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Jones Lang Lasalle (NYSE:JLL)

Q4 2011 Earnings Call

January 31, 2012 6:00 pm ET

Executives

Colin Dyer - Global Chief Executive Officer, President, Chairman of Global Executive Committee and Director

Lauralee E. Martin - Chief Operating Officer, Chief Financial Officer, Executive Vice President, Director, Chairman of Global Operating Committee, Member of the Global Executive Steering Committee and Member of Global Executive Committee

Alastair Hughes - Chief Executive Officer of the Asia-Pacific

Analysts

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

David Ridley-Lane - BofA Merrill Lynch, Research Division

David Gold - Sidoti & Company, LLC

Sloan Bohlen - Goldman Sachs Group Inc., Research Division

William C. Marks - JMP Securities LLC, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Unknown Analyst

Operator

Good day, and welcome to the Fourth Quarter 2011 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 report on Form 10-K for the year ended December 31, 2010, 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, and hello to everybody joining our call today. I'm in Singapore where it's 7 a.m. This is one stop on a 5-week trip that will take me around Asia of our -- 8 of our Asian markets. And with me this morning is the CEO of our Asia Pacific business, Alastair Hughes, who will comment on market conditions and on our successful achievements in this key strategic region where we're doing so well, and I'm sure he'll be happy to take questions from you later on. Lauralee Martin, our Chief Financial and Operating Officer, also joins us. She's in Chicago, and she'll be discussing our financial results in greater detail in a few minutes.

But first, to put our remarks into context, here are the headlines on our performance and some comments on the market environment in which we achieved them. We are pleased with our 2011 results. Revenue totaled a record $3.6 billion for the year, up 23% from 2010 and a product of double-digit year-on-year growth in all of our operating segments. Full year net income was $154 million or $3.70 a share. Adjusting for certain charges, net income was $215 million or $4.86 a share, a 39% increase from $166 million in 2010.

Performance in the Americas was led by our Leasing and Capital Markets business, improved results in Europe benefited from integration of our King Sturge merger and from our strong Capital Markets' results overall. Asia Pacific delivered record revenue and profits outside continued growth in market-leading businesses in India and China. Our LaSalle Investment Management delivered strong investment performance to its clients earning increased incentive fees. So all-in-all, we completed 2011 in very good shape, and we're well-positioned to generate continued growth this year.

Turning to current economic environment conditions. IHS Global Insight forecast 2012 global GDP growth at 2.7%, down marginally from the 3.7% in 2011. The world's 3 largest economies: U.S., Japan and China, are all expected to grow.

With relatively favorable economic news coming out of the U.S. recently, there were various projections of 2% for the year. Given lingering Euro-zone debt issues it is not surprising that economic risks are so skewed to the downside in Europe. Asia Pacific is expected to grow at the region at 5% in 2012, with China leading the way and solid growth is also predicted, while Japan continuing its recovery from the earthquake and tsunami.

Despite lingering economic uncertainties, key real estate indicators for 2004 -- sorry, it's Q4 2011, showed that most major markets continue to progress steadily through the recovery cycle. Investment volumes are generally held firm, although there is evidence of continued slide to quality assets, to protect against downside risks. Most markets have seen positive net absorption, declining vacancy rates and modest prime rental growth.

To summarize current market conditions, we posted slides on the Investor Relations page of our public website, joneslanglasalle.com.

Slide 3 shows the J&L investment sales clock, which presents capital values in world markets at their differing stages in the cycle. You can see that compared to a year ago, working capital values continue to accelerate in most major markets, however it has begun to slow in others, and capital values have started to fall in Hong Kong, and we anticipated Singapore will also move through the top of the cycle this year. We also believe that this is a temporary correction, however, with value growth probably returning to both markets in 2013.

Direct real estate investment into commercial real estate globally totaled $411 million in 2011, a 28% increase on 2010. Investment markets are proving to be resilient, as real estate continues to attract capital from domestic and increasingly cross-border investors. Volumes were up nearly 60% in the Americas in 2011 to $155 billion; up 20% in Europe to $165 billion; and Asia Pacific investment volumes increased by 6% to $91 billion.

However, these increases were made in the first 3 quarters, and in the fourth quarter, investment volumes showed single-digit decreases over 2010 in all regions, all that year of hesitancy. Prime office yields had held steadily -- is steady in most major markets during the fourth quarter. Rates were maintained on the back of 2 ongoing trends, attractive spreads on the one hand and continued investor demand for high-quality core assets.

Turning to Slide 4, we see a similar story in major office leasing markets, which remained resilient in the fourth quarter. The U.S. net absorption totaled 10.6 million square feet in Q4, up 10% on Q3 for the full year across 15 major U.S. office markets. Those absorption increased to more than 150 million square feet, up 7% from the prior year. Those tick up in on the Europe during the fourth quarter totaled 31 million square feet, nearly unchanged from quarter 3. For the full year, it was a take up just 5% above 2010 levels.

In Asia Pacific, there were higher volumes of gross lending activity in India and same sale levels in Greater China and Australasia, lower activity volumes in Tokyo, Singapore and the emerging Southeast Asian markets.

Office vacancy rates continued to reach downward in all regions. In the U.S., at year end, total vacancy rates dipped to 17.6%. That's 20 basis points below the third quarter, and a whole 90 basis points below the prior year picture. Europe's vacancy rates fell 30 basis points to 9.9%, and Asia Pacific's vacancy rates stood at 10.4% at year end, down 1% from the prior year number.

Prime rental growth slowed in the fourth quarter, growing by less than 1% across 24 major world markets. Beijing was more than 9% vendor growth; and Sydney, a plus 6% or the quarter's strongest performance. However, Singapore, Hong Kong, Chicago and Washington DC both moved negative, in our view, a temporary supply/demand imbalance. And we expect to see a return to positive rental growth in 2012.

So if you summarize all of those trends, what you're seeing globally is a continued cyclical recovery in demand for both rental space and investment service properties. We're seeing a slight hesitancy in Q4, but a good demand base to progress in 2012.

So with that, to discuss our own results in more detail, I'll pass the call over to Lauralee.

Lauralee E. Martin

Thank you, Colin. Before I begin my prepared remarks, I want to note that a portion of our earnings information were somehow accessed and posted publicly about an hour prior to our intended release time. As soon as we learned of the situation, we immediately contacted the New York Stock Change, which briefly halted trading in our stock until we were able to fully disseminate our full earnings release through all public channels. We are investigating how it happened to ensure that it does not happen again.

Now, back to my formal comments. Echoing Colin's comments, particularly given the global economic challenges we faced during 2011, we're very pleased to have finished the year with strong performance across the major majority of our service lines and geographies, which resulted in 23% revenue growth and 29% adjusted net income growth for the consolidated company.

In the Americas region, annual revenue increased 21% to $1.5 billion. This growth was delivered across all service lines led by our transactional businesses. Our Leasing businesses delivered double-digit revenue growth in each of the 4 quarters of the year, and Capital Markets & Hotels, revenues increases of 38% for the fourth quarter and 62% for the year, reflect the continued successful expansions of our Capital Markets' platform in the U.S., as well as in Brazil and Hotels. With our strong fourth quarter performance, we improved our full year operating income margin, as we said to with 1% of the prior year.

Heading into 2012, our transaction pipelines for both Leasing and Capital Markets look solid, and we are well-positioned to continue to improve on our margins in the Americas.

Turning to EMEA. The positive impact across the region of our King Sturge acquisition becomes more apparent with each successive quarter. We moved quickly to integrate our businesses and consolidate our platforms, and the effectiveness of the integration is evidenced by both the top line and the bottom line results that the region delivered in the fourth quarter. As we noted in our last call, our presence is largest in those countries that are best positioned to manage through the Euro market challenges, that being the U.K., France, and Germany. And our revenues in each of those countries as well as in Belgium, Russia and in Central Eastern Europe, were all up significantly in the fourth quarter against the prior year.

For the year, EMEA revenue increased 34% to $974 million and operating income adjusted for King Sturge amortization approximately doubled to $39 million.

Regarding the King Sturge integration, we recognized the charges in the fourth quarter of approximately $21 million and $43 million in the year for staff retention, lease exits, severance and other transaction costs related to the acquisition. Of those totals, $8 million in the quarter and $16 million in the year, was part of the purchase price that the King Sturge partners paid as retention to their non-equity partners, although we account for those amounts on our books of as part of the transaction costs.

Apart from the King Sturge integration, we also took actions and incurred additional restructuring charges in the fourth quarter to respond to uncertainties in the economic environment across Europe, taking costs out of the business in places where market recoveries remain challenged.

Our Asia Pacific region completed a year of strong performance despite the impacts on its Capital Markets & Hotels' revenue, of decreasing investment volumes in the broader market in the fourth quarter, with particularly low Hotels' volumes in the quarter.

Revenue across the region was up 20% for the full year to $816 million, while operating income increased 34% to $66 million. Revenue growth was balanced across service lines, including increases in leasing, and also on annuity revenue streams from property and facility management. Our improved full year results benefited from continued strength in operating performance led by our teams across Greater China, India and Australia.

Turning to LaSalle Investment Management. We completed a second year in a row with approximately $5 billion of net capital raise. Both our private equities and our public securities businesses benefited from the capital-raise activities, which was spread across geographic regions of the globe. We put over $4 billion of capital to work during 2011 in new investments for funds and separate accounts, also across all geographic segments. Furthermore, we completed sales activity in excess of $2 billion worldwide, generating positive returns for clients and incentive fees and equity earnings for the firm.

And last but not least, our investment performance for clients was at or above benchmarks during the year for all business segments. While some shakeout in the industry continues, LaSalle Investment Management consistently proved its competitive strength through its leading investment performance, its capital raise abilities and the resulting steady base of advisory fees.

Regarding our overall financial position, we continue to maintain our investment grade balance sheet and benefit from low interest expense. We reduced our full year interest expense to $36 million from $46 million a year ago, of which our cash interest in the fourth quarter was only $3 million.

In the fourth quarter, we completed acquisitions in Singapore, Indonesia and the Pacific Northwest of the United States, while also reducing net debt by $184 million during that period. Our balance sheet remains a differentiator with our clients and an important priority in positioning ourselves to be able to respond to marketed opportunities in a consolidating industry.

In summary, we are very proud of the performance our people delivered in 2011. We have completed the year in a stronger operating and financial position than where we began, we continue to take market share and we're well-positioned to continue increasing the strength of our it business in 2012.

I'll now turn the call back to Colin.

Colin Dyer

Thank you, Lauralee. Let's look now at the business which drove those results. If you turn to Slide 5, you'll see a few example of recent significant business wins. To supplement our corporate outsourcing business, in 2011, we launched 62 new assignments, expanded our relationships with 38 clients and renewed 41 contracts. Our overall market level of Corporate Solutions business, which serves mid-market corporate clients, won another 51 assignments in 2011, up from 35 in the prior year, in rapidly growing area of our business.

In terms of specific corporate wins, GlaxoSmithKline, selected us as the single real estate provider with 80 million square foot global portfolio. We've supported GSK since 2001, working alongside other service providers, and we will now be a lead provider for this top pharmaceutical and healthcare company.

In the Americas, AMC Theaters, the intent is to deliver project managing services of 4 million square feet of remodeling projects, and UBS reappointed us real estate advisor in 27 countries across Europe.

Turning to investment sales activity. In Seattle, we completed the $77 million sale of 1800 9th Avenue. The transaction marks the first closing of the investment sales professionals who joined us in our October merger with Pacific Real Estate Partners to which Lauralee referred a moment ago.

In the U.K., we advised Legal & General, Hermes and LaSalle Investment Management the GBP 312 million sale of the U.K. Logistics portfolio. Now the major hotels transactions completed during the quarter. They include the $295 million sale of the W Hotel in London.

In leasing and tenant representation transactions and management assignments completed during the quarter, including -- included representing DIRECTV, to lease 630,000 square feet of space in El Segundo, California, which was the largest office transaction in Los Angeles in the last 10 years. And in Slovakia, we negotiated 2 leases totaling 460,000 square feet of logistics space to Tesco International Clothing.

Alastair, some wins in Asia Pacific?

Alastair Hughes

On general property [indiscernible], the world's leading exporter of these products, which is based in New Zealand, we think that's providing project management services into China production facility with a total land area of over 4.4 million square feet.

In Singapore, we sold [indiscernible] Office building for USD $161 million. And the year's largest office leasing transaction in Seoul, [indiscernible] we leased the entire 700,000 square feet [indiscernible] Tower [indiscernible].

Colin Dyer

And finally, we have the fund's management area, where industry changes continue, successful businesses like LaSalle Investment Management continued to do well.

In the fourth quarter, LaSalle raised $750 billion of separate account capital commitments and the year-end results performance exceeded benchmarks for all of its business segments. Assets under management totaled $48 billion at the yearend.

Finally, investors, advisors and financials institutions continue to confirm LaSalle's position as an industry leader with that the comments that included Euromoney's 2011 Best Global Investment Manager in the third consecutive year in which LaSalle has won this prestigious award.

So let's turn to consider the all-important near-term prospects for real estate markets worldwide. Our current projections call for 2012, direct real estate investment volumes to match 2011 levels at around $411 billion, with upside potential in the Americas.

If you look at Slide 6, you'll see that we expect dollar volumes in the Americas to increase by 10% to 15% this year, hold steady in Asia Pacific and softened by 5% to 10% in Europe. High-quality, well-leased commercial buildings in major city centers around the world will remain an attractive asset class for long-term investors. And at Jones Lang LaSalle, we expect to continue to gain market share in this environment.

If you turn to Slide 7, you'll see our projections for changes in rental and capital values in the prime office sector for this year. Total, we expect increases in capital values to slow in 2012, but nevertheless, remain positive overall with an average increase of about 5%. We see a large range of growth prospects on a market-on-market basis, however, from 20% or more in Beijing to minus 5% to 10% in Singapore and Hong Kong.

Property yields will remain generally unchanged in most markets this year, with current levels supported by continued investor demand for core assets. One exception to the flattening trend is the U.S. prime office market, where we expect yields on cap rates, the top 4 product to continue to see downward pressure boosting capital appreciation.

Global leasing volumes in 2012 will be similar to last year's levels. Corporate balance sheets are strong and confidence is growing with sustained corporate occupier activity. The rental value outlook for 2012 shows most major markets expecting to see positive growth with Beijing, Toronto and San Francisco emerging as the strongest performers. And Alastair, just some comments on Asia Pacific?

Alastair Hughes

Thanks, Colin. As you said, the economies of Asia Pacific were forecast to grow again this year. And with the exception of the big international banks, we are seeing this reflected in the real estate growth plans of all of our multinational and domestic Asian clients. We have decent levels of demand for space and there's a healthy level of supply in most markets. And these 2 factors will support good levels of leasing activities.

There's not a lot of western money coming into the Asian investment markets right now, but there are a lot of Asian buyers. And we expect investment volumes to be about the same as last year.

Geographically, the fastest growing markets will be China, India and Indonesia. We have leading positions in each of these markets and our teams will invariably helping our clients to grow.

Colin Dyer

Well broadly, we see 3 trends playing out this year. Firstly, the corporate outsourcing world is going to continue to grow and particularly in Europe, as companies search further efficiencies to deal with the local issues that they're facing.

Second, and as I've already said, we expect the U.S. markets to see solid cyclical growth, and Asia Pacific to see both cyclical and fundamental growth in real estate activity. Europe market growth will be generally flat.

Thirdly, institutional money and emerging market high-end work money will continue flowing steadily to real estate globally as property continues to be viewed as a safe haven against long-term inflation and possible short-term dislocation in Europe.

In our own business we are very positive about our prospects for the year across all markets. In terms of actions for headlines, we will continue to focus on our clients' success in markets around the world. We will maintain our financial strength and flexibility so that we can continue to respond to opportunities, and also to handle any unexpected challenges. We'll continue to manage our costs aggressively, working to our long-term margin targets. And we'll also continue to invest selectively and strategically in future growth and profitable market share.

We're always proud to close these remarks by talking about some of the awards which we received. Honors, which we believe to see -- which we believe reflects our commitment to superior client service and which underscore our leading position in real estate services and investment management.

In Europe, we swept the highly regarded Eurogold Property Awards for Central and Eastern Europe, we won for all the main agency categories. In U.K., we won 3 awards at the Hermes Responsible Property Investment Awards in 2011. In the U.S., we won Best Place to Work Awards in 7 major markets, and we also won the Australian Facilities Management Association's Service Provider Excellence Award.

Alastair Hughes

And if I may, Colin, given the conditions, which our people in Thailand contended so diligently last year, from floods to [indiscernible], I'd like to highlight 2 honors we received there. First, we were named Best Property Management Company in Thailand in the Thailand Property Awards 2011, and the [indiscernible]. These are [indiscernible] Thailand was awarded the country's Multi-Business Person of the Year Award, which recognized the individuals who have made outstanding achievements in both their working and private life.

Colin Dyer

And to finish, certainly, a fitting recipient for that honor. We thank you as well to all of our staff in Thailand for seeing our clients through the recent flooding. And thanks to all of our people around the world for their continued commitment to our clients and the dedication to Jones Lang LaSalle.

So with that, we'll move on to questions. Operator, could you explain the process, please?

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Brandon Dobell of William Blair.

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

I wanted to focus a little bit on how we should think about the cost structure for 2012, and I guess kind of a bit 2-level question. One, it felt like the -- some of the charges came a little faster than we had thought this quarter. So a, how should we think about how those flow through the P&L during 2012 related to the King Sturge acquisition and retention efforts? And then -- how I think about, I guess, either cost savings or cost containment efforts in the different regions relative to where you finished up the year?

Lauralee E. Martin

Let me take that in pieces, Brandon. First of all, we've taken -- of the $56 million of restructuring charges, we've taken $13 million of that was for non-King Sturge. So we have taken actions in order to position ourselves in markets for whatever the economic environment is. So the balance of that was King Sturge, and the principle pieces of that was to consolidate offices and to do some backroom activities. So between all of those, that sort of a run rate savings payback of about $12 million a year, with $6 million of it coming from King Sturge, synergies and the balance of it from rightsizing. And then relative to the balance of what we have left, we've spent about 2/3 of our retentions that we've talked about. So there'll still be more retention. The amortization, again, we are pretty much through the backlog. So we'll have 2 quarters where the amortization runs about $2 million a quarter, and then it drops down to where it's a little bit less than $600,000 a quarter. So the amortization will run off here fairly quickly going into the new year. We do believe we have about $5 million-plus -- it's less than $10 million, but more than $5 million, of further consolidation for King Sturge that principally runs around backroom and technology. So there'll still be some one-time charges potentially mostly done in the first quarter that will get us through that.

Colin Dyer

And as a broad gross picture, Brandon, this year, as we've said, we be very cautious on adding new hires. We have pretty much got a hiring pause on until at least we get through quarter 1 and we can see what's happening around the Euro issue. The exception of that is global. The exception to that would be some of the more obvious momentum areas like China, parts of India. We won't be -- we aren't hiring people because the market demand continues to be very robust. We will not be adding new offices this year with the exception of our usual [indiscernible] China, where we're moving across at already 2 to 3 offices a year.

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

And maybe a follow on to that. You briefly mentioned the longer-term margin targets. Maybe any -- I mean, narrow that down to kind of what your definition of long-term would be or if there's any change in terms of how you -- what you think those margin targets should look like now that you're past the King Sturge acquisition?

Lauralee E. Martin

Well, we haven't backed off of our margin commitments, which breaking them down, the Americas is 12% to 14%; EMEA, 8% to 10%; Asia Pacific, 10% to 12%; and then LaSalle runs 20% with the upside on that for incentive and transaction fees. We will continue to move towards those goals through this year in the Americas and Asia Pacific. So our goal is to get there in sort of the next 18, 24 months. EMEA, it's dependent upon the Euro situation.

Colin Dyer

Yes. We were doing fairly -- we're making fairly good progress towards those numbers in Q1, Q2. Again, we'll weight it harder and after that you'll see it's the way the euro kicked in last year, it already had a significant effect.

Operator

Your next question comes from the line of David Ridley-Lane of Bank of America Merrill Lynch.

David Ridley-Lane - BofA Merrill Lynch, Research Division

When I think about Leasing, U.S. leasing volumes, and I look at the slide that has the change and the projected change in 2012 rentals, what kind of difference or -- it looks like most of the cities in the U.S. are up between 0% and 10%. How does that compare to 2011 rental volumes? And what I'm trying to get is how much will rent increases benefit your leasing volumes in 2012 versus 2011?

Colin Dyer

Yes. We think the overwhelming impact would be on leasing volumes rather than the rental levels, David. Overall, broadly we think that the market activity levels will be flat. That's our planning assumption for this year. But what we are seeing and you'll see in new last year's numbers, even in relatively flat markets across the U.S. and I'll claim that internationally as well, even in relatively flat markets, we are able to pick up market share, very healthily. And so for us, flat markets are just fine if. We'll continue to grow off the back of the available business. I'd just say in general, the -- our sense of business confidence in the U.S. is really quite good, almost as though it's ahead of what you're reading in the press. Quarter 4 GDP numbers in the U.S. were 3% to 3.5% growth, and that is happening against all of the misery that's going on in Europe. So despite the unsettling economic views, U.S. grew quite robustly in Q4. And you see it come through in some of the employment numbers as well. Well, our sense is that there is actually a bit more underlying momentum in the U.S. than forecasters and even our own forecast give us credit for.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. And just maybe one follow up. In this quarter, we saw operating expense growth slightly below revenue growth. Can the company continue to grow costs more slowly than revenue as -- if we see revenue growth decelerate through 2012?

Colin Dyer

Yes. Well, that's the aim. As you heard, we're pausing hiring in Q1. We are very focused on the margin issues. If for no other reason, then the uncertainty around where the euro ends up certainly affects Europe and has a knock-on effect, a secondary effect in the other major regions at LaSalle. So we're being very cautious on cost base. We're focusing strongly on that, particularly in the first quarter and half of this year. So we're expecting to see good results from that.

Operator

Your next question comes from the line of David Gold of Sidoti.

David Gold - Sidoti & Company, LLC

A couple of follow-up questions. First, I guess the 2 sort of go hand-in-hand. One, I was curious if you can comment a little bit more on debt targets. We know first quarter typically have some stuff up, as presumably, we have some catch up for payout and bonuses. But where you think debt will be, maybe on average, for the year? And then part 2, feeling at this stage on acquisition landscape? And would you -- are eyes still open? Would you be comfortable doing going something or do you pause on that, as well as you pause on hiring?

Colin Dyer

Well, let's let Lauralee talk to debt and I'll pick up the acquisition point.

Lauralee E. Martin

Our priority at the moment as we think about cash is things that grow the business. So that would be if there are acquisition opportunities, which Colin can address. Our CapEx, we ended up a little bit less than $90 million, and so a touch more than the $85 million that we told you. But we think will be down $85 million or less next year, and co-investment is about $45 million level. So we had a very strong year end. You can see the receivables on the balance sheet, which we aggressively go after collecting. We do pay our bonuses in the first quarter, but we feel very good about this powerful cash flow that we have for this year. We also have very little in the way of deferred payments for our acquisitions this year. The bigger payment comes next year, so there's a modest call on that. So we'll be weighing all of that. But at the moment, it's a progressive down on the debt level.

Colin Dyer

As a bridge from that to your second point, David, I -- we are expecting the euro situation to kind of be managed through this year, and that to be no major further distractions. Nevertheless, we do have our contingency plan, and in doing that -- doing stress testing our own forward projections, which are more stringent even than our usual ones. We are holding more cash against any liquidity issues resulting from euro disruption. So we are being very cautious. That then means that in the acquisition area, we'll continue to maintain an even higher level of prudence in our balance sheet. We're going to keep that investment grade rating preciously intact through the year. And within that context, our approach to acquisitions is going to be very, very cautious. If we do anything, it will be relatively small-scale. If it's debt-funded, it is strategic, easily targeted. But we are looking at opportunities and looking out for opportunities across the regions, and in LaSalle Investment Management. But again, all of that against the backdrop of the extreme caution in our financial structure.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Got you. Lauralee, would you be able to give us a sense for how much the acquisitions done through the year contributed to the fourth quarter?

Lauralee E. Martin

We -- even with King Sturge, we no longer have that as a separate operating entity because as soon as we can consolidate, we do that. But what we do know, as you can see the market share gains as we performed above market levels in Europe and in the U.S. and all of those are part of those acquisitions. So no, I can't give it to you explicitly, but I think the momentum clearly is there.

Operator

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

Sloan Bohlen - Goldman Sachs Group Inc., Research Division

Just a question maybe we can follow on that. For Lauralee, to have performance on the capital markets side in the U.S. and Europe, will it be possible to try and break out what the King Sturge impact was in Europe and then what the acquisition impact would be in the U.S.?

Lauralee E. Martin

Again, we don't have that. Though King Sturge brought us a very robust capital markets capabilities. So the fact that we have the performance that we had broadly, they'd obviously integrated well with our teams and were big contributors. In the U.S. where we added early to staffing, not just in '11, but back in 2010 to be well-positioned, clearly, you can see that in our results. We had also very strong performance in Brazil. As you know in the first quarter of 2011, we talked about a hotels acquisition that we had to run through comp. And clearly, we had very strong hotels activity in the Americas in the fourth quarter, so we feel good about those decisions. And then what we've also done is picked up the capability and a lot more product types where we had historically been primarily, if not solely office-focused where, today, we have retail, industrial, multi-family, as well as our debt and investment banking capabilities. So all of that is either acquisitions or acquisitions of teams and new people joining us. So it's a robust decision on our part. You've gotten in early in that cycle, and I think you're now seeing the payback.

Sloan Bohlen - Goldman Sachs Group Inc., Research Division

Okay. And then somebody has asked this question I think earlier, but at these in the U.S., can we expect that the -- sort of that early expenditure on acquiring talent that maybe the margin impact is now done and the potential we could see some margin step up for the Capital Markets business in the U.S.?

Colin Dyer

First, the Capital Markets business where we have indeed this year tracked the margin and seen it move very healthily forward. But we are expecting further progress in the course of 2010, but also more broadly across the U.S. business as we move to improve margins through cost control and just to building the business volume of a more relatively fixed cost base. We did have a large number of a brokers early in the cycle. We continue to do that, but in a very much more restrained way as the cycle proceeds. It becomes harder as the cycle goes on to pull people out of competitors simply because they are locked into business flow. It just becomes hard for them to leave it behind.

Sloan Bohlen - Goldman Sachs Group Inc., Research Division

Okay. And is there -- I know, Colin you mentioned that no new offices outside of maybe China and India. But is there a broker-focus that you're looking to hire? Is it still in the U.S.? And are there any markets or segments that you're looking to expand in?

Colin Dyer

Yes, the broker folks in the U.S. clearly, we have said, we are building our Capital Markets business strongly. That is a strategic priority for us. As I've said, showing good results. Our broker business continues to add selectively, where we find really good people. And generally, we will the best and remove the less good, so that our net is less than our gross hiring. And that is largely focused on the cities where we're currently present. So we are not looking to expand hugely short term and in terms of the numbers of cities in which we are operating in the U.S., it's more adding people to existing bases, which is of course in terms of margin accretion and efficient process.

Operator

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

William C. Marks - JMP Securities LLC, Research Division

I want to first focus on investment management and the AUM was down slightly in the quarter, but you continue to raise capital as -- I assume, it's a figure we would expect to grow in 2012.

Lauralee E. Martin

The answer is yes. We did have a slight decline in our securities business, but we had more than that offset in terms of separate accounts and our funds. We have announced that we will be exiting one of our funds in Asia during 2012. But for the assets going off, is that sale occurs, we would be growing our business with new capital raises and investment dollars against that. So in terms of advisory fees, they're relatively, I don't want to say flat, but not a high growth year as we replace those assets going forward.

William C. Marks - JMP Securities LLC, Research Division

And are there any some meaningful incentive fees associated with that?

Lauralee E. Martin

We are expecting both equity earnings and incentive fees in 2012. Incentive fees most likely not until the third quarter. Equity earnings possibly first quarter, maybe second, depending on -- of the timing of everything.

Colin Dyer

While we are raising new money, Will, we're seeing very successful separate accounts, not only people are prospecting or watching our fees for [indiscernible] but also continuing to take over selectively from other managers. I mean the funds world, we -- it's obviously been very quiet period for the last 2 years plus. We are out with a couple of funds currently are getting better reception than we expected, and certainly a lot better than 12 or 18 months ago. So that market feels as though it's beginning to warm up, where we have a track record. It's very much around the points we've made about the outperformance, which all of our businesses are showing against benchmarks, is obviously hugely helpful in going out and talking to limited partners about the fundraising.

William C. Marks - JMP Securities LLC, Research Division

A few other things. One, in the first question, you were asked -- discussing the restructuring charges. Can you just, in total, tell me what is left. And it sounds it's weighted towards first quarter.

Lauralee E. Martin

We have about $5 million of restructuring to go. We would have amortization next year of about $6 million, give or take. We're 2/3 to our retention, so I think the total is like about $26 million, and we've taken about $16 million. And other than that, it's probably mix-and-match, if that's helpful.

William C. Marks - JMP Securities LLC, Research Division

You've taken $16 million of $26 million, so about $10 million left?

Lauralee E. Martin

Yes.

William C. Marks - JMP Securities LLC, Research Division

Okay, on APAC, Lauralee, you mentioned that the -- with the investment sales or capital markets, one of the reasons for the decline was the Hotel business. I mean, there was a pretty meaningful decline. Is that the sole reason or I guess -- I think Colin had mentioned that single-digit declines for the industry.

Colin Dyer

Yes. I would tell you that Asia was a factor. But Alastair, was there some broader sort of Asia Pacific issues in capital markets?

Alastair Hughes

Yes, I think, Will. There were significant market volume declines in Q4 probably because there was very little distress in the system. So the sellers are holding firm on the prices, but buyers are a little bit twitchy because they're hearing effects about the euro. And that slight standoff means that volumes decreased in Q4. Our revenue didn't decrease as much as market volumes because we were taking share. And we're also involved in a couple of quite big transactions that didn't happen in Q4. But will happen, we think, in Q1. And generally speaking, we expect market volumes in Q1 to be pretty healthy across the Asia Pacific and we've got a very good, strong pipeline as well.

William C. Marks - JMP Securities LLC, Research Division

Okay. If we look at further into 2012, broadly speaking, Colin or Lauralee, is the first half of the year, a tougher comp than the second half?

Colin Dyer

Yes, it is. There's obvious reason. Q1 last year, generally, we were talking a clear global cyclical upswing. That came -- sort of hit the flashpoint mid-year both in the U.S. and in Europe for sort of domestic fiscal reasons. And then Asia, as Alastair was just kind of indicating for our Q3 as well. So half 1 in 2011 was relatively stronger than half 2. So when you get into the next year, we're coming off as upon weaker, relatively weaker second half into a relatively strong first half comps. So yes, that's certainly the pattern we would expect that relatively, second half of the year to be easier, just reversing the trends I've described. That's one way of looking at it. Our perspective is simply that we feel we've got good momentum. We've indicated we're feeling good for the year as a whole. And we're looking just to sort of pickup on the business growth quarter-by-quarter throughout the year.

William C. Marks - JMP Securities LLC, Research Division

And just one final big picture question. On margins, if we look at the ability to grow the margin in 2012, it seems that if the comp and benefits line has stayed pretty flat the last few years in terms of margin or as a percentage of revenues. Should we look at that as not really an area of savings and rather than the operating administrative in other line instead?

Lauralee E. Martin

Yes. I would say that, that's probably a pretty steady number. I mean, we'll -- we will look to leverage our support staff for our business producers as much as possible as our growth comes through. And that -- as we do that, that's a mix of some compensation, though a small part of that total piece. And then also, just the overall spend that goes with that. But generally, that's not going to move that number significantly. So it's mostly going to be out of G&A.

Operator

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

Michael W. Mueller - JP Morgan Chase & Co, Research Division

My question was answered.

Operator

And your next question comes from the line of Mark Byford[ph] from Bloomberg Research.

Unknown Analyst

Colin, I was wondering if you could comment on the CMBS maturities that are expected to mature in Europe. I think the estimate is around $100 billion. And just in terms how your Capital Markets business and your outsourcing business could benefit from a lot of banks trying to push that off of their balance sheets in 2012?

Colin Dyer

CMBS maturities in the U.S. So the biggest maturing -- some of maturing debt worldwide is U.S. bank debts in 2011 and 2012. And the CMBS peak is 2014 and '15 from memory. And in all of those next 4 years, it will be a $300 billion a year to be refinanced. That's going to have significant sort of crowding out effects on new lending in the U.S. markets. That's also going to challenge refinancing capacity as well. That against the background with the U.S. CMBS market last year struggled against the $35 billion against a hundreds plus 5 years ago. So there's quite a significant refinancing pay coming through the pipe over the next 2 or 3 years. That is in turn beginning to drive the reverse effect or the reverse side of that refinancing level which is -- refinancing [indiscernible], which is a level of sales of distressed assets, note sales, banks selling off debt and that's being purchased by funds, which are being formed, and will be in place in several years to pick up the activity. What has happened today has been that in both Europe and the U.S., there's been relatively little pressure to deal with these distressed issues of poor financing structures. We see that beginning to change, and it's been changing because banks, regulators are forcing actual activity and in the banks balance sheets have now been rebuilt particularly in the U.S. to the point where they can take the losses to deal with issues. Having said that, it's not a tsunami. It's a stream of activity. It sort of supports the numbers which we have described at our total capital markets projections for the year, so overall flat with some slight ups in the U.S. and some slight downs possibly in Europe. So it contributes to the activity. But it isn't going to produce any increases above the number we projected for markets as a whole.

Unknown Analyst

Okay. And then just lastly, I'm just wondering, if you could provide some color around what you're hearing from decision-makers for commercial real estate investors in terms of fund flows, making decisions based on any kind of currency movements. I mean, I think the Financial Times said in article how that talked about how Japanese funds are being pulled out of the Brazil market because there will be depreciation of the yen and some of the regulator -- because the Japanese regulators are looking at those markets more closely, and there is concern given the amount of inflows that we're seeing into the U.S. market that, that might -- last year that, that might cause some outflows potentially given that it's been -- the Japanese yen has been depreciating against the U.S. dollar. Are you seeing any of that or hearing anything on those types of decisions from real estate investors globally?

Colin Dyer

Well, overall picture, we're seeing money continue to flow into real estate into core assets, in particular, still not a lot of taste for high-risk activities. So its core and core plus that people have been looking for. That makes the European -- some of the bigger European cities and the big liquid U.S. markets obviously attractive because of those characteristics seeing we'd go for Tokyo. In terms of where money is coming from, we're seeing a lot of money flowing from Asian and Middle Eastern sources of capital. And that's sovereign wealth, its high net worth, and some corporate money and it's slowing into the U.S. and Europe. We're seeing money, as Alastair said, within Asia, investing a lot in Asia, so those flows are established and robust. We're now seeing a lot of American -- sorry we're not seeing a lot of U.S. money, look to go outside of the U.S. at this stage in the cycle, it's very domestically focused. And as for the currency risk issue, people don't really invest with that upfront of mind, although in real estate it tends to be at over a sort of 5- to 7-year or plus hold cycle where people really have trouble taking a position on a currency. But what we have heard -- I have heard just the last few days in Asia Pacific is German funds investing in Asia and saying, "Please don't worry about hedging the euro." In other words, they're bearish on the euro and they're quite happy to see that exposure unhedged and take any appreciation they see through Asian currency exposure against the euro.

Alastair Hughes

I would just add to that. I could agree with Colin. It tends to be one -- just one of the factors. So if you look at all the Asian money from Malaysia, Indonesia, Singapore, Hong Kong [indiscernible] Market, the reason that it's blended is in fact, the buying there -- is that they're applying different regions. And right at the end, it is [indiscernible]. It's just another reason, but it's not the driving reason.

Operator

And there are no other questions in queue at this time.

Colin Dyer

Well, thank you, all, for that. And we'll close today's call. Thanks all of you for joining us again, today and for your interest in Jones Lang LaSalle. And we look forward to speaking to you again at the end of the first quarter. Have a good day.

Operator

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

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