throughout 2012 as we integrated King Sturge and the ongoing cost discipline and productivity initiatives we have put in place. These benefits flowed through the EBITDA, which shifted from a negative $4 million last year to a positive $3 million this year.

In Asia-Pacific, we saw further fee revenue growth this quarter amid uneven market conditions across the region. Broadly, we saw double-digit fee revenue growth in Property & Facility Management, which is largely comprised of our Corporate Solutions business and provides a sustainable annuity revenue base to guard against the region's traditionally very cyclical markets. I'll remind you that last quarter we closed the largest ever quarter of leasing revenue in Asia-Pacific to close out a very strong full year. So there was some acceleration of deals into 2012 that otherwise would have closed in the first quarter. This is partly contributing to the 15% decline in first quarter leasing revenue. Leasing dynamics are highly varied across the region. But broad activity is down across the Asia-Pacific region by 17%. We've seen sluggish leasing activity in Australia, China and Japan that is more than offsetting the increases in Hong Kong and across Southeast Asia. India, which is a very large market for us, was flat year-over-year.

As we've mentioned on previous calls, we responded to inflationary pressures last year, primarily in China and India with compensation increases that took effect in the second quarter of 2012. The first quarter of 2013 is the final quarter that our response to those pressures had a significant year-over-year impact on our Asia-Pacific operating expenses. As a result of lower revenue in our high-margin transaction businesses and these increased compensation costs, our operating income EBITDA and related margins were down compared with a year ago.

LaSalle Investment Management demonstrated its stable core business through the delivery of advisory fees consistent with the last 5 quarters and that was after the loss of advisory fee income from the asset sales that gave rise to the $8.4 million of incentive fees in the first quarter of 2012 and the $22.8 million of incentive fees for the full year of 2012. Assets under management of $47.7 billion also reflect stability in comparison to recent quarters, as well as increasing momentum in capital raising activities and continued strong investment performance for our clients. I'll now turn the call back over to Colin.

Colin Dyer

Thank you, Lauralee. Turning to business wins, Slide 4 shows some examples of recent wins across our company and across various geographies. In our corporate outsourcing business, we won 12 new assignments in the first quarter, renewed 5 contracts and expanded 1 relationship. You'll see examples of different corporate wins on the slide, including Whirlpool and Unisys. The state of Tennessee assignment shows how interest in outsourcing is spreading beyond the traditional corporate clients to public and government institutions intent on reducing costs while improving productivity and their working environment. In our local market level Corporate Solutions business where we serve the needs of mid-cap corporate clients, we won 13 new assignments during the quarter, covering 18 million square feet.

Turning to investment sales activity. Our focus on transactions, which reflect our leading positions in several key markets. In 2 Moscow transactions, we advised on the largest-ever transaction in the Russian commercial market, the Metropolis shopping and entertainment center, and the largest office transaction ever completed in Russia, the consortium sale of the White Square Office Center. In China, we completed the $426 billion sale of a majority stake in the LifeHub@Jinqiao, which was Shanghai's largest retail center transaction in the last year. We also advised on the $300 million sale of Ocean Towers, the largest office sale in the past 12 months in Shanghai's [indiscernible] area. And in the U.S., we completed the sale of Archstone Crystal Tower in Washington, D.C., for $322 million, the highest sales price for a single property in D.C. history. The quarter's leasing tenant rep and management transactions included for KeyCorp in Cleveland, 0.5 million square-foot lease, the largest corporate headquarters green lease transaction to date in the U.S. We completed our first retail leasing assignment in Wuhan, China for a 1 million-square-foot mall, and we won also India's largest property management contract for 15 million square feet of commercial sites and 3 million feet of top-end residential.

Turning to LaSalle Investment Management, as Lauralee said, LaSalle grew assets under management to $48 billion. LaSalle is continuing with the realignment and repositioning of its business to get back to net post-crisis growth. So while the capital raising environment remains challenging, LaSalle is beginning to see increased investor interest in commingled funds whilst continuing its success in winning separate account management and in forming strategic partnerships with major new sources of capital. During the quarter, LaSalle completed $1.6 billion in new acquisitions, well above the Q1 2012 level.

Looking forward, Slide 5 shows our full year projections for global investment sales and leasing markets. And once again, there are major differences between the 2 activities. With the year's strong start in global capital markets, we're maintaining our estimates of full year investment volumes of between $450 billion and $500 billion, which is 10% to 15% above last year's levels. We see capital values increasing by 2% to 3% year-on-year, showing continued firmness in markets worldwide. We expect investors to move out along the risk curve in search of available assets and enhanced yield. We expect leasing markets to be flat year-on-year globally with modest growth only in the U.S. With supply muted, vacancy rates are forecast to drop marginally to 13% globally with prime rental growth expected to be up 2% to 3% for the year. In funds management, we anticipate capital inflows accelerating through the year with investors still focused on core assets, but as we said, increasingly willing to examine and move out along the risk curve. So in this environment, we remain confident about our prospects for the year fueled by market share gains, increased productivity and the skills and client focus of our people. We will continue to hire new producing staff and pursue acquisitions across Jones Lang LaSalle.

Before moving to questions and answers, I want to mention just a few of the independent third-party awards which we have received which reflect our commitment to client service and reinforce our reputation as leader in real estate services and investment management. In an unprecedented achievement at the U.K. Property Awards, we won Office Agency of the Year, Investment Agency of the Year and Industrial Agency of the Year awards. In the Watkins survey, which is a bi-annual poll of corporate real estate executives across North America, we outranked 23 competitors to be named America's #1 corporate real estate services firm for the fifth consecutive year. We were named 2012's #1 Capital Markets Advisor in Asia-Pacific by Real Capital Analytics for the second year in a row. And for the sixth straight year, we were selected as one of the world's Most Ethical Companies by the Ethisphere Institute and we were named America's most trust-- to America's most trustworthy companies by Forbes and 1 of the 100 best corporate citizens by Corporate Responsibility Magazine. We are particularly proud of all of these awards, not only because they show that we're successful at our business but also that we perform to the highest standards of corporate ethics and responsibility and that's consistent with continuing to build a sustainable business enterprise and successfully extending our 250-year history.

So with that, we are happy now to take your questions. Operator, perhaps you could explain the Q&A process, please.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of David Ridley-Lane with Merrill Lynch.

David Ridley-Lane - BofA Merrill Lynch, Research Division

I was just wondering where you see operating leverage really coming through in 2013? I was a little surprised when I was looking at first quarter results because I would have expected a bit of a stronger gross margin performance given how strong capital markets were. So again, where do you see the operating leverage coming through this year?

Colin Dyer

Firstly, I think there's some evidence there of good operating leverage coming through in the Americas where there's margin expansion year-on-year and also in Europe, where we're particularly pleased with the ongoing results of the merger between King Sturge and the legacy Jones Lang LaSalle operation throwing up not only cost synergies but increasing opportunities for revenue growth. Q1 is a small quarter. As you know, we're very seasonal and so it's a quarter in which even the enhanced pick up in capital markets activities doesn't have that great an impact, particularly when it's balanced against the relatively poor markets which we're operating in, in the leasing area and where leasing activity picked up by comparatively small sums. So we'd expect for the full year to continue -- that picture to continue in Europe and the Americas. We'd expect LaSalle to continue producing the tidy performance that it has in Q1 and the area we're looking for, obviously significant uptick in performances in Asia-Pacific where for largely market-driven reasons, the opening quarter was rather muted. During the rest of the year, as Lauralee said in her script, this is the last quarter in which we're fighting comparatives. Where we have comparatives where the prior year quarter showed lower -- significantly lower personnel costs as she referred to, we raised our payments -- salary payments to significant number of the employees in India and China in -- from Q2 last year. And so that comparison gets easier for the balance of the year.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Yes, this is very helpful. And I wanted to follow-up on the comment pipelines and leasing are very solid. Just on the trajectory that you see for Americas, leasing the comps for you do get a bit tougher in the second quarter and third quarter. So given your projections for the market trend, given your pipelines, do you think Americas leasing can stay positive despite the tougher comps that you'll be facing in the back half of the year?

Lauralee E. Martin

I would say one of the things that we've seen dramatically change in the marketplace is the ability to recruit. We have historically -- last year, it got much more difficult in the second half of the year, but we were up some 20 people in the first quarter versus being down some net 2 people the prior year, and we've already approved significant additional hires that will come in to both our leasing and our capital markets going forward. So a lot of the market share comes from adding to our capabilities and our resources, and we think that we're in good momentum to do that. Now we've got some market headwinds in terms of what's out there, the overall market says [ph] 0% to 5%. So the pipelines are good. We need some confidence in the markets. The other thing I would say, if you actually looked at the fundamental, Washington, D.C., which is a very large and important market for us, we're the largest there. We were down significantly because of the fiscal policy, and we also saw New York down -- though a bit ahead of our estimates. So we feel good about New York for the year. If we carve those 2 out, all the rest of our leasing was up about 14% year-over-year. So you really have to break it down and understand the reasons in each of the markets. But in terms of the momentum we have, I -- we just need good fiscal policy and things would be great.

Colin Dyer

As I indicated early on, David, the U.S. economy feels to us to be underlying, pretty strong and headed for continued momentum, perhaps increased momentum. If you look at the house price increases across the U.S. today of 9%, you look at the confidence [ph] in [ph] fees, which are up, published this week from business confidence, the U.S. economy has got good underlying momentum and it's just really about the corporates picking up that confidence and taking more space and signing more leases. The big impact, as Lauralee said, is going to be what happens in D.C. and what happens in New York as that market recovers.

Operator

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

William C. Marks - JMP Securities LLC, Research Division

I guess, first question just because it has to be asked even if though I know what the answer is, but what would you say about the new CFO search?

Colin Dyer

Well, I can't imagine why you ask questions that you already know the answer to.

William C. Marks - JMP Securities LLC, Research Division

I just wanted everyone to hear it.

Colin Dyer

I know. Of course, it's going well. I'm pleased with the progress. And when we have something to tell you, we won't hesitate to announce it.

William C. Marks - JMP Securities LLC, Research Division

Okay, perfect. Second question is on the balance sheet. Intuitively, I would have expected an improved balance sheet versus a year ago. I realize bonus payments are higher in a better environment but so is cash flow. So maybe you could address that?

Lauralee E. Martin

Yes, a couple of things in there. Well, first of all, we're now paying our bonuses completely with cash versus with our previous shared ownership plan we would pay a part of that with stock. And so that is probably a $25-plus million difference. The other thing is we have normally working capital movement, probably the significant one that I would point out. It's not important to you, it just tells you we watch this very closely is that we normally pay our back taxes in Europe and Asia in the second quarter. We paid them in the first quarter and that was another about $30 million. And then the last piece of it and -- was that if we think about the end of last year, the expected tax increases, I would say that our producers accelerated the collection of their commissions as much as possible into last year in order to take advantage of lower tax rates, which means we didn't have the normal -- a level of seasonal receivable collections that would fall in first quarter. They actually fell in the fourth quarter. So there's some working capital movements that are not normal there. We feel good about our cash management overall, we feel good about how we're managing the balance sheet. And we did also -- one more piece, we did pay an additional amount for the earn out for the Staubach organization that's coming up, that's accrued on the balance sheet. So that's another key factor.

William C. Marks - JMP Securities LLC, Research Division

I'm sorry, there was -- some were not paid in the first quarter?

Lauralee E. Martin

No, it's accrued, it's on the balance sheet and it will be paid in the second quarter but it's added to the balance sheet. When you look at net debt, it's in the debt number. So depending on how you're doing your calculation, it's in the liability.

William C. Marks - JMP Securities LLC, Research Division

Okay, okay. Moving on and actually a little bit related to debt. Should we expect interest expense to be roughly in line with last year, a little better or a little bit worse?

Lauralee E. Martin

It will be about the same. We basically have traded off a slightly higher interest rate by putting in the term debt to have a better-managed balance sheet. So that's 4.4% versus generally about 2% but by paying off the Staubach debt, which was accreting in at 6%, actually, the interest that you'll be seeing will -- that gets offset. So net-net, it should be about the same as last year.

William C. Marks - JMP Securities LLC, Research Division

Okay. And one revenue item. The property and facility management growth seems a little bit weak and I know it's just the first quarter, maybe it wasn't weak versus your expectations but I think in the past you said you can do 10% or higher on an annual basis. Is that still the case or am I misquoting you?

Colin Dyer

Yes, on the drop, I think it was focused in Europe, Will, from memory. We feel confident in that area, it was just a 1 quarter blip and I think it will be -- maybe not at the levels you quoted for this year or you quoted back to us this year, but we feel good about that area picking up in the course of the year. And we've got significantly some big corporate solutions outsourcing wins, which will be coming through in the second quarter onward this year as we bring on particularly the HSBC account on stream.

Operator

Our next question comes from the line of David Gold with Sidoti.

David Gold - Sidoti & Company, LLC

A couple of quick ones for me. First one is broadly speaking, market share gains particularly as you noted in capital markets were impressive. Can you comment a little bit on what's driving that? Is it changes that you made during the downturn? Is it more hiring of sort of select producers for some of the acquisitions that you didn't quite have before? Or what's really pushing that along in the productivity?

Colin Dyer

Well, it's sort of different by market, David. The Americas growth is very much down to the fact that we've, since the downturn, added significant numbers of people. So the bottom of our performance in capital markets was roughly $30 million in the U.S. and last year we were at $130 million, so it's a figure of -- a feeling for how much we've grown over the last 4 years by adding people. And it's a strategic push on our part. And I think we're now ranked 3 nationally by Real Capital Analytics in that area. So that's straight investment in people. It's a considerate strategic goal, which we've announced and which we're pursuing. When you go to Europe and to Asia-Pacific, the situation is different. We have -- we're leaders in the markets in both of those regions. And what we have seen particularly in Europe is the markets become as -- particularly as the bulk of the trading has been in stable core assets, the market has polarized significantly towards the big 2 and sometimes a third but significantly the big 2 because the market is looking for reliable performance, the ability to push deals to the maximum but significantly they're looking for international capital and that's, of course, our sweet spot. And that's been the reason for the significant share growth we've seen across Asia-Pacific and Europe, which is most clearly visible in Europe in this quarter's numbers. Our performance in Asia was very strong as well. The comparative year-on-year is less impressive and the reason, as Lauralee referred to, is that last year, we had a very significant fee in Japan from the disposal of a large portfolio. And that makes the comparative in a weak [indiscernible] quarter -- excuse the comparative. So in Asia and Europe, it's very much market share growth by being [ph] to the fact that sellers are looking to have their assets put to market by the best quality providers and those that can produce global players into a deal.

David Gold - Sidoti & Company, LLC

Got you. Okay, that's helpful. And then just one other. LaSalle Investment Management, there's a comment in the release about stability ahead of new investor mandates. Was curious if there are mandates out there that you've won that you can talk about or at least give us a broad sense.

Colin Dyer

No. What we're seeing there is -- I mean, we've referred to the challenges of the commingled funds business. Although to Lauralee's point, we're now seeing that unfreezing a bit and we're seeing money flowing into funds and we are close to a closure on an important fund, not at the levels we've been seeing 6 or 7 years ago but nevertheless, good solid closures which will enable us to get on with the next round of investing. So that's, well, the situation in the commingled fund area. We've been adding new business areas, such as the JLLIPT in the U.S, distributed through a dealer [ph], a nontraded REIT distributed through Merrill Lynch to the public. That's showing good momentum. We have our KG structure in Germany, enabling us to access the wholesale -- the mid-scale wholesale market. We've got the growth of our debt business in Europe, which is actually in that case a fund but the growth in separate accounts has been across the U.S. and Europe and it's been institutional clients either transferring mandates from others to us or coming to market with fresh tranches of business that they are looking to put to work in the real estate markets. We've not got [ph] any individual accounts which we can or want to call out, but there is a continued flow of the order of $50 million to $100 million mandates that we're seeing into the U.S. and European businesses in particular.

Operator

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

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

I wanted to focus back on one of your comments. I think, Lauralee, you talked about the environment for recruiting being a little bit more challenging. The combination of that with kind of tougher leasing markets, has that changed any of the compensation dynamics? Or has it given the client any more leverage in terms of commissions or pricing for you guys? And I guess the same thing would kind of play on the property management side as well. Just trying to figure out if there's any kind of pressures that we haven't seen recently kind of coming back into the fore especially on...

Lauralee E. Martin

Actually, what I'd said was we're actually seeing our ability to attract and hire open up again. It had really started to slow down in the second half of last year and now all of a sudden it seems to be open again. And so that's very good. I mean, there's always pressure on compensation, but I think we have good discipline around that, and what we focus on is really making our people be most productive so they make the most money with the tools of Jones Lang LaSalle. So it's about how much wealth they make, not necessarily a sharing that is the most important.

Colin Dyer

So the compensation structures haven't changed, it's just the ability to earn more. And on the Property Management and the FM side, we've commented on fee pressure there before, it's been a factor since the recession but there are no changes in that situation. I wouldn't say it's getting worse but it's not improving either. So we are sort of accepting that as the new norm and getting on with making our FM and PM businesses a bit more efficient in order to be able to be -- to continue to be very profitable at the fee levels that are available in the market.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Okay. And if we think about the cost structures in EMEA and Asia Pac, looking out the next couple of quarters, should we expect to see some of these, especially in the EMEA, I guess, some of the cost-containment efforts continue to give you a little more kind of year-on-year operating expense leverage? Or I guess, in APAC with leasing being tougher than it probably would've been expected at 6 months ago, should we expect any kind of similar efforts there to pare back the cost structure or at least keep it flat on a dollar basis?

Colin Dyer

If you take Europe, first of all, I mean, you'll see the improvement in the margin. The EBITDA figures for quarter 1 and you'll see, I mean, 12% growth out of Europe, with Europe going through what Europe is going through, we think is very satisfactory. Europe surprised me last year with that continued good performance despite the economic environment. So we're very happy with that top line continuing to grow at that rate, but we will continue with the process of cost-containment in Europe benefiting from the actions we took last year. You saw us through the year, put in larger sums than we would have expected into restructuring through Europe. That was a large part, King Sturge, [indiscernible] Growth of southern European actions. At the moment, we think we'll just hold back and benefit for the balance of the year from the improved operational leverage that will produce. In Asia-Pacific, we're moving. As I said, we have this phenomenon of the uplift in salaries in Q2 last year burning off, so the comparatives will get easier. We, frankly, hope for a little better revenue performance in the balance of the year than we saw -- we saw a very muted first quarter. We're watching the Asia growth story carefully and the market -- there is growth in Asia still but it's clearly less growth around in 2013 than there was in '12 or '11. And so we will be containing cost in Asia and we'll watch that carefully and I would say beyond containment, we don't have any plans at this point for further cost cuts.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Okay. And then final question from my point of view, Lauralee, any sense of where CapEx for the year would come out, as well as any kind of co-invest requirements that you would expect? Just trying to get a better idea on cash flows.

Lauralee E. Martin

We probably are expecting about $90 million of CapEx for the year. We spent about $12 million in the first quarter, and probably $40 million to $50 million co-investment capital for LaSalle Investment Management. We are in that starting-to-invest stage. So I think that's a positive. It means we're on that [indiscernible] and I think we spent about $7 million in the quarter. I can check that for you. Just $3 million, they're telling me.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

$3 million, okay.

Operator

[Operator Instructions] We have a follow-up question from the line of David Ridley-Lane.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Just following up on the capital market's performance in the first quarter. How are the pipelines looking for Europe? I heard you highlight volumes in the U.K. but interested if you're seeing more or less assignments in places like Germany and France?

Colin Dyer

Yes in Germany, we've seen a lot of product come to market in Germany and we had a special dig into that. Two phenomena we were able to isolate, one is that there is more middle-market, sort of less core product coming to market, which is being -- which is tradable at this stage in the cycle. And secondly, we're seeing legacy assets from often international funds, which were purchased in the 2006-2008 era. The markets are now back to a point where people can contemplate absorbing the losses on those -- of that product and that's coming to market as well. The challenge in most other places in Europe is that the core assets, which investors want, is less and less available. A lot got traded early, we've seen relative price stability for a year. So people who wanted to trade at those prices have done so in the course of the last year. So this is a scarcity of good core product available in the 6 or 7 cities that the international investors want to be in. And so we are seeing, as I mentioned, people go out along the risk curve. We are, for example, seeing the opportunistic funds, private equity funds, looking at Spain closely now, which we haven't seen before. The deals are not there yet, but they're now putting teams in and spending time, we hear from people on the ground. So I think, likely, there'll be a little bit of a move out on the risk curve, which means that the market will broaden and deepen over the coming year. But as you heard from our forecasts for the year, we're expecting European markets to remain at least flat with some upside in there as well.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Got it. And then maybe one question for Lauralee. Investment grade balance sheet, that's now turned out. Your dividend increase was good but relatively modest. So I thought that you might be interested in using share repurchase as a way of returning some strong free cash flow you'll have to shareholders?

Lauralee E. Martin

We still think our best use of cash is to grow the business and the stronger our platform gets, the more we are approached by boutiques, et cetera, that would like to be part of the firm. So we continue to think that's the highest and best use. There always is an evaluation as time goes on, but at the moment, we're about growth and investing in the business.

Operator

And there seem to be no further questions at this time. I'll now hand the call back over to management for closing remarks.

Colin Dyer

Well, with no further questions, we'll end today's call and I'd like to thank everybody for participating, for your interest in Jones Lang LaSalle, and we look forward to talking to you all again following the second quarter results. Thank you, and good evening.

Operator

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may all disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Jones Lang LaSalle Incorporated Management Discusses Q1 2013 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts