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Jones Lang LaSalle Incorporated (NYSE:JLL)

Q3 2012 Earnings Call

October 30, 2012 9:00 am ET

Executives

Colin Dyer - Global Chief Executive Officer, President and Director

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

Analysts

David Ridley-Lane - BofA Merrill Lynch, Research Division

William C. Marks - JMP Securities LLC, Research Division

Todd Lukasik - Morningstar Inc., Research Division

David Gold - Sidoti & Company, LLC

Operator

Good day and welcome to the Third Quarter 2012 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, 2011, and in other reports filed with 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 welcome to everyone joining this review of our results for the third quarter 2012 and for the first 9 months of the year. Before getting into the quarter, just a few administrative points. First of all thank you, all, for joining, particularly those who are in the path of Hurricane Sandy over the last 2 days. We hope you escaped reasonably unscathed. We, as a result, as the operator just said, will be posting a transcript of the call on our website and indeed will be recording this call for those of you who are unable to make it, and we do have indications that there are few of you on the call as a result, this time.

From our perspective, with respect to our clients, it's still much too early for us to tell the extent to which they have been impacted or damaged, but clearly, business in the New York and New Jersey area will be severely dislocated for the coming few days. But our teams have been active over the last 24 hours in coming to client's assistance, and will continue to do that.

Final point of administration, I got stranded in Washington D.C, telephones are down and so, you're hearing me on a cellphone. That should work well, but if for any reason it doesn't, Lauralee will take over with plan B on this call.

So Lauralee is joining me, our Chief Operating and Financial Officer. Lauralee is safe and sound in Chicago and she'll be reviewing our performance in detail in a few minutes.

To summarize our results, we continue to win market share and recorded sound performance in what's remained a cautious and challenging market environment. The third quarter revenue totaled $249 million, which is up 5% in U.S. dollars and 8% in local currencies from the third quarter of 2011. Year-to-date, revenue increased to $2.7 billion, 10% higher than in the first 9 months of 2011, and a 13% increase in local currency. For the quarter, we reported adjusted net income of $55 million, or $1.23 per share, and that compares with $50 million or $1.12 a share one year ago. Year-to-date, adjusted net income was $128 million or $2.86 a share, and that compares with $101 million or $2.27 share in the first 9 months of 2011.

We completed 2 M&A transactions during the quarter, acquiring Credo Real Estate, a market-leading advisory firm in Singapore, and merging operations with 360 Commercial Partners, a leading real estate services firm in Orange County, California.

And finally, our Board of Directors declared a dividend of $0.20 per share.

Before Lauralee discusses our results in detail, let me put them in context by summarizing conditions in the global economy and in real estate markets around the world. According to IHS Global Insight, the global economy will grow 2.3% this year, consistent with earlier estimates as hesitant -- as the hesitant worldwide recovery continues. Growth is expected to be 1.3% in advanced economies for the year and 4.8% in emerging markets. Next year, economic growth is expected to reach 2.6% globally, developing economies grew -- slowing marginally to 1.1% growth, while emerging markets grow at 5.1%. Regionally, the U.S. is seeing steady growth around 2% with forward real estate market opportunities on the upside, assuming postelection progress on government finances. Europe continues to struggle as sovereign debt crisis still poses the most serious risk to deliver outlook, and here, risk weighted to the downside. Growth in Asia Pacific is flat year-on-year with no signs yet of the shift from a downward trajectory which China and India have experienced in recent quarters. However, the most recent reports of accelerating industrial production, retail sales and investments in fixed assets in China during September give some confidence that the Chinese economy is stabilizing and growth rates will begin to pick up from the fourth quarter.

So all in all, we see continued gradual, but fragile, cyclical recovery, although with very different conditions, characteristics and potential risks from one region to another.

In this environment, in real estate markets globally, the investment market held relatively steady in the third quarter, while office leasing activity was more subdued. To summarize current market conditions, we posted slides in the Investor Relations section of our website, joneslanglasalle.com. Slide 3, shows the Jones Lang LaSalle investment sales clock which depicts capital values in major world markets which were at different stages in their real estate cycles. Capital values on prime assets across 24 major office markets increased at an average annualized rate of 4.4% at the end of the third quarter. For the full year, we expect values to increase by 3% to 4% as rates of growth continue to slow, down from 24% in 2010 and 13% in 2011. Global investment volumes totaled $100 billion for the third quarter, which is 7% below the same period in 2011. Investment volumes in the Americas were 8%, above the third quarter of 2011, at $44 billion. Market volumes in Europe totaled $33 billion, and that's 22% lower than in the prior period of last year. And Asia Pacific recorded $22 billion in investment volumes for the third quarter, down 5% year-on-year, but relatively steady on a year-to-date comparison.

On Slide 4, we project year-end global investment sales volumes at $400 billion, broadly matching 2011 levels as prime properties continue to attract significant investor interest.

Turning to Slide 5, we see a picture of conditions in leasing markets worldwide. Prime rents across 24 major office markets increased by 0.4% in the third quarter affecting further slowing in rental growth. The trend does remain positive in most markets however. The scattering of cities between 2011 and 2012 charts shows the widely divergent market conditions that we're seeing around the world.

Office leasing activity slowed during the quarter, with year-to-date volumes in all 3 regions now running about 15% below the same period in 2011. Our owner third quarter releasing -- leasing revenues increased by 15% year-on-year in the Americas. Our European and Asian leasing revenues were down slightly in local currency, but this taken together is further evidence of our growth in market share across all regions.

Office rate, vacancy rates continue to trend lower in the quarter. The global office vacancy rate across 94 world markets now stands at 13.2%, and that compares with 14.5% at the peak of the vacancy cycle in the second quarter of 2010. Vacancy rates ranged from 17.2% in the U.S., the lowest level in 3 years, to 9.7% in Europe and 10.6% across Asia-Pacific, the sharpest fall vacancy and therefore, the most market tightening recorded in Singapore, Moscow, Beijing and Mexico City.

In office markets globally, cautious corporate occupiers and weak job growth are expected to contribute to reduce leasing volumes for the year, around 15% below the 2011 levels.

And U.S. technology and energy companies end markets in the West continue to dominate demand growth, while some that build markets are starting to contribute to the recovery. Across Europe, current forecasts see gross take-up in the region for 2012 to be about 10% lower than 2011, but roughly in line with the 10-year average. In Asia-Pacific, we expect overall leasing demand to be moderately weaker in most markets for this year, the result of slower economic growth and weaker corporate hiring.

Looking ahead to the final 2 months of the year and despite our healthy pipelines, we anticipate continued transaction caution amongst investors and corporate tenants.

So all in all, the uncertain economic environment continues to determine market sentiment. Nevertheless, as Lauralee will now explain, our new business pipelines remain healthy. We are managing costs tightly. And our results indicate that we continue to take market shares from our competitors.

So with those opening remarks, I'll turn the call over to Lauralee.

Lauralee E. Martin

Thank you, Colin. As Colin mentioned, our consolidated results for the third quarter demonstrated the firm's stability amidst varied market conditions across the globe. We grew fee revenue by 5% on a local currency basis over the third quarter of 2011. We had another quarter of solid performance in our annuity businesses, particularly across Asia Pacific and the Americas for each delivered double-digit local currency growth in Property & Facility Management. The investments we made in our platform over the last several years have increased transactional revenue in key markets and contributed to market share growth. We also have healthy new business pipelines that have positioned us for a good finish in the seasonally strong fourth quarter.

In the Americas, fee revenue increased 10% in local currency from the third quarter of 2011, led by leasing revenue growth of 15%. We continue to focus on building market strength and improving our share position, and can report further progress this quarter. Our 15% growth compares favorably to overall leasing volumes which were down 14% in the third quarter. We have also expanded our Property & Facility Management annuity revenue base, achieving 10% local currency growth in the third quarter on a fee revenue basis. Our Capital Markets & Hotels business grew 8% in local currency, 26% year-to-date and has a strong pipeline going into the end of the year. Operating income and EBITDA margins for the quarter improved 50 and 60 basis points respectively on a fee revenue basis.

In EMEA, fee revenue decreased 3% in local currency from the third quarter last year, driven by slower transactional activity due to euro uncertainty. While leasing revenue was relatively flat compared with last year, down 1% in local currency, we have built strength with the corporate occupier clients through our Corporate Solutions business, which is helping to offset reduced market activity. Capital Markets & hotels decreased 9% in local currency where securing financing for deals remains a challenge.

Despite difficult underlying markets, our people have a positive mindset about year end, that is, the result of winning new client mandates, expanding market share and successfully integrating the merger with King Sturge over the past year. We have continued to be disciplined on costs, and our year-to-date expansion of margin demonstrate the actions we have taken to date have proven to be effective. Included in the third quarter restructuring charges are additional costs for downsizing in the Southern euro markets, as well as additional lease exit cost which will deliver future savings in 2013 and beyond.

In Asia-Pacific, fee revenue increased 9% in local currency in the third quarter and increased 7% year-to-date. Our annuity business, Property & Facility Management, produced 17% fee revenue growth in local currency in the quarter, reflecting continued expansion of our high-quality platform for corporate occupiers, providing a steady base of stable income for our results in the region. Increases were most significant in Australia, Greater China and Thailand where we're winning business with locally headquartered multinational corporations and large investors. Transactional activity was down across the region, which has negatively impacting margins as transactional revenue tends to be higher-margin business. The region also has been impacted by inflationary pressure across the region, particularly India and China which has increased fixed compensation cost. LaSalle Investment Management's third quarter advisory fees were consistent with the first and second quarter 2012 levels, even after significant asset sales over the last 12 to 15 months. As we mentioned last quarter, we believe current levels reflect the baseline level of activity to be expected from LaSalle Investment Management but we expect future enhancements to their results driven by their capital raise-abilities and continued delivery of leading investment performance. We're also pleased to report over $11 million of incentive fees reflecting our performance for our clients, as well as more than $10 million of equity earnings in the quarter.

With respect to the balance sheet and cash flows, we paid down $60 million of debt from a year ago, $35 million in the quarter, and remained committed to maintaining our investment grade rating. Our year-to-date acquisition spend has been modest as we focused in the U.S., primarily on hiring individual market makers, and concentrated in Europe on integrating King Sturge. We have co-invested to support LaSalle's efforts to raise new funds and to win new separate account mandates. Our older vintage funds continue to be harvested, often with equity earnings and incentive fees.

Our third quarter results varied by region, but taken as a whole, indicates solid performance across uncertain and cautious markets. Increased market share, solid annuity revenue growth, and focus on converting our strong pipelines position us for a solid fourth quarter finish to 2012.

Let me now turn the call over to Colin to discuss some of our recent business wins.

Colin Dyer

Thank you, Lauralee. Referring back to the slides once more, Slide 6 shows a few examples of the new business wins which Lauralee referred to, and which contributed to our third quarter results. Beginning with our Global Corporate Outsourcing business, we've won 39 new assignments to date this year, expanded our relationship with another 31 clients and renewed 31 contracts. In Beijing, for example, after we secured the 270,000 square-foot lease for Renren, the social networking company which is China's Facebook, we were appointed to provide facilities management and project management services for a further 410,000-square feet of space. That lease was Beijing's largest to date this year, and facilities management assignment represented the first time that a Chinese corporation has engaged an integrated service provider to deliver the full scope of facilities services and the fit-out was our largest in China so far this year. We also saw growth in our local market Corporate Solutions business which focuses on mid-market corporate occupiers. To date this year, we have won 45 new assignments totaling nearly 90 million square feet in this sector. In second quarter investment sales activities, we advised on the largest single-asset seller in France since 2007, a EUR 500 million sale of a retail complex on the Champs Elysee in Paris. And in the Germany's biggest transaction this year, we advised on a EUR 784 million sale of 2 landmark buildings in Frankfurt. Major leasing, tenant representation and property and asset management wins for the quarter included an 811,000-square foot lease in Calgary for Canada's Imperial Oil.

The big news at LaSalle Investment Management is that on October 1, we announced a public offering to raise up to $3 billion to our non-listed REIT. The Jones Lang LaSalle Income Property Trust, or JLLIPT, is an open ended fund with a diversed -- diversified portfolio of high-quality income-producing assets located primarily in the United States. The fund differs from earlier non-listed REITs in terms of its daily pricing, improved liquidity and lower upfront fees. We're especially pleased with the fund's distribution relationship with Merrill Lynch and their commitment to offer it through their 16,000 financial advisers. JLLIPT is strategically important for LaSalle Investment Management and a significant step towards -- forward to expand our client base into the individual investor space. Over time, we expect the fund to grow assets under management for LaSalle.

In terms of market prospects, we've already talked about conditions through to the end of this year. Looking ahead to 2013, preliminary projections show investment sales volumes matching this year's levels at around $100 million -- $100 billion per quarter, with potential upside particularly in the Americas where volumes could be as much as 25% higher than this year. We expect capital values to an increase -- to increase by an average of about 3% next year. We anticipate that global leasing volumes will be 5% to 10% higher in 2013, up 10% to 15% in the U.S., 5% in Europe, while Asia-Pacific market volumes, which have been in record levels in 2011 and '12, are expected to be down about 3% next year.

Prime rental growth next year is expected to broadly match this year's rates at around $0.03 on aggregate, with most major markets registering a single-digit growth. Slide 7 shows Beijing and San Francisco will, once again show the strongest rental performance, while London, Moscow, Sydney, Tokyo and Hong Kong will also register above average growth in the 5% to 10% range.

In the funds management sector, institution investors continue to commit new capital to real estate because it still offers attractive relative returns, but they're doing so with great care and caution. At its strong third quarter equity earnings and incentive fees demonstrate, LaSalle Investment Management will be well-positioned to deliver superior performance to its clients in this environment.

So for next year, we anticipate markets that are not going to get worse, but at the same time, not improving as quickly as businesses as might hope. There are encouraging signs. The U.K. emerging from recession and China perhaps, turning around its declining growth rates. But there are also global-scale issues that concern business confidence, the postelection fiscal cliff in the U.S. and the ongoing issues with sovereign debt in Europe being the 2 principal examples.

Most of our annuity businesses will continue to grow. Fee revenues in our Property & Facilities Management business were up 10% year-on-year across our operations during the third quarter, and grew 17% in Asia Pacific. Large numbers of corporate clients will continue next year to look to outsource, to manage and reduce costs, playing to the strength of our Corporate Solutions business globally and indeed, our European corporate business. In our European corporate business, the pipeline of new opportunities is up by more than 30%. These annuity businesses are countercyclical, supporting revenues when transaction's slow. So we remain confident that we'll continue to grow next year just as we have in similar market environments this year. We are confident that we'll continue to take market share, which not only contributes to near-term performance, but also puts us in a very good place when the recovery finally gains momentum. We're maintaining our discipline on costs, while also working to increase productivity across the business. And finally, we can expect competitors lacking a command in global platform to continue getting weaker.

To close our remarks today, we'd like just to mention some awards we've received reflecting our commitment to client service and to our industry-leading position. 2 recent examples, we were named Best Corporate Citizen by Corporate Responsibility Magazine, the only real estate-related firm to be so honored. And in Asia-Pacific, we were selected as the #1 overall real estate adviser in the region at the 2012 Euromoney Real Estate Awards, the second consecutive year in which we have received this top award.

So on that some positive and happy note, I will pause and invite your questions. Operator, could you please explain the process?

Question-and-Answer Session

Operator

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

David Ridley-Lane - BofA Merrill Lynch, Research Division

You've had a bit of a slowdown in advisory and consulting revenue this quarter, and if some of that is transaction-related and some is more contractually recurring in nature, is there anything to read through from that 3% year-over-year decline in local currency for that service line?

Colin Dyer

David, only that, as we described in the commentary on the market, we're looking at very hesitant confidence around both leasing and investment markets. And the advisory -- a part of the advisory work is very discretionary and it's the sort of work which when people feel good, they move ahead with, and when they feel less good, they tend to dial back or delay on it, so it's probably, principally, a reflection of that phenomenon.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. And clearly, great market share gains in the Americas leasing. I was wondering if you can maybe review the headcount additions and wondering if you're continuing to add broker headcount here as well?

Colin Dyer

Yes, we are. The pace of growth in numbers has been dialed back somewhat. It gets tougher as you go through the year to do that. And it actually gets tougher as you go through the cycle indeed to do that as brokers in competitive countries have vested interest in deals which are well underway. So the numbers have been slowing a little bit. Lauralee, do you have it totaled?

Lauralee E. Martin

I think we're up about -- in U.S., about 25, year-to-date, in leasing. In Capital Markets, actually nothing in the quarter. So to Colin's comment, quarter was relatively slow. And again, what we have done is we're finding, as people get closer to the end of the year, they've got a lot in their pipelines and it's much more difficult to move them. So we would expect we'll to start to see movement again when we open up in early '13. We continue to have robust conversations, people are very interested in our platform. And so it's clearly one that, we think, has momentum, but it's tougher to move people as markets get to the end of the year.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Sure. That makes...

Colin Dyer

But as you commented, the actual revenue numbers are growing nicely, and that's a good indication of the productivity of those people we have hired in the past year 2, 3, is now coming through and growing as we would plan.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. That all makes sense. And then, what's the relative size of the additional Southern Europe restructuring and what's kind of the ballpark for the estimated savings per quarter?

Lauralee E. Martin

Of the severance that we took in the quarter, was $1.6 million for severance and other. You don't get as much of a payback, unfortunately, out of European, as you do otherwise. So generally, I would -- you'll see it in 2013. But our view is it's more to offset what we think will be slower revenues, than necessarily, you're going to see an improvement in a bottom line margin. It's really protection of bottom line margin.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. And so, will you expect a few million dollars in the fourth quarter for structuring related to King Sturge, or are we finished with that?

Lauralee E. Martin

The King Sturge that's left is still the contractual retention. So if we think about that, that could -- that's still another a little bit less than $2 million, and we still are -- our IT -- we have IT in progress, which is about $2 million as well. So I'm guessing, in the fourth quarter, we could still have between the sum of 2 of those about $4-ish kind of million of restructuring.

Colin Dyer

What we're seeing on our European businesses -- Southern European businesses doing David is, in addition to the restructuring activities, there are leaders that, they are also, at their discretion, taking salary haircuts and bonus haircuts. So they're responding to market conditions in a way that we would hope them -- that they would, which is encouraging.

Operator

[Operator Instructions] Your next question comes from the line of JMP Securities with Will Marks.

William C. Marks - JMP Securities LLC, Research Division

I guess, first I want to ask about the equity earnings in the quarter. I don't know if that was something that -- you talked a little bit about the incentive fee during the quarter, I don't believe we knew ahead of time there would be a big equity earnings. But more importantly, I look back and you're about double the equity earnings from LaSalle Investment Management, what you've been in any year, I think, in your history already this year. What should we expect from this business going forward?

Lauralee E. Martin

That was an unusual quarter. So you're right, Will. And it was broader-based than what we would have thought. So it's a mix of things coming out Canada, Asia, et cetera. So I think what LaSalle is doing is which is what we want them to do for their clients, is looking at all the vintage, taking advantage of where markets have recovered and giving the best return they can off of those vintage funds as the markets do recover. So that's an unusual number. We were delighted to have it because it reflects performance for our clients, but I would not expect something like that going forward.

William C. Marks - JMP Securities LLC, Research Division

Okay. And I assume it's a pretty high margins, or they are high-margin fees?

Lauralee E. Martin

Yes.

William C. Marks - JMP Securities LLC, Research Division

And I guess, I'm going for -- as part of this because of -- if we look back at your equity earnings line, it was negative. Largely negative, I think, at the downturn. And so, is this part of -- you have an ability to markup and generate those equity earnings in the future?

Lauralee E. Martin

You are correct. The markdown is when there's been permanent impairment, and that was done through evaluating what was happening in those markets. And we cannot markup on things where we are under that method of accounting until there is an event. And so, what we have had is events, which means properties are being sold, being realized at better than anticipated values which is very good performance by our people, and then we do have the gain off of that. So there's a mix of somewhere, there may have been a markdown and somewhere, there was not, and we just actually had terrific performance.

William C. Marks - JMP Securities LLC, Research Division

Okay, great. On your cash flow, I see you do have the table as per norm, in your PowerPoint presentation. It looks to be, because when I first saw that your cash flow over the past year was -- or your debt -- sorry, net debt reduction was $60 million, it seemed low. But could you go through exactly, or I guess maybe over 12-month period, how much you've spent on acquisitions and I guess, acquisitions, CapEx and co-investment?

Lauralee E. Martin

Yes. We -- to date, our CapEx is about $55 million. So we're on a normal trend as we gave you under guidance. We have used about $26 million for business acquisitions. So as we mentioned, it's been modest this year. We have been very much focused on integrating what we've already done. And then, we have had much more activity in LaSalle Investment Management to rebuild some of their new activities that we've talked about and we've had between them about $95 million of cash that's gone into that. And then we get another $40 million of that back, so there's a net piece that comes through. And then additionally, we paid $32 million for previous acquisitions that were deferred payments at King Sturge. We'd be happy to spend more time off-line if any of that's confusing. But I would say that the pieces -- if there's a way to summarize that for you, we're managing the pieces that you want us to manage aggressively, which things like CapEx. We're making sure we're getting the returns off the business acquisitions that we have and are settling those down. And then, we're putting the money into where we think we have the best opportunities for growth. And at the moment, that's very much supporting LaSalle Investment Management as they get back into a capital raising mode to offset the -- what's really come out of harvesting the vintage assets that they are managing.

William C. Marks - JMP Securities LLC, Research Division

How much were the -- I think Colin had mentioned 2 acquisitions during the quarter. I assume it's a pretty nominal amount. I'm just curious if you can mention that.

Colin Dyer

Yes. In the order of [indiscernible] million.

Lauralee E. Martin

Yes, but the cash out on those was $11 million to $12 million, and the balance both head to deferred, our typical structure. So Colin's giving you a gross number, but as you know, we think it's very important for retention to have deferred payments.

William C. Marks - JMP Securities LLC, Research Division

Okay. And then just lastly, on the use of capital. What about share repurchase? We haven't seen that in a while. What's your strategy?

Colin Dyer

So, I'll get that. Well, we've discussed this a couple of times recently. Our main focus currently, apart from the cautious management of the cash flow and the balance sheet as Lauralee described in terms of other returns to shareholders, has been in dividend payments which we've maintained through the recession and indeed begun to grow back again. So our principal attention has been on moving the dividend forward. If we get to a point where in consultation with our shareholders and our board, we think it's appropriate to repurchase shares, we will do that. We don't have any plans at the moment.

Operator

[Operator Instructions] Your next question comes from the line of Todd Lukasik with Morningstar.

Todd Lukasik - Morningstar Inc., Research Division

I was just wondering if you could comment a little bit more on the Property & Facilities Management business sort of may be characterized what inning you think we're in, in terms of rolling that out around the globe in the 3 different regions? And also I guess, how long do you think the double-digit fee growth there can continue?

Colin Dyer

I'm not sure of any of the quitely [ph] appropriate thing to work a comparison to use it. It's been a solid part of our business for a long time on the investor side of our operations where we've had very strong operations in Europe and Asia and we've been growing it with our leasing activity in the U.S. that's on the investor slide. So that solid business, it's sort of midrange profitability in most places, but exceptionally profitable for some Asian geographies. The facilities management side of that, that's the similar work which we do for investors, but this time for corporate it's -- that is growing. It's been a strong franchise for us in the U.S. with our traditionally strong big Corporate Solutions business. And as its growth will what has [ph] reflected the broader growth in our Corporate Solutions activity, so from that U.S. -- strong U.S. base, we grew it rapidly in Asia Pacific into 2005, 2012 period. And so that continues to show healthy growth. As we referred to in the prepared remarks, the Asian Corporate Solutions business continues to grow and develop and those Asian companies are professionalized, and we referred to Renren in China, giving us broader management activities for the first time for a Chinese corporation. The good news and bearing improving news is in Europe where the traditional big corporate is very much self-managed their own real estate activities. And we certainly saw, post-recession, a very significant wave of change in that traditional approach with larger corporations looking to outsource many of their traditionally self-performed real estate services including their facilities. So we expect Europe to show continued healthy growth. And indeed, we had one particular very healthy win in Europe in the course of Q3, which we are not able to talk about at this stage, but that's kind of in Q4.

Operator

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

David Gold - Sidoti & Company, LLC

Just a quick question. Essentially, it seems that the commentary has been kind of mixed in minimum. In one hand, there's certainly some uncertainty in your tones -- in your tone, given the global issues. But at the same time, there's commentary as to the robust pipeline and the healthier strong expectations for the fourth quarter. Just wondering if you could give a little bit more color, sort of on both, essentially the goes-ins and goes-outs and basically, to the extent that there could be some uncertainty as to getting transactions closed. What the holdup is. Is it purely the economy? But essentially, I guess I wanted to get a little bit better sense of we're building a strong a pipeline, but we're still uncertain about it. So just if you could sort of gel the 2?

Colin Dyer

Well, I agree with all of that, David. That's perfect [indiscernible]. You almost answered it for us, I think. It's a very paradoxical sort of the world. And I'll give you one particular quoting in there from our head of Europe. But it's a world in which we see -- we believe we see that business is coming our way because of general uncertainty and hesitancy, and that traditionally favors the strong brands in any markets, and ours is no exception. We've always seen share growth particularly strongly during recessions, for example. So we think there's as an effective kind of the money in the business coming our way for reasons of trust and confidence, we're building share as a result. And that's why our pipelines are pretty much, around the world, in leasing and in capital markets, feel good, feel strong, are better than they were a year ago. The whole challenge -- and that reflects, if you like, a general sense, of people want to get on with business, actually. The question then becomes, what happens with those pipelines, and how quickly are they translated from intentions to the trade to actual deals. And it's there that the whole question of hesitancy, people keeping their eyes on the global news feeds around the big global uncertainties, from the U.S. elections, to Chinese growth rates, to corruption India, to the Europe euro situation, and any slight warble causes these people to be hesitant and not to move on and close the deal. So the velocity is the big challenge and how fast can we move these deals through. We feel our -- we're in -- well-placed. Our people feel confident, as Lauralee referred to in the European context. It's all down to how much confidence do our clients have to finally move things across line and transact. And the quote from our European head when we did our quarterly review from him was kind of -- and he's very cautious German, Christian Ulrich. And he said, "It's really surprising just how good our numbers look. And how good our people feel and how they feel they're really in a strong growth position against the context of everything we read in the newspaper everyday." So there you are. That's about as good as we can do. We're confident. We hope we're conveying that to you. We're positive about our own prospects and the way we're doing business, but we're keeping our hands very firmly on the cost control and cash control levers as well.

David Gold - Sidoti & Company, LLC

Got you. Got to the topple in it [ph]. I guess from the distance, someone interpreted that there is inventory and there is transaction interest, but it's taking longer for things to close, and so that adds to the uncertainty?

Colin Dyer

Yes. And this is -- we're just now coming into November and December, when everyone's suddenly get their minds suddenly concentrated. And we saw last year in, particularly, in December, very rapid closure at the end of the year despite all that's going on 12 months ago around the year. So it's sort of unpredictable. We feel good. Again, the pipelines are good. We'll just watch very carefully to see how our clients' confidence enables them to move their deals across the line.

David Gold - Sidoti & Company, LLC

Perfect. And then just last. Just having some phone trouble, but I didn't quite catch -- Lauralee, did give any guidance as to fourth quarter, either in kind of the user [ph] equity earnings expectations?

Lauralee E. Martin

I didn't comment -- whatever would occur, we're not -- at this point in time, I can't anticipate it because it would really be just if transactions do occur. But it's not, at this point, anything that would rise to a level that I would be flagging it or making you aware because our people don't, at this point, know it either.

Operator

You have a follow-up question from the line of Will Marks with JMP Securities.

[Technical Difficulty]

William C. Marks - JMP Securities LLC, Research Division

Sorry about that. I don't know what happened. I guess for Lauralee, the interest expense line seemed high for the quarter. Is it high, or can you give us a little bit of a run rate for that figure?

Lauralee E. Martin

Yes. I would say we do occasionally have lumpiness from quarter-to-quarter. It tends to more be because they might be movement in some of our emerging markets around that. I would go back to what you think is a normal trend. So nothing of issue in there.

William C. Marks - JMP Securities LLC, Research Division

I'm sorry, meaning it was a little bit high during the third quarter?

Lauralee E. Martin

Yes, because there were just some movements in emerging markets, but nothing unusual.

William C. Marks - JMP Securities LLC, Research Division

Okay. And then -- okay. The -- on CapEx, you had mentioned that you have given guidance in the past. I know you have -- was it -- is it $75 million? Or you can you repeat what that is?

Lauralee E. Martin

Yes, $75 million to $80 million, and we're at about $55 million right now, year-to-date.

William C. Marks - JMP Securities LLC, Research Division

Okay. And then on looking at the fourth quarter. Last year, you did give us a little bit of margin guidance and I think that's because margins have been so depressed before, but I mean, any thoughts on margin? Can you offer us anything?

Lauralee E. Martin

Well, it's very much dependent on how much the transactional activities flow through as you do know, each of our quarters contributes margin higher than what the year-to-date run rate is. So we have given you, on our investor deck, what the margin was for the full year last year and then we've compared each time the year-to-date against that. We are on a trend that, if we have a good fourth quarter, we would be continuing to make advances towards our goals, but it's very much transaction-dependent.

William C. Marks - JMP Securities LLC, Research Division

Okay. And then just my last question on -- was there anything in the fourth quarter last year on the revenue side? It did seem that if there was down turn, it happened, at least the beginnings, were in the fourth quarter last year in terms of global revenue declines. Any thoughts on that? I guess what I'm getting at, it's sort of a guidance question is, is fourth quarter an easier comp? However, you want to answer that, if at all.

Lauralee E. Martin

I would not say it's an easier comp. No, we had, obviously, a very good strong fourth quarter last year. Pretty broad-based. And so we're working hard to have a really solid end-of-year.

William C. Marks - JMP Securities LLC, Research Division

Okay. And just one related note. I thought that was my last question, but your comp and benefits line was quite low, I have to guess, at 62.9% last year in the fourth quarter, and I know it does drop in the fourth quarter. Is that exceptionally low or is that a good number to think about for the fourth quarter?

Lauralee E. Martin

I think what you have to look at is we had not focused few on fee revenue last year as we have this year. And we did have some contracts come in, in the fourth quarter that, on a gross revenue, made that comp look lower than it would on a fee revenue. So I would encourage you to go and back and look at the fee revenue comp to revenue ratio, and that would give you better guidance.

Operator

And at this time, there are no audio questions.

Colin Dyer

Good. Well, thank you, operator and thank you, everybody, for your interest in Jones Lang LaSalle. We look forward to talking to you all again in January at the end of our fourth quarter. In the meantime, thank you for your attention.

Operator

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

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