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Jones Lang LaSalle Incorporated (NYSE:JLL)

Q2 2009 Earnings Call Transcript

August 5, 2009 9:00 am ET

Executives

Colin Dyer – President and CEO

Lauralee Martin – CFO and COO

Analysts

Mark Biffert – Oppenheimer

Kevin Doherty – Bank of America/Merrill Lynch

Sloan Bohlen – Goldman Sachs

William Marks – JMP Securities

Michael Mueller – JPMorgan

Brandon Dobell – William Blair & Company

David Gold – Sidoti

Operator

Good day and welcome to the second quarter 2009 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, or objectives are forward-looking statements only. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company’s Annual Report on Form 10-K for the year ending December 31st, 2008, and in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any forward-looking statement.

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 Mr. Colin Dyer, Chief Executive Officer for opening remarks. Please go ahead, sir.

Colin Dyer

Thank you, Brandy, and good morning everybody. Thank you all for joining us for this review of our results for the second quarter and for the first half of 2009. With me on today’s call is Lauralee Martin, our Chief Operating and Financial Officer.

Headlines for the quarter include revenue, which for the second quarter was $576 million, a 13% decrease in US dollar terms from quarter two 2008, but only a 6% decrease in local currency terms. Revenue for the first half of the year was $1.1 billion, a 13% decrease from 2008, but down only 5% in local currency terms.

We reported a net loss of $14 million for the quarter or $0.40 per share. Adjusting this for restructuring and certain non-cash co-investment charges in the quarter, net income would have been $11 million or $0.30 per share.

Year-to-date the loss was $76 million or $2.15 per share, again adjusted year-to-date loss would have been $11 million or $0.31 per share. Adjusted EBITDA was $49 million for the second quarter compared with $55 million for the same period in 2008. Adjusted EBITDA for the first half of the year was $60 million compared to $77 million for the first half of 2008.

These results reflect both the seasonal nature of our business and the lack of significant transaction and incentive fee opportunities in the current economic and market climate. Before we look at the numbers, let us look first at the general business and real estate environment in which we are operating. After five or six quarters of recession in most economies there are some early signs of economic recovery and economists’ consensus is that most countries will start to see a very slow recovery from the second half of this year.

Annualized world GDP growth is expected to be less than 1% for the second half, while some economies notably in Europe are not forecast to record positive growth until 2010. Some of the largest global property REITs have taken advantage of improved corporate equity and credit markets to strengthen their balance sheets. Total global REIT debt and equity issuances reached $32 billion so far in 2009 and that is nearly double the 2008 half-year total.

In real estate markets there has however been little progress since our last earnings call. Real estate fundamentals and real estate debt markets remain weak and sales and leasing transaction volumes remained low. Tenants have frozen space requirements or are restructuring their operations and in the US and Europe, leased space take-up was down 30% to 40% on the year, and down 10% on the prior quarter.

Office employment could continue to decline well into 2010 raising vacancy rates despite relatively low levels of new supply in mature markets. Some farsighted corporations are taking the long view and at taking advantage of current low rent levels to fix longer-term deals, but they are still the exception.

In investment sales, the properties currently trading are high-quality buildings with secure long-term leases, but with real estate debt market still constrained transaction activity is predominantly in smaller deals primarily equity funded or with fellow [ph] finance in place. The UK market was among the first three place, and London actually saw improved volumes and a 25 basis point yield or cap rate compression in the first quarter. With a strong buying pool our challenge there currently is now lack of stock.

We also saw yield compression in Hong Kong but most other markets are still showing significant falls globally. Class A office values in Singapore are now down by up to 50% from the top of the bubble and values in Munich, Paris, and Melbourne by up to 35%. In the US, although the transaction volume remained weak, the sale of several prominent office assets in the east and West Coasts suggests that prices are now also down by up to 50% from the peak.

In Europe, after seven quarters of declining volumes, quarter two sales volumes equaled quarter one with volumes flat in the UK and Germany but up in France, Holland, and Spain. Meanwhile the sale of distressed assets remains just a trickle and markets are still waiting for this to turn into a flow or even a flood. So to sum up continued pressure in commercial real estate markets particularly in particularly in capital market and leasing, Early positive signs of returning stability in the global economy, echoed by a slightly better tone in world real estate markets as players accept the new realities and begin to work out plans to move forward.

In this environment, we, Jones Lang LaSalle, have been proactively driving to the same operational priorities as we have throughout the recession. We continue to strengthen our balance sheet to reduce costs and size our business to market conditions. We continue to take market share both by retaining our key revenue generating these but also by hiring selectively new talent, and we continue to innovate in our services to our clients.

These four priorities put us in a stable confident position to weather this great recession and drive broader growth as markets recover. So now Lauralee will cover our cost, balance sheet and results priorities and I will follow with comments on building our new service lines and growing our market share in our core lines.

Lauralee Martin

Thank you, Colin, and good morning to everyone on the call. We posted slides on the investor relations section of our website www.joneslangLaSalle.com for your reference. I will use these slides as the framework to discuss our quarterly results, but we have also included year-to-date comparisons in the appendix beginning on slide 12 for your reference.

Slide 2 provides a reconciliation from our reported GAAP loss to an adjusted net income of $11 million for the second quarter of 2009 or $0.30 a share. We continue to take actions throughout the quarter to reduce discretionary spending and align our staffing levels with the current market conditions. As a result, we took additional restructuring charges of $13.1 million after tax primarily related to severance.

We anticipated a portion of these charges last quarter when we communicated our annualized savings target of $100 million in base compensation and benefits for these actions. But with the majority of the actions implemented, we now expect the full benefit to exceed $125 million. We will record restructuring charges in the second half related to the staff productions and integration plans we have already implemented but the magnitude of these charges will be significantly less.

We have continued to take an aggressive approach to manage discretionary spending. We will echo what we told you in the first quarter that we expect these actions to result in $15 million of annual savings on a local currency basis in the operating and admin lines. We also reported in the first quarter that we anticipate our planned capital expenditures to be $45 million or less for 2009, and this remains consistent with our current expectations. We recognized $14.9 million of non-cash co-investment impairment charges in the second quarter or $12.7 million after tax as a result of real estate asset value declines.

As a reminder, accounting rules require that impairments of value determined to be other than temporary must be taken at the individual asset level and separate from the overall value of funds performance. At the same time the accounting rules do not allow us to recognize any unrealized increases in asset values for other assets and funds.

These impairments are non-cash charges and therefore do not impact our bank EBITDA. I will cover this in more detail in the LaSalle Investment Management performance discussion.

Moving to slide three, adjusted EBITDA was $49.3 million for the second quarter, which compares to $55.3 million in the second quarter of 2008. The comparison of adjusted EBITDA by segment shows strong performance in the Americas supported by a corporate outsourcing business and the addition of the Staubach organization. LaSalle Investment Management experienced the most significant decrease compared with other segments primarily due to lower incentives and transaction fees.

Turning to slide four, we reported significant seasonal improvements in our adjusted EBITDA compared with the first quarter of the year. We saw double-digit improvement in each of the three geographic segments compared to first quarter EBITDA and our consolidated EBITDA improved substantially consistent with the seasonal nature of our business.

Slides five and six show our revenue performance in the quarter compared to last year as well as the first quarter of 2009. First looking at the year-on-year comparisons on slide 5, in the Americas, revenue was up 31% for the quarter principally due to the addition of Staubach and the continued wins in our corporate outsourcing business. Colin will be highlighting some of these new business wins shortly. The Americas operating income this quarter was $18.6 million, which includes over $3 million of non-cash amortization on intangibles.

EBITDA was $31.2 million, an increase of nearly 75% compared with last year's $18 million further demonstrating the success of the Staubach merger. In EMEA second quarter revenue continued to be impacted by declines in transactional revenues as well as weakening foreign currencies against the US dollar, which included a 21% decline in the pound sterling and a 13% decline in the Euro.

Management services revenue, which is primarily annuity revenue was flat compared to the second quarter of 2008 in local currency, despite a reported down 17% in US dollars. Second-quarter revenue in Asia Pacific was down 8% in local currencies overall, but the growth in our annuity revenue was up 19% in local currency compared with the second quarter of 2008.

Transactional revenue continues to be impacted by the current market and adverse currency movements. LaSalle Investment Management’s revenue was negatively impacted by $15 million of non-cash impairment charges, but we are pleased that our advisory fees remained stable with $59 million recognized in the quarter in line with our first quarter advisory fees. I will spend more time on LaSalle Investment revenue in a few minutes when we turn to slide 10.

Now turning to slide 6, we reported seasonal revenue improvement in each segment consistent with historical patterns and in line with our improved adjusted EBITDA performance. On slide 7, capital markets and hotels activity remained at a very low level in the second quarter resulting in significantly lower revenue in each segment compared with last year.

We are however taking market share from our competitors as demonstrated by our number one position in the UK for transactional volume according Property Data’s League Table. And by your highest position ever in real estate alerts recent US league Table of office investment sales over $25 million.

On slide 8, the Staubach merger continues to be very positive for the firm, and we are extremely pleased with the integration and performance after passing the one-year anniversary of the transaction in July. Compared with the second quarter of 2008, our leasing revenue in the Americas more than doubled to $122.7 million despite very challenging economic conditions.

Outside the Americas leasing revenue declined in US dollars, but by smaller amounts in local currencies. In EMEA, leasing revenue down 32% in local currency. In Asia-Pacific leasing revenue was down 30% in local currency, while there is activity and transactions in closing, our closing there are at reduced values as rental rates continue to fall.

There are some bright spots in Asia to report. The month of June was the best ever financial report for our Hong Kong business based on combined revenues from our releasing, tenant rep, and residential business lines. Turning to slide 9, we have provided additional information about our management services revenue this quarter, which is primarily comprised of property and facility management and project and development services revenue. Our project and development service offering, which we call PDS, is more transactional in nature with revenue aligned with the CapEx budgets of our clients.

As our corporate clients in particular have reduced their capital expenditures, our revenue has declined as well down 11% in local currency. The Staubach company also had a strong PDS business, which contributed to the Americas PDS revenue, declining only 3% in the second quarter. Despite the economic impact to our PDS business, we are very happy that Engineering News records annual ranking of construction managers, recently ranked as at our best showing yet in what is considered to be the construction industry's gold standard for size rankings, improving our position from last year.

Focusing on the more annuity life revenue and management services, our property and facility management grew 19% in the quarter as a direct result of our significant wins in our corporate outsourcing business. On slide 10, we have provided details on LaSalle Investment Management’s revenue. On a year-over-year basis, advisory fees were down 18% in the second quarter, 11% in local currency. As I mentioned earlier in the second quarter, advisory fees were stable relative to the first quarter of 2009. We noted in our earnings release that assets under management, which have always been reported on a one quarter lag or $36 billion. One half of the $5 billion decrease from our last reported assets under management was due to valuations in our public securities business and from foreign exchange movements.

Our consistent focus however has been to drive stable, profitable advisory fees. Advisory fees on funds and separate accounts typically do not have a direct correlation to assets under management, but instead are based on the net operating income contractual arrangements or equity either invested or committed. As a result, we reported stable sequential advisory fees in the quarter, and while there is clearly deep pressure in the industry, we are not immune to it. We expect to maintain a healthy margin from advisory fees to the cycle.

We are very pleased that we recognized over $3 million of incentive fees in the quarter as we liquidate mature funds. We continue to expect to earn limited incentive fees for the remainder of 2009 as property values fall globally and transaction activity remains limited. LaSalle Investment Management’s results were also impacted by $14.9 million of non-cash investment impairment charges in the second quarter. Future impairments will be dependent on performance at the individual asset level and therefore difficult to predict. The business continues to work aggressively to stabilize property performance, extend existing debt where necessary and position assets for exit in a more orderly market plane.

We continue to pursue new client opportunities, while remaining patient with our existing dry powder. Turning to slide 11 in our balance sheet, during the quarter we completed our secondary offering of 6.5 million shares and closed on our bank amendment. The net proceeds after bank fees from these transactions were $211 million. As a remainder, we repaid our annual bonuses of over $200 million in early April. Through June, we have repaid an additional $70 million of net debt this year as a result of seasonally better performance, aggressive receivable collection, and reduced spending particularly in Capex, acquisition and dividend.

The debt balance on our credit facilities at June 30 was $398 million. Our debt balance typically peaks in the first half of the year, and we anticipate our debt balance to continue to fall as we generate in the second half of the year. We ended the second quarter in a very solid position relative to our debt covenants with the leverage ratio of 2.4 times compared to an amended maximum ratio of 3.75 times.

Without our recent equity and debt actions, our leverage ratio at June 30 and our debt is at its seasonal peak would have been 3.0 times. So we would have had considerable cushion even without our actions. As a reminder, our strategic rational for equity offering and bank amendment was to position the firm with differentiated financial strength among private and public real estate service providers. This strength will position us to maintain absolute client focus, grow our corporate outsourcing and our LaSalle Investment Management businesses and capitalize on an industry recovery.

So to summarize, in a challenging market environment we are pleased with our improved operating performance from the first quarter. We will continue to focus on driving down cost, use our strong business positions to win new business and drive profit. Let me now turn the call back to Colin to discuss some of our recent wins and accomplishments.

Colin Dyer

Thank you Lauralee. Lauralee has covered the actions that we have taken to maintain financial flexibility and a strong balance sheet. So I will spend a few minutes talking about recent accomplishments in these areas, where we have driven innovation or grown market share. Those are as Lauralee said corporate outsourcing, maintaining a solid investment management with premium investment management business, and our new services in value recovery and energy management and sustainability.

Let us start with corporate outsourcing. We increased our first half corporate solutions wins by 40% year-on-year. We were awarded 69 new assignments in all, including 32 wins from new clients, 22 expansions and 15 renewals. This confirms that corporate occupiers continue to see outsourcing as a smart strategy for controlling costs and rightsizing their real estate portfolios and that they view Jones Lang LaSalle as the preeminent global platform.

In EMEA, Whirlpool expanded our relationship in the region adding lease auditing services to our responsibilities. And Bank of New York Mellon awarded us lease administration and property management responsibility for their own 1.2 million square feet of space. In Asia, we successfully renewed our contract with DBS Bank, one of Asia's largest financial services group, and we are providing them with facilities management for their Asian portfolio. Standard Chartered Bank also appointed us facilities management and project management partner across China and the Philippines.

In the Americas, Merck selected us to provide facilities management and project management services for the pharmaceutical company’s 14 million square foot portfolio, and also in the Americas Corinthian Colleges, one of the largest post-secondary education companies in the US and Canada chooses us its real estate strategic alliance partner for 4.5 million square feet portfolio.

We also expanded our position as the Bank of America's largest facilities service partner winning more than 60% of their Merrill Lynch portfolio, including their high-profile New York properties. We are also proud that we were given considerable responsibility for managing the bank's entire US critical facilities business.

Our global coverage in corporate outsourcing is a big differentiator for our firm. Recent multiregional wins for Jones Lang LaSalle include France Telecom, where we provide transaction and tenant representation services for a 106 million square foot portfolio; with Standard Chartered bank, where we have expanded our relationship to provide lease administration for the banks 17 million square foot global portfolio, and Smith Industries, where we have been retained for tenant representation and lease administration services for their 7.5 million square feet of space.

Also internationally Shell named us a preferred provider for tenant representation, project management and consulting services for its 20 million square foot America's portfolio, which ranges from Canada and the US to Mexico and Latin America. In Asia-Pacific, we won Shell’s regional contract for tenant representation, capital market, project management, valuations, and strategic consulting, and we have already started work on new assignments for them in India, Malaysia, Australia, Hong Kong and in Europe.

These wins and our growth in revenue in this sector justify our continued investment in our world leading platform. Turning to LaSalle Investment Management, given the tough conditions in global real estate investment markets protecting and improving the performance is LaSalle’s number one priority, and we have reinforced our asset management teams in all regions to achieve just that.

We are also focusing on staying close to our institutional clients with constant, open and honest communication about market conditions. LaSalle is also allocating senior people to new business pursuits. A number of competitors are dropping business lines, downsizing their platforms or even exciting the real estate sector and this is creating new opportunities for LaSalle to win business.

As the broader asset markets recovered, real estate will continue to hold his place in future investment strategies. Indeed as equities rebound and property reprices the so called denominator effect will ease and real estate could see incremental dollar allocations. As an example, German open-ended funds saw 3.1 billion Euros of net inflows in the last quarter, and we at LaSalle saw over $1 billion of net inflows into our global REIT business in the first half of this year.

However, investors will base their future alliance decision on how managers perform under duress today. All of LaSalle’s efforts are designed to ensure that we emerge from the downturn among the strongest players in the industry with our reputation enhanced as a completely trusted adviser, who puts our clients’ interests first in both good times and bad.

In the area of innovation, we are developing our value recovery services for public and private entities affected by distressed market conditions. This involves integrating a range of our services for each client situation. So for example, we are providing receivership management and leasing services in the US on 20 assignments in 10 states totaling approximately 8 million square foot. In Europe Barclays Capital appointed us to provide an asset strategy and cash flow scenarios for two shopping centre investments in Belgium.

In Asia-Pacific, we have won 17 value recovery mandates this year, including an exclusive in Singapore to refinance or privatize a prime property fund, the auction of a group of residential properties in Hong Kong, and three separate asset management mandates in Japan, two for residential portfolios and one retail portfolio.

In the area of new services, I'm also pleased to report that demand for our energy and sustainability service continues to grow very strongly, and we are building our capabilities and our leading question in this field. To start these assignments effectively, we now have well over 500 of our people who have earned lead accreditation, or have equivalent qualifications from similar organizations across the world. And I should say amongst these lead qualified professionals is our CFO and COO, Lauralee Martin, who has been accredited since 2008.

These professionals are putting their credentials to work for our clients. For example, we served as the lead consultant on two of the first three properties certified platinum under the new operations and management standards for existing buildings. This includes our work with the McDonald's Corporation on its world headquarters in the Chicago suburbs and Beacon Capital’s building at 550, West Washington in Chicago.

In another major achievement, Upstream Sustainability Services, our UK-based sustainability team was appointed by the Global Reporting Initiative to lead the development of global sustainability guidelines for the construction and real estate sector. GRI is an independent global action centre of the United Nations environmental program and it is fast becoming the global standard global in corporate sustainability reporting.

So as we use current markets to build new service capabilities in areas like value recovery, energy and sustainability, we are also working to expand our share in our traditional core business lines. As Lauralee said, the UK Investment Agents League listed us for the total value of transactions completed showed us moving up first place from second on the list last year. And as she also said, a recent US real estate alert report on brokers in office transactions of $25 million and more, showed that we have more than doubled our market share in the first half of this year to over 12%.

US transactions completed during the quarter, include brokering and agreement, which enabled Whirlpool Corporation to sell its 570,000 square foot manufacturing facility in Jackson, Tennessee. In London, we completed the largest office transactions in the UK so far this year, acting for the Government of Oman for its 445 million pound acquisition of 75% interest in Bishops Square in the city of London.

Last week in Paris we completed the largest transaction this year in the French market, the acquisition of (inaudible) on behalf of our client (inaudible), which is a French insurance company. Our French corporate solutions, project management and capital markets teams all collaborated on this assignment. In early July, also in Europe we completed Germany's largest transaction to date -- for the year to date, representing (inaudible) in the sale of the newly completed 215,000 square foot, (inaudible) retail development in Berlin’s (inaudible), one of the city's top retail destinations.

So overall we have seen some significant investment failed share gains in some very fragile markets across the world.

Moving to leasing and tenant representation, in the Americas we won more than 400 new assignments totaling over 48 million square feet during the second quarter with more than half of the wins coming from new clients or firms. In US leasing, our total agency portfolio grew by 12% year-on-year to 168 million square feet, and in Atlanta we were selected for proxy management and leasing services for the Georgia-Pacific center in downtown Atlanta, a 1.1 million square foot landmark building.

Also in the Americas we won 3 million square foot leasing assignment for the majority of Arden Realty suburban Chicago portfolio, and recent tenant representation assignments include a 100,000 square foot project for Frost Brown utility in Cincinnati, and a 350,000 square foot assignment for digital reality in Boston.

Investment in industrial teams bore fruit when the Covington Capital Corporation awarded us the leasing assignment for its 780,000 square foot industrial warehouse facility in Dayton, Ohio. CCC has also retained Jones Lang LaSalle for all industrial investment transactions throughout the United States. We are proud to have this entrepreneurial real estate development and investment company as a new client of the firm.

In France, we represented Societe Generale, which leased 50,000 square foot of space in a new building in the (inaudible) suburb of Paris, and we secured 130,000 square feet for a major pharmaceutical company in the south-west suburbs of Paris. Over in Germany, we recently won a leasing mandate for 425,000 square foot of prime office [ph] and retail space in Dusseldorf.

As Lauralee said, our Hong Kong team recorded its best month ever thanks in large part to nearly 40 transactions, which they closed for major international law firms. In Shanghai, we represented DBS in its lease of 140,000 square feet of space plus naming and signage rights in what will now be the DBS Tower in Shanghai.

And again in industrial work, our China industrial team joined our Los Angeles-based port, airport and global infrastructure group to represent New Jersey's preferred freezer services in their cold storage expansion into China. A new 280,000 square foot refrigerated warehouse is being consulted on Lingang Logistics Park in Shanghai, and in follow on business we will also represent LPS exclusively in its expansion through China and act as global marketing partner for Lingang Group, the state administered development company responsible for developing this 30,000 acre manufacturing and logistics park.

Greater China like India is a very important growth market for Jones Lang LaSalle and our combined revenues from these countries was level with 2008 in the first half of this year, and we will be continuing to reinforce our leading market positions in these markets as their economies lead the global recovery.

Finally our colleagues’ talent, accomplishment and outstanding client service performance continued to be recognized by third-party awards and in industry-leading rankings in the second quarter of this year. There were many, but here are just three. Firstly, we were recognized as the best overall provider of corporate real estate services by the Watkins 2009 Survey. The Watkins Research Group is an independent market research firm, which conducts the survey every two years interviewing more than 200 corporate real estate decision-makers from 182 international companies representing North America's largest users of corporate real estate services.

Of the 19 service providers evaluated, Jones Lang LaSalle was rated first in every one of the 10 survey categories, which included delivery of results, adaptability of services, pricing, reputation, and financial strength. This award is a big deal and we are very proud that our commitment to service during this recession is being recognized in such an emphatic way.

Our team in Japan was selected by Procter & Gamble for a partner award recognizing our delivery of outstanding facilities management services for them, and we were one of only 20 business partners selected from their 500 Japanese suppliers. And finally in the awards category, our Middle East and North African business was named Hewitt Associates Best Middle East Employers list in 2009.

So much for market situations and our current achievements. Looking ahead, we are going to continue to focus on the priorities which we discussed during this call. They are maintaining a strong and flexible balance sheet, focusing on cost reductions, taking market share by protecting key teams and revenue generators and through selected external hiring, and finally growing our new products and services, which address the challenges and opportunities arising from the downturn.

And I should say that it really goes without saying that we will hold in all of this to our core values of internal collaboration, working with total integrity and always in the best interests of our clients. Our careful focus on these priorities has given us a stable base, which allows us to operate with confidence in today's business environment and positions our firm for renewed growth as market stabilize and recover.

With that presentation, we would like to open the call to your questions. Operator, perhaps you would explain the process please.

Question-and-Answer Session

Operator

(Operator instructions). Your first question comes from the line of Mark Biffert with Oppenheimer.

Mark Biffert – Oppenheimer

Good morning. Colin, I was hoping you could, you maybe provide some of the color and feel the kind of ties to EBIDTA. I mean last -- the last half of last year had about $191 million to $192 million of EBIDTA. I'm just wondering how all that transaction activity that you mentioned translates into EBIDTA growth through the second half of this year and whether you think you can surpass the numbers you reported in the last year.

Colin Dyer

Well, let's first say clearly that we don't provide any guidance on some of the question, one part of that question would lead us into guidance territory. So we don't give that, but I mean the examples of the transactions, which we just been through were intended to show you a couple of things. First of all that there is business activity out there in what are widely seen to be really depressed transaction markets worldwide, and we further benefited from some of the best of those transactions with the leading sales positions developed in the UK with the sale of the largest transactions are involved in the largest transactions across the major European economies in particular. I think it also demonstrates the fact that we are being proactive in building or continuing to build teams where we think that's appropriate in some markets, but also in retaining our key talents so that we can get these sorts of transactions done.

Mark Biffert – Oppenheimer

Okay, and then in terms of fund flows that you're seeing into LaSalle Investment Management, you guys looks like brought in a little over $1 billion into that and what kind of inflows are you seeing quarter to date into that space and do you expect that to move higher and possibly benefit some of your management fees in that business?

Colin Dyer

By quarter to date you mean Q3.

Lauralee Martin

Q2 are you asking?

Mark Biffert – Oppenheimer

Is it a quarter behind, is that what you're reporting in terms of the inflows?

Lauralee Martin

No, I'm sorry the inflows we report for the quarter that just occurred, we report the assets under management on a one quarter lag because it just doesn't get reported and rolled up until that period of time.

Mark Biffert – Oppenheimer

Okay, so I guess in Q3 are you continuing to see inflows into the space in Q3?

Colin Dyer

The inflows are quarterly inflows. So, there is a difference there between assets under management, which is of course the lag on the inflows which are current quarter numbers. But yes, the inflows particularly to the private, sorry into the public security section of LIM has been comfortable -- comfortably strong I'd say. We've been pleased with that and that does continue, it's a steady flow rather than a one-time event.

As to private equity funds raising that's been very limited. We raised $500 million if I remember in the first quarter and since then it's been fairly slow. There is not a great deal of appetite in the institutional market for, currently for fresh investment in real estate or institutional investors largely waiting, looking for market trends, doing some sort of direction to emerge in real estate markets, but as I said earlier on one particular issue, which institutional investors had which was they were seeing that allocations to real estate looks over allocated as compared to equities. That's kind of self-corrected as equity markets have recovered and as the value of real estate portfolios have been repriced regrettably downwards, but it has taking care of that denominator effect.

Mark Biffert – Oppenheimer

Okay, and then jumping to leasing revenue, previously Colin you had mentioned that you guys when the market was down 40%, you guys were only down 20%. How does that currently compare in the second quarter relative to the market and your performance?

Colin Dyer

Those were second-quarter numbers.

Lauralee Martin

Are you talking -- we give you in the charts the regional breakdowns but I think what you're referencing is the first quarter Americas, for last quarter we sort of gave you a placeholder against if we did a performance Staubach, is that what you're referencing?

Mark Biffert – Oppenheimer

Right.

Lauralee Martin

We would have been in the low 30% down in the Americas on a consolidated basis, which actually we are delighted because that was the Staubach organization’s highest record quarter because it was what just prior to our merger.

Mark Biffert – Oppenheimer

Okay, and then lastly on the restructuring charges that you mentioned for the second half of the year, I mean compared to the current quarters that half of what you reported in the second quarter. Just kind of give us direction where that could be or that how big that number could be?

Lauralee Martin

It would be significantly down probably less than half of that number. What we have is that we have taking actions and just under accounting until certain notifications are done, we can't report them. So it's more tails off at the end of that activity.

Mark Biffert – Oppenheimer

Okay, thanks a lot.

Operator

Your next question comes from the line of Kevin Doherty with Bank of America/Merrill Lynch.

Kevin Doherty - Bank of America/Merrill Lynch

Great. Thanks guys. I guess just following up on the restructuring charges. Could you just provide a little more color may be on what accounted for these charges this quarter and how the $25 million in incremental savings came about?

Lauralee Martin

Well, there are principally severance. We have continued to take actions around the world. Our most aggressive actions have been in Europe. We have taken some actions in the Americas, Asia-Pacific, and LaSalle Investment Management. The biggest change as we taken these actions we have been able to have to pay back periods be less than what was earlier anticipated. In the US, our payback has generally been about three months Asian in LaSalle Investment Management, each about 4.5 months, in Europe 7.5 months. So it's really been good execution and focused execution that has allowed us to take the actions and get more savings.

Kevin Doherty - Bank of America/Merrill Lynch

Okay, and then you had also talked in the past about I guess $50 million in discretionary cost savings. Could you provide an update on maybe how much of that would have followed through on 2Q and then how much is still yet to be realized over the course of the year?

Lauralee Martin

Well, we're pretty much at a run rate at this point in time and let me refresh you that is local currency. So what you'll see is you know, significant down actions around the world because of currencies that we wanted to make sure we were giving you local currency, but we are at a run rate now that is, you know, achieving that number throughout the year, and just to refresh it's things like travel and living, it's professional fees and so forth. I mean, the good news would be we'd actually like to see that tick up because that means that business is picking up, but at this point in time we believe we've got that number captured no matter.

Kevin Doherty - Bank of America/Merrill Lynch

Okay. And I also want to see if you could just talk about the revenue opportunity from the corporate solutions wins that you mentioned, and then what's typically the right way to think about the EBIDTA ramp-up as you bring on some of those newer clients?

Colin Dyer

Yes, between the wins and the transfer of business into our firm and then the revenue and then ultimately the profits generated from that business, typically a time lag of six months or so. So wins in the first half of this year may begin to show revenue in the second half later on from here on and revenue begins to flow into next year. It's typically also a period where we don't make profit as we take the costs of transfer and then the revenue ramps up after that. The wins we have seen this year have been across of the globe. So all three regions have contributed and our win rate on the RFPs, which we have competed on has been over 50% in each region and well over 60% in the US.

Kevin Doherty - Bank of America/Merrill Lynch

And maybe just in order of magnitude on the size of the contribution from those new assignments?

Colin Dyer

We haven’t sized that out yet and we don’t get guidance on it either, but it will be very handy and you can see that the revenue from our corporate business was up in the first half of this year and the second quarter too. We think, you know, that's very satisfactory in an environment where you know, there is pressure on from the corporates to reduce costs. So in that environment they are able to increase the numbers of clients increase the activity without clients, and maintain a comfortable revenue growth. We are pleased with our performance.

Lauralee Martin

And just maybe a way to give you a feel and you will recall that we had strong growth in that business last year, and now as we are reporting the year-over-year performance, you can see it falling through a very healthy double-digits. So, clearly that win, execute and translation does flow through the P&L, and we showed you that growth both in the press release and then in some of my discussions as we looked at management fees around the globe.

Kevin Doherty - Bank of America/Merrill Lynch

Great, thank you.

Operator

Your next question comes from the line of Sloan Bohlen with Goldman Sachs.

Sloan Bohlen - Goldman Sachs

Hi, good morning. Colin just first a question on strategy. It sounds like, you know, post IPO, the reason for the IPO is to solidify the balance sheet and use kind of as a marketing tool for the outsourcing and the investment and management. Can you kind of talk about that and then, you know little bit more in reference to what the potential growth in some of the brokerage businesses could be going forward and how you potentially use a stronger balance sheet there?

Colin Dyer

Right. It was a secondary offer, but we like the idea that IPO (inaudible), but we were clear when we went to market both on the quantum of funds that we were looking for and we were clear on the reasons both for raising the equity but also for adjusting our the covenants around our bank lines, and that was to obviously solidify the balance sheet to two significant commercial ends. One was to enhance our ability to incorporate business, because we found that as a recession, particularly the credit crunch ground on corporate clients, we were spending enormous amount of time talking to corporate clients, both existing and perspective about our balance sheet because when it committing the business management to us for a period of five years, they want to be sure that we've be around for that period of time.

So by doing the things we did around the balance sheet, we completely swept away that issue, and we know that as a result of that we have significantly enhanced our ability to win business. It was good already. It's going to get better. And the second area was in LaSalle Investment Management and there are two problems there. Firstly, we are being invited by parties to bid for new mandates or to take over the management of funds, and in doing so, those principles are also looking at our financial strength, because they want to be getting into bid [ph] with a manager who same story as corporate solutions area, is going to be around in five years time.

And so that was the first problem with respect to LIM. The second one was that we as a firm have always coinvested in LaSalle’s funds and we wanted to have the flexibility on our balance sheet to continue to be able to do that in the coming years. And so all of those things were taken care of with the actions, which we drove. You talked about the possibility for enhanced revenue in the brokerage sector, but of course with the Staubach acquisition, we've got a considerably enhanced brokerage team and strategically filled-in from the Jones Lang LaSalle perspective, by holding our service offered in the US where we were weak in brokerage. We are now able to service our corporate plant in that area in a very robust way.

Likewise, in our brokerage activity in leasing and our investment sales activities were broadly around the world. Want you have are a group of professionals, who are operating in revenue terms at well under the peak of say two and three years ago. So we have the people in place, we have the geographical coverage, we have the service line coverage intact and ready to go as markets continue to stabilize and improve, and then we've added to that additionally by selectively hiring some teams such as a 10-man who came in at the end of the first quarter into our business in New York. So, we are well placed to pick up in our brokerage activity as markets stabilize and improve.

Sloan Bohlen - Goldman Sachs

Okay, and at this point is there a geographic preference for further expansion. If you're to grow in brokerage businesses did you look at the opportunities there going forward?

Colin Dyer

I think at this point the markets are in general so low in transaction volume levels. We are sitting with enough capacity in each individual to pick up and grow his or her individual business in brokerage lines across the world that were nicely placed. We wouldn't be looking at selective investments, but as things tighten I would anticipate it's the pace at which the markets begin to pick up in activity, which will determine where we will be putting people into or hiring people into the business, and if you look at the kind of hierarchy as to where the world might recover as a driver of that, I think we would say that Asia and in particular India and China which will be in high single figure growth in the second half of this year. We are very well placed there that it would be a candidate --those areas will be candidates for adding people as the markets recover, and then the hierarchy goes through a broad ratio picking up South America, probably the US sometime after that and probably Europe and Japan following in this process of recovery.

Sloan Bohlen - Goldman Sachs

Okay, and then kind of to that end, you talked a little bit about the potential distress assets that might come to market and how that's a trickle, and it could be a flood. Could you talk about one, what the opportunities that could be there and then second, could you talk about how lenders are being accommodating and extending terms, and if you could maybe reference that by geography?

Lauralee Martin

Well, let me address the lender piece first, which is most important with LaSalle Investment Management. If you have maintained good relationships with your lenders, which LaSalle Investment Management has and you demonstrate that you are the best at managing that property far superior than them. The lenders are accommodating because they want to protect value, and so again a consistent performance is absolutely critical in terms of the lenders. I'll turn it over to Colin because the opportunity around the stress that you're talking really comes from the value recovery business that we've been building.

Colin Dyer

Yes, I'd say I mean LaSalle have renegotiated a couple of hundreds of bank lines on individual assets around the world, and they've been able to -- over the last 18 months, they have be able to do that as Lauralee said because of the quality of the relationships and that's what you see across the broader market, where borrowers have good relationship with their bank or balance sheet lenders. They are generally able to extend their loans or renegotiate the covenant rules around them if they've come under covenant stress, and generally financing is being rolled forward. Tougher in securitized lending, we'll come back to that in a minute, but the -- so that's meant but so far least in this recession that the banks have been helping the equity players to stay with their assets and manage those assets rather than foreclose and force a fire sale of assets with these markets that's an entirely sensible thing for both equity and debt players to do.

So banks and equity are generally be working together to keep financing in place and keep our initiative in place. When however, that breaks down and for example there is insufficient cash flow to service the loan and that's generally a pretty definitive trigger for some action. We are being invited to come in with a number of services. It starts with general portfolio or an asset strategy advisory to single asset on how to manage that asset over the coming 1 to 2 years. We then are often brought into asset manage or just straight manage the building. We could -- we are asked to take over the leasing and then eventually at some point the distressed asset can thus turn into a sale, and the reason why we so far seen a trickle really across the world is that that process held forbearance by the lender, and then this whole process of working through getting the asset into shape for a profitable sale just takes some period of time, probably a lot longer than the market had originally anticipated.

So that's the process from lender through to execution of a sale. What I would say is that the that you can see from the date that is published that the number of distressed assets and the dollar value of distressed assets across the world is beginning to mount and so this process will turn from a trickle to at least a stream over the coming 12 to 18 months.

Sloan Bohlen - Goldman Sachs

Okay, thank you and then just lastly, one little follow up on that. Do you think that the catalyst for when those transactions perhaps happen. You mentioned the securitized market, do you think it's the maturities of those CNBS loans that are tougher to work out that kind of triggers a lot of the sales to happen and, you know, maybe could you frame timing of when that might occur?

Lauralee Martin

You know, I might take a crack at that one. If you look at the progression of our value recovery service, we are working with a number of banks around their home builder portfolios through auction and technology capabilities that we have that can move those kind of things. That was the first wave that hit big distress. The next part of our business that has been growing most rapidly is retail, why? Because that was the next piece of the industry that has hit some distress. The message is as the distress happens it moves forward. I think everybody is talking about the CNBS and actually how it will play out, and clearly what you're seeing is a lot of discussion around, nothing can really happen until there is a default because the documents then require to go to a special servicer. So it is in motion, but you can see it driven by stress and then requirements to deal with what comes out of it.

Sloan Bohlen - Goldman Sachs

Okay, thank you guys very much.

Operator

Your next question comes from the line of William Marks with JMP Securities.

William Marks – JMP Securities

Thank you. Hello Lauralee and hello Colin.

Colin Dyer

Good morning.

William Marks – JMP Securities

I have a question on I believe Lauralee you may have mentioned that term briefly the intangible amortization. Did you quantify as you have in previous quarters what that was for acquisitions?

Lauralee Martin

I talked about it in the context of the Americas, which was about $3 million principally because that is now going to drop off pretty dramatically as we go into the balance of the year. I think we have only a million left on that as we go forward. We can give you more detail on that. Well, if you want to call us online for some of the others, the pieces that are in the rest of the world are pretty much what they're and are going to run pretty consistently.

William Marks – JMP Securities

Okay, but it's becoming less meaningful?

Lauralee Martin

Yes, the Staubach piece in particular, we had one 12-month piece that was pretty high into the P&L and as we put in all our disclosures it would drop off, when we hit the one year anniversary, which has now occurred.

William Marks – JMP Securities

Okay, and also somewhat related on Staubach, was there much in the area of revenues that you couldn’t recognize for GAAP purposes?

Lauralee Martin

It was relatively modest. We still had a small amount. It was about $4 million.

William Marks – JMP Securities

And then, I was also a little bit confused. I believe you said that low 30% pro forma decline in leasing revenues in the Americas without Staubach, and that would imply that Staubach’s revenues --

Lauralee Martin

No, no, no, with Staubach. I'm sorry. On a pro forma basis, as if they were part of us --

Colin Dyer

Apples-to-apples.

William Marks – JMP Securities

As if they were part of you a year ago you --

Lauralee Martin

Right because we were up dramatically because they are a part of us, but if they would have been it would have been in the low 30s decline, and again that was their record all-time quarter, second quarter of last year. So that would be a tough comparable.

William Marks – JMP Securities

All right, -- go ahead

Colin Dyer

Which is against the market as a whole, that's a good performance and as you said shows us picking up share.

William Marks – JMP Securities

And Staubach, I believe Staubach employees were incentivized to close deals particularly in the second quarter because that was the end of their fiscal year, is that correct?

Lauralee Martin

Last year, yes.

William Marks – JMP Securities

Okay.

Colin Dyer

That pressure is gone now.

William Marks – JMP Securities

All right, okay. On the balance sheet, your deferred business obligations, can you break out what is Staubach?

Lauralee Martin

We have given you that -- it's the majority of it Will, but we can get that for you. It does the amortizing. Are you trying to get the interest, is that what you're trying to do?

William Marks – JMP Securities

No, no. I'm just more of understanding of what the present value of the future payment you need to make for Staubach is?

Colin Dyer

(inaudible) We'll have a look at that while we're talking. We'll take some more questions and we'll come back to you when we have got it on the call here.

William Marks – JMP Securities

Okay, and more quickly --

Lauralee Martin

Yes, and just to put it in perspective though as you know we gave you the number at the time we started, and did the acquisition. We in the quarter accrued half of our interest was cash and half of our interest was accretion. So when you look at our interest line, $335 million is the piece owing to the Staubach Organization at this time.

William Marks – JMP Securities

Okay, I'm sorry. Your interest line -- interest expense was $14.5 million for the quarter?

Lauralee Martin

Yes, but half of it was cash interest, half of it was non-cash, which is accretion against those portions.

William Marks – JMP Securities

Got it, okay. A couple of other quick questions, the lag on the investment management side, I brought up, the question I have in that is on the security side of the business, where I would assume that assets under management are up due to stock price performance in the last quarter. Is that also from March 31st?

Lauralee Martin

Yes, it's a lag also. So, we are anticipating, you know that with the improvement of the market that will be helpful in the next quarter. To give you a contrast, I think it's difficult as you look at that number, which has obviously fallen pretty dramatically from its peak, which was $54 billion. Of that decline to today, $4 billion was currency. So, just the dramatic decline because a great deal of our portfolio is in Europe with the pound sterling and the Euro and then we had $4.4 billion of decline in the global securities, and so that's what is driving a big piece of that, but as I said we focus on the annuity revenues, and we've talked about the importance of having a margin in our business with the cost of running the business and the margin on the advisory fees and that has been protected and preserved and we are very proud of that.

William Marks – JMP Securities

And then, I mean you mentioned the $4 billion in currency, $4.4 billion in securities. So the rest is in part asset real estate I would assume. Is that all or generally from pricing, you know, repricing appraisal?

Colin Dyer

Correct.

Lauralee Martin

Yes. Yes, that's correct.

William Marks – JMP Securities

Okay, and do you expect assets to be priced down in the second quarter as well, meaning that when you're reporting in the third quarter?

Colin Dyer

Yes, there is a steady downward trend as we go through our quarterly and these are -- some of the rolling 12 months, 6 months, and some were quarterly evaluations but there is still clearly a downward trend being worked through. It is service advance in the UK, where assets have been repriced very rapidly by values. It's probably still someway to go in the US to give the extremes.

Lauralee Martin

Yes, I think the market has now recognized value impairments that will come out of the fact that there's just been a repricing based on the cap rates of property just in total. Going forward, as Colin said, there will be continued evaluations if property performance deteriorates, but that generally goes at a much slower pace than what has occurred in the quick evaluations in the marketplace overall.

William Marks – JMP Securities

Okay, perfect. That's all from me. Thank you.

Operator

Your next question comes from the line of Michael Mueller with JPMorgan.

Michael Mueller – JPMorgan

Hi, most have been answered, but just following up on the prior question, I mean is there a way to quantify just thinking about the appraisal process and all the assets under management in the funds in terms of you know, what the timeframe is to kind of burn through it? Let's say real estate values don't change at all from today and they are just static over the next couple of years. How long would it take with the appraisals coming up whether it is quarterly or every six months to fully mark the AUM to market? Is that a one-year process, is that a multiyear process?

Lauralee Martin

Well, I don't know because we don't know where markets are heading. I think that what is important we do evaluate our portfolios quarterly. And as Colin said, the goal is to be very honest with investors. They don't want to feel that you have deceived them around the value of their investments. So those values are done for investors and that relationship is very important. So we think we've done a good job of being open and transparent as to where that is.

Michael Mueller – JPMorgan

Okay, and then I think in terms of the new initiatives, you talked about investment management, you talked a bit about value recovery. Is there any other business lines that you can touch on that we should expect to see the company move into over the next year or so?

Colin Dyer

Move into, we have obviously, constantly our internal plans for new business lines, which look attractive to us, that usually grow out of existing relationships which we have with our clients. I wouldn't expect anything radical over the next 12 months, more like add-on and tack on services to existing broad business areas. If you look at where we are seeing growth, we've referred to quite a bit of it, and share growth across the piece in virtually all business lines we believe, but dollar growth even in this market across our corporate solutions business that's both large and small corporations, as dollar growth in our -- and footage growth in our facilities management and property management business.

Are you leasing portfolio, agency leasing portfolio has grown as we said by double-digit percentages in the quarter. Value recovery business lines and the assembly of those lines and our energy and sustainability services as we refer to extensively are also growth areas, and, you know, whether you see growth as we said consistently. We've been cutting costs where markets have been declining, where we are seeing growth we've been carefully investing behind that growth, and so expect to see us backing those lines of some [ph] growth in this market environment.

Michael Mueller – JPMorgan

Okay, and last question you mentioned you've been invited to take a look at -- potentially taking over the management of some funds out there. If you are thinking relative to your existing AUM, can you size up how significant that opportunity set is?

Colin Dyer

They'll be significant enough to be worth mentioning to you on subsequent calls when we've achieved them, but I wouldn't give you a number at this point in time.

But we'll let you know.

Michael Mueller – JPMorgan

Okay, thank you.

Operator

Your next question comes from the line of Brandon Dobell with William Blair.

Brandon Dobell – William Blair & Company

Thanks. Is Lauralee or Colin, would you expect the same type of seasonality in the leasing business globally that we've seen historically. I guess within that, one sub-question would be the pace of new sublease space coming on the market, if you can characterize how that trended over the last several months. Just trying to get a feel for it, we should expect that to be you know, kind of a net contributor to a better half in the back half of the year relative to previous years?

Colin Dyer

Well, you may have seen our excellent Peter Roberts, Head of our Americas business on Bloomberg television a couple of days ago and he was saying that the total vacancies in the US leased market and offices at lease is now in the high teens and it could peak as high as 20% and more, and in fact it's beyond that in some submarkets. So we are clearly in this situation where vacancy rates are growing and that means that we've got net negative absorption across the US and indeed across most of the rest of the world.

What we are seeing or beginning to see in some markets, if you take the Class A office buildings, which is really the top of the market, those -- rents in those assets dropped pretty much as dramatically as they did across the broad market. So I think in terms of 30% plus headline rents in major CBDs across the world, but what we think we are seeing currently is that the lease rates, rental rates fall, Class A buildings in major centers are beginning to stabilize. It doesn't mean to say they are rising yet, but if you take London, Hong Kong, Tokyo, Mumbai, Moscow, as we call it rental clock, we begin to see those markets, rental rates in those markets bottoming out.

That's a good first sign because what it will say it'll be the first signal to occupy the clients for the space, but actually delay is no longer a profitable thing. But in those markets at least they might as well get moving and begin to take space and we suspect that will start as I've indicated in the better buildings in the major cities. When that happens, we could very rapidly find that there has been a kind of a panic reaction and the prices are being cut on those major buildings, perhaps too far in the kind of very dramatic reaction to the credit crunch impact on the markets, which we saw in the second, sorry in the last quarter of last year and the first quarter of this year.

So we can’t at this point say that volumes are picking up any time soon, but we can see some early signs of stabilization in lease rates. You asked a question about seasonality --

Brandon Dobell – William Blair & Company

Right.

Colin Dyer

And Lauralee do you want to try that one?

Lauralee Martin

Well, you saw our seasonal first quarter to second-quarter. I think the challenge Brandon is we're seasonal but on a year-to-year comparison you know, down. So I think that what we've done is address our businesses in terms of cost and sizing to that down market, such that we perform through that seasonality even though it's at a lower level.

Brandon Dobell – William Blair & Company

If you look at -- not the absolute, you know, level of activity in the past several years, but just kind of that quarter-on-quarter trends, Q1, Q2, Q3, Q4. That same kind of trend should exist although it is 30% lower than it was last year. But it sounds like you don't see anything out there that would suggest to you that the seasonal trend of the past would be markedly different, it is just going to be at a much lower level. Is that fair?

Colin Dyer

If you got more moving parts than we normally have, so against a market stable and growing, you can impose a seasonality, you have got some unknown overall downtrend still at play. So they are just more moving parts.

Brandon Dobell – William Blair & Company

Okay that is fair. If you look at the second quarter run rate or operating or administration expenses, is that a good benchmark to kind of build out the rest of the quarters, the next two or three quarters are even four quarters from a dollar spend perspective, you have been pretty successful on the cost side, just trying to get a sense of relative to that 175 million you talked about at the outset, if that at this current run rate is the right place to start or do you think there is more knock-on effect in the cost we haven't seen flow-through yet?

Lauralee Martin

I think that should be pretty close. You do have some variations in things like travel that will match the seasonality and, because our travel is very much business and client related. So you have that and then the other piece is, we will have expenses come into the operation with the outsourcing wins. Clearly there will be revenues that will go with them as well. Again that could change, but if it changes it would be for good growth and profit reasons, not because we have backed off of any cost control.

Brandon Dobell – William Blair & Company

Focusing on that outsourcing business for a second, can you characterize for us, let us call it, the pace of RFPs or the pace of potential opportunities out there, maybe any color around relative size, are you seeing bigger RFP's, you are usually seeing bigger opportunities. Then final question would be, it is going to be bit of a difficult question, but how do you guys think about the profit margin in the corporate services business, more specifically the property facilities management business relative to the rest of your operations. I know that transactions are going to be low these days, but transaction margins are low these days, but trying to get a sense of looking out on a longer term basis, how we should think about your structural margins and focusing on property management?

Lauralee Martin

The pipeline is very strong. So not a slowing. I think our people would say that the size of the outsourcings are up and up fairly dramatically as corporations are taking the need for cost control to the next level. In terms of margins, the margins of our FM [ph] business in the US, where we have considerable scale are quite attractive. They are decent in Asia and Europe where we don't have scale they are marginal. Relative to the other business lines, they track with the normal pricing that we have in the marketplace. So tenant representation, as you know we showed you the Staubach margins at the time of the merger and that would continue our project management business. Again we -- that is as a percentage of cost and it is an attractive business to us. And so it is a business that we find very attractive both for its annuity characteristics but also because of its margin and profit contributions.

Brandon Dobell – William Blair & Company

And final question --

Colin Dyer

Just a bit more color, our highest win rates are in the multinational cross-border awards, and in that area we can see year-on-year a quarterly win rate, which is double last year, a quarterly number of RFP's one which is double last year's level. It gives you a feel for the strength of the market, the demand in the market as well as our performance against that demand.

Brandon Dobell – William Blair & Company

Final question over in investment management, you talked about fee pressure, but hopefully being able to sustain your fees where they are, I guess I want to get a better sense of how should we think about the interplay between fee pressure relative to clients, are there opportunities out there to go get new business. Do you think you could use pricing as a lever to increase your AUM. I guess you are strong [ph] pricing dynamics around that business right now, and how you feel comfortable that you can kind of maintain that advisory revenue if indeed you are seeing fee pressure?

Lauralee Martin

The biggest pressure out there, which is what the industry is facing, is on committed funds, because clearly no one wants to rush to get those assets under management, because that would not be a smart thing to do. So that is probably where there is the most pressure. There is pressure on the balance of it, and there is client relationship pieces, I think there is a nice balance that says, when there is not enough revenue to properly manage the assets that is really the issue, and so the opportunities that Colin mentioned on potential takeovers are really driven by the fact that there were businesses that were going to earn the money on incentive fees. They are not going to get that incentive fees and now they do not have the resources to keep adequate staff of the talent and caliber to manage those portfolios.

So yes there is tension, but it will be played through, but I think again focusing on what you really want in that portfolio is the performance of the assets will be the balancing factor.

Colin Dyer

And these decisions are really not being taken on price, meaning fees. Clearly that is an element of the scorecards that investors will use or institutions will use in selecting their managers, but far more important to most of them is the point Lauralee made about performance, but it is also one of their feel for the quality of the team, the level of trust, the level of historic communication, which the management team has shown to its clients. In all of these factors, particularly in an environment where people for cautious, all of those factors we believe are as important or more important than pricing at this stage.

Brandon Dobell – William Blair & Company

Okay, I appreciate it. Thanks a lot.

Operator

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

David Gold – Sidoti

Hi, good morning.

Colin Dyer

Good morning David.

David Gold – Sidoti

Just want to follow up a tiny bit if we can on cost cuts in the quarter, I guess one thing we should have been more conscious of is potential for, where sort of the line is basically reducing cost without say cutting into muscle, and so I know that something that you have been very focused on, but just curious sort of how we think about that and sort of where we are on that, and I guess we're the point that we are, maybe as lean as can be or is there still some more potential for cost cuts?

Colin Dyer

I think we're beginning to feel the bottom of the recession, and if you say that cost cuts sort of broadly max the shape of the recessionary curve, I would say that we are coming close to the point in which we are not looking to make more radical cuts in the cost base of the business. Clearly, as Lauralee said, we will have the continued benefits of year-on-year on costs we have made over the past 12 months. That will come through in coming quarters. We clearly are still very focused on tight cost control, but it is the point of the cycle where we believe that we have got good teams in place. We have lost some of the inevitable fat, which you build up as an organization during growth periods. We certainly look to removing our poorest performers in revenue generating terms, we have kept the best and indeed we have been adding to the best. So our focus over the coming 6 to 12 months be shifting towards driving revenue growth and building revenue line, because we think we are beginning to get to the point in the cycle, when that becomes the next imperative.

David Gold – Sidoti

I see, okay, so from where we sit today then presumably (inaudible) is not over?

Lauralee Martin

I would say this costs [ph] is managed. There is no question that our businesses that have the cost in them have bonus pools, and profit-sharing that if they do not see the revenues, they will take appropriate actions, but they also know it is disappointing and I think you referenced, when you said when you get into muscle, that there is that tipping point where you lose a place in the market because you don't have the critical mass, and I think what we have shown with all the examples we have tried to give you is that we have not done that. That we have been able to keep our tipping point and take advantage of the fact that others tipping point has fallen through.

David Gold – Sidoti

Okay, and then just one other I know you mentioned in the release about LaSalle Investment Management raising $1.1 billion during the quarter, and just curious if you can give any color as to a certain funds [ph] separate accounts, and B, a target or not, if the funds are targeted on a certain geography where that would be?

Lauralee Martin

Yes, the majority of that money David was in our securities business. In the first quarter, we mentioned a couple of private funds, which was in Canada and Mexico, and our ventures in Europe. They are modest. I think we only had a couple of hundred million in the private sectors. So most of it is securities.

David Gold – Sidoti

Okay, good. Thank you both.

Operator

(Operator instructions) There are no further questions at this time.

Colin Dyer

Well, thank you operator. With there being no further questions, we will conclude today's call. I would like to thank all of you for participating and for your continued interest in Jones Lang LaSalle, and that would cover our investors, analysts, but also our many colleagues who listen into these calls. Thank you all and we will see you all on the Q3 call.

Operator

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

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Source: Jones Lang LaSalle Incorporated Q2 2009 Earnings Call Transcript
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