Welcome to the Fourth Quarter 2015 Earnings Conference Call for Jones Lang LaSalle Incorporated. As a reminder, today’s call is being recorded. A transcript will be posted in the Investor Relations section at jll.com. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the company’s annual report on Form 10-K for the fiscal year ended December 31, 2014 and in our other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. Now we’ll turn to Colin Dyer, Chief Executive Officer, for opening remarks.

Thank you. Hello everybody and welcome to this review of our 2015 results for both the fourth quarter and the full year. Christie Kelly, our Chief Financial Officer joins today’s call as usual and we also welcome Grace Chang, our new Managing Director of Corporate Finance and Investor Relations. Grace comes to JLL from 20 years of U.S. and international experience at GE where she held increasingly senior finance and real estate positions. She will lead our global corporate finance initiatives and serve as principle contact between JLL and the institutional investor community. If you have any difficult questions, please ask Grace. Christie will review our financial performance in detail in a few minutes. But let me begin by summarizing our results. An excellent fourth quarter helped us complete another record year at JLL and LaSalle. Fee revenue totaled $1.l7 billion for the quarter, 14% above the fourth quarter at 2014 in local currency terms. For the year, fee revenue increased 17% to $5.2 billion. Adjusted net income was $206 million for the quarter or $4.53 a share, up 14% from last year and that’s after a 42% negative currency impact. For the year, adjusted net income totaled $455 million or $10.01 per share, 26% higher than in 2014, a gain after a full year currency impact of $0.87. We continue to grow through acquisition activity, closing or announcing 24 transactions during the year. And our investment grade balance sheet will allow us to continue to grow through additional acquisitions and significant technology investments. So thinking as a whole, we had a very strong quarter and year, with broad-based double digit fee revenue growth across all of our service lines for the year. LaSalle investment management produced annual revenue growth of 16% local currency and also generated significant equity earnings…

Thank you, Colin, and welcome to everyone on our call. I am pleased to report JLL’s record top line and bottom line financial performance for 2015. As Colin mentioned, we delivered record earnings per share for the fourth quarter and full year despite continuing significant foreign exchange headwinds. Growth for the year was broad-based with double digit increases in fee revenue across all service lines, geographic segments in LaSalle. For the year, we expanded margin on a local currency basis in all segments for the business and delivered strong results in the fourth quarter against outstanding performance in the fourth quarter of 2014. We continue to invest in our people, technology, data and acquisitions to position the firm for long-term profitable growth. Our results reflect the benefits of investments we have made in our platform to continuously improve the quality and scope of our services for our clients while building the long-term value of our company. These results coupled with our long-term perspective translated into further strengthening of our investment grade balance sheet as S&P upgraded our credit ratings to triple B plus in July. And during the last quarter, Moody’s raised their Baa2 ratings outlook to positive. As Colin said, we finished the year with consolidated fee revenue of $5.2 billion, up 17% over last year and adjusted earnings per share of $10.01, up 26% over last year. For the quarter, we delivered consolidated fee revenue of $1.7 billion, up 14% over last year and adjusted earnings per share of $4.53, up 14% over last year. Operating margins in the quarter declined approximately 30 basis points to 16.6% at constant rate, primarily due to timing of technology and data investments made in alignment with our strategic plan. Adjusted operating income margin calculated on a fee revenue basis increased 30…

Thank you, Christie. So to give you a sense of how we achieved these results, Slide 3 offers a sample recent business wins across service lines and geographies. In 2015, our corporate services businesses won 137 new assignments, expanding existing relationships with another 75 clients and renewing 35 further contracts. These 247 wins total nearly 905 million square feet of space across all regions. Our 2015 average win rate was 60% for new business, 79% for expansions and 83% for renewals. A highlight of the year came in December with the early renewal of our contract with HSBC, one of the world’s largest banking and financial services institutions. We are now the bank’s sole global outsourcing provider of integrated facility management services and 97% of their 55 million square foot portfolio across 42 countries. We have also been appointed to provide management services globally for the Australian Department of Foreign Affairs and Trade with more than 1,000 properties in 76 countries. This brings the combined Australian government portfolio under our management to nearly 26 million square feet. Turning to the capital markets, you’ll see major transactions from Chicago to Hong Kong. Focusing on the deals we’ve highlighted in Europe, we’re seeing a shift in business as investor appetite builds for large portfolio transactions. Examples of this includes a €1 billion Aqua portfolio which was a sale of 17 office assets across six countries and the traction portfolio sale of 30 office properties across the continent. This multi asset, multi-currency country deals are complex and few firms can compete them effectively. Clients know that they need the best and most trusted advisors to succeed playing to our strength and driving our market share growth. Our hotels business also had an excellent year with revenue up 15% in U.S. dollars and 23%…

Yes, sir. [Operator Instructions] Our first question or comment comes from the line of David Gold from Sidoti. Your line is open.

Hi, good morning.

Hi, there, David.

Two questions for you. First one is sort of broader. Colin, in both your commentary and maybe some other conversations, there’s been talk about your view of how, let’s say, the length of the cycle has pushed out. And I was curious if you might be up to give us an update on that and sort of current thinking of what’s the potential for this cycle and how long do you think it runs.

You have one question or two, David?

Oh, that’s the first.

Give us the second one and we’ll -

Okay. The second one sort of ties in, although it’s probably a little easier. And that is, as we think about your commentary on equity earnings and incentive fees, we’d love to gain a little more clarity there with also the backdrop that if we think about the commentary a year ago, at that point it was - you also used the word moderate, yet on a combined basis, were up almost 30% year to year. So I just want to get a sense there for, as you were thinking about it a year ago, what was, let’s say, that much more different this year and then how we should think about next year.

Okay, well I’ll take the first half which, as you say, will lead neatly into the question on my statement.

Right. It’s probably really six questions but -

Yes. Let’s just talk around it. We’ve been thinking in terms of a cycle which will begin to peak in ‘17 or ‘18 for some time. So this puts us in the sort of third to fourth quarter of a four-quarter game. Nothing has changed that point of view. We talked about, in this commentary, about some slowing of the investment sales activities across most regions in quarter four of last year. We also said that our perspective at this stage is that given the weight of money of both equity and debt that’s available to invest in real estate and given the appetite for real estate, there’s a relatively safe investment harbor given the problems of the fixed income and equity sectors. We would anticipate continued strong activity in the investment sales markets globally. Whether this Q4 activity is an early warning of a moderation, we don’t know yet. We’ll judge that as we go through this year. But the underlying activity levels are strong in the investment sales markets. The same comments apply in the leasing markets. We’ve talked about sort of double-digit increases globally in volumes transacted last year. And for projections from both the IMS and our own forecast is around underlying global economic growth in the mid-3% across the world for this year, suggests that the economic cycle has got some way to run and that our own experience of our clients seem and continue to take more space for expansion of their businesses. But that trend is solid and we’ll continue steadily into next year. So that’s the way we see things at the moment. Our crystal ball is as clear as usual. But we are anticipating a further growth in our business this year and we’re certainly investing behind that. Christie, perhaps you’d take the question on -

Equity earnings and incentive fees, sure. David, so as you know, it’s tough to predict incentive fees and equity earnings. And where we are right now in the cycle in terms of the fund lives that are driving incentive fees, our expectation is that incentive fees, as I mentioned in my prepared remarks, will moderate in 2016. And I think probably the best gauge is to look at the performance for this year and based on what we’re seeing, would probably be 60% of what we brought in this year based on what we view towards. We don’t have view towards everything. And we do expect that it will be more front end loaded this year. As it relates to equity earnings, and again, based on what we see, our expectation is that equity earnings will really revert more to our historical average which is quite strong. But again, not to the tune of what we experienced in 2015. And the team is just doing an exceptional job - acquisitions, dispositions, investments and the like, on behalf of our investors.

And just remind us where you see the historical average.

Of equity earnings?

Yes.

Yes, we’re kind of in that $25 million, $30 million range.

Perfect. Thank you both.

Thank you, David.

Thank you. Our next question or comment comes from the line of Mitch Germain from JMP Securities. Your line is open.

Good morning. Colin, just trying to follow up with your comments on China and appreciate the color. Maybe just talk about revenue mix in the region. Is it similar to broader Asia where it’s 50-ish percent contractual and then the rest is tied to transactions? Is that a good indication of where you guys get your revenues in that region?

In China?

Yes.

Yes, the regional numbers you quote are slightly different in China where the balance is a bit less on annuity and a bit more on transactions.

And just your commentary suggesting that nothing is really slowing on the transaction side, correct?

No. As I said, I mean, we’re concentrated in the tier one cities and tier two cities. And what we’ve seen is that the, I mean, the switch that’s going on away from the traditional industrial base and towards services and technology companies. And the services and technology companies are intending to focus in the largest cities as I made the comments about the demand for retail, logistics and office space in those major cities actually being quite robust. Where there’s stress in China is in the peripheral tier two cities and in the tier three cities where the industrial base was focused and where you see a clear decline in activity. But it’s working so far in our favor and of course we’re the market leaders there. We are strongly profitable in the region and we’re continuing to grow and expand our teams.

Is there any change in availability of capital from either the equity or lending side in that region?

No, there’s been steady demand for investment group probably in China. It’s tending to switch more to local buyers because insurance companies in particular are beginning to ramp up their purchases of investment grade property and there’s been a bit less interest in the international buyers in China. But the markets have been solid and as we said, the fourth quarter numbers were actually up 50% on the prior year. Availability of debt, again, for local transactions as we find it, Chinese buyers tend to buy with more equity and not as much debt as western investors.

Great. Your outlook, your market buying and outlook for 2016, just curious about EMEA. Is the flat capital markets and absorption, is that a function of maybe a slowing in the U.K. or what’s really kind of driving that because we’re hearing indications are that region storming [ph] is pretty robust from an investment and leasing perspective?

Yes, the U.K. was a bit slower in the fourth quarter last year but it was more than balanced by Germany in particular, also France. And leasing in Paris was very robust in the fourth quarter. The prospects for this year, I mean, Europe is continuing to pick up slightly in its growth rates, Britain has been solid for a while but the continental Europe numbers are beginning to pick up a bit more. And we’re seeing just solid activity across the markets across the whole of the Western Europe. Eastern Europe has been fairly strong. Russia remains a problem. We actually made a profit in each of the last two years in Russia but it’s, obviously given the economic environment there, that’s a challenge. But Europe as a whole, we’ve been very pleasantly surprised by the continuing robustness of our business there, driven by actually the business community is continuing to invest and continuing to gradually expand despite the kind of flattish top line growth numbers in the economies as a whole. And we’ve been continuing to take market share, we believe, across the region.

And to that point, Mitch, when we look at our New York capital markets results, just as a point of reference, we were up 29% year-on-year versus a market that was up 14%. And that’s against the backdrop of outstanding performance in 2014.

Got you. And then last one for me. Your willingness to invest in this market either from an M&A perspective or from a recruiting perspective, could we see the similar numbers that we approached in 2015 or is there likely going to be a bit of a slowdown here?

No, our mindset today is as confident and as robust with respect to hiring, with respect to M&A work as it was a year ago. So as you can’t predict how it’ll come up because you tend to be responding to opportunities that you manage to unearth, we would expect a similar sort of picture for the full year.

Thank you.

Thanks, Mitch.

Thank you. Our next question or comment comes from the line of Brad Burke from Goldman Sachs. Your line is open.

Hey, good morning.

Hi there, Brad.

Good morning, Christie. I wanted to ask in the capital markets outlook and then I appreciate the detail on your outlook, but just how much variability do you think you have around the forecast that you’re given for 2016 and whether any of the weakness that we’re seeing in the same U.S. markets in the U.S., whether that started to translate to weakness in appetite to complete new transactions.

Well, we’ve made the comment about Q4 last year being - investors being slightly a little more hesitant than they had in prior quarters. We’ve also underpinned our thinking for markets that will basically be at or slightly above 2015 levels in 2016. So I won’t repeat that. I think we’ll just watch this during the first quarter and a half of the year. We see underlying interest in real estate from all sources. We talk to institutional investors, any specific pension funds, for example, who are still raising the percentage allocation to real estate. And for the amount of money that’s available to invest in real estate is undiminished. We’ll see how sentiment behaves in the first quarter and whether the point you make about the CMBS markets or other factors begin to weigh on investors’ confidence. But at this point, the fundamental point to continued robust market, it’s similar levels to 2015.

And in terms of the willingness to invest incrementally in CRE, with the energy-sensitive economy, specifically Canada, Norway and Middle East, are you sensing any change in sentiment there in terms of how they’re thinking about incremental investments in 2016?

I’m not close enough to be able to answer that question with respect to the investment funds in those countries. What indications you’ve had, you’ve read probably that Saudi Arabia is disinvesting $60 billion to $80 billion from equity markets globally. So where they are selling, it’s tending to be in areas where they can get rapid liquidity. And that wouldn’t include real estate because the times to yield investments or to liquidate investments are obviously much longer. What I’d say is we’ve noticed across the energy centers like Houston and Calgary, for example, within the North American continent, clear reduction in demand for leasing space and with that, a reduction in appetite for investment sales in those markets simply because the level of demand has come off so rapidly.

Okay. I appreciate that. And then just a follow-up on M&A. Christie, I think last time you had said that you would be willing to eventually take the leverage on the balance sheet up to two times EBITDA, so just wanted to get an update of whether that is still a level that you would eventually target. And then also, considering the weakness that we’ve seen in the public markets, whether you’re starting to see any of that translate into lower multiples in the private markets when you’re looking at incremental M&A opportunities.

In terms of leverage, Brad, we’re committed to maintaining our investment grade balance sheet and focused on structuring our transactions with sound financial discipline. So to that point, we will stay within the swim lanes of being investment grade. And so from the perspective of our net debt leverage right now to where we may be, suffice it to say that we’re very focused on investment grade. As it relates to transactions and multiples, we’ve been pretty consistent in terms of the transactions that we’ve executed and really sticking to the guiding principles that Colin and the team have been executing for 10 years as JLL. And to that point, our multiple range is within the 6 to 8. And we’re pretty consistent in that regard. We’ve got some transactions that are a little lower, some that are a little higher. And then further to that, we always look to structure our transactions with, on average, two-thirds upfront and at least a third deferred. And that deferral is tied to performance, both from a revenue and profitability perspective. We’re really focused on culture and doing integration well, as Colin noted. And so from the perspective of what we see in the private markets, we’re not seeing that, but again, we’re very consistent about what we look to acquire.

Okay, I appreciate it. Thank you.

Thanks, Brad.

Thank you. Our next question or comment comes from the line of David Ridley-Lane from Bank of America Merrill Lynch. Your line is open.

Sure. I was just curious on your thoughts around your real estate services business adjusted EBITDA margin as you go into 2016, especially as some of the property and service management revenue sounds like it could exceed the growth rate of, say, the capital markets business and sort of a little bit of a negative mix shift there that could be weighing on margin expansion in 2016.

Sure, David. First of all, when we look at adjusted EBITDA margin, the performance and the robustness of the underlying revenues is exceedingly strong. And where we look at the annuity businesses and the response from the lack of volatility, while it is a lower margin business in the transaction businesses, it’s actually a good mix, if you will. So we’re looking to really lead our business to over 60% annuity-based income streams. And you can see that in the M&A transactions that we did. So I think we’ll see a leveling, yes, but I think it will also generate an even more robust recurring income platform for our firm and for our investors.

Got it. Colin, did I hear you right that 5% of fee revenue was invested in IT spending in 2015? I’m just wondering, is that operating cost?

Yes, it’s a mixture of operating cost, capital investment and acquisitions.

Got it. And then sort of on the IT operating costs, as you look forward into ‘16, was 2015 a unusually high year and we should expect the IT spending to come down or this is not the right pace for you to be focused on your long-term goals?

Well, our underlying spend in operating cost, we set a target of doubling that between 2012 and 2016. And we are on track to do that. We’re actually proud of that because that’s a real clear indication of our commitment to invest in what’s strategically a very important new aspect to our business which is driving the way in which basic business processes are being supported by technology, be it back office processes or indeed our interaction with our clients in the transactions and in the facilities business. It’s right across the piece. We’re adding technology into our business mix. And so that drive to spend more is a drive to add more technology to our basic business processes. The M&A work, we bought a couple of businesses last year, in particular, Corrigo, which our pure play technology encompasses [ph]. And that’s new for us. But what we’re seeing across our markets is the fact that it’s technology impinging in the way which we are operating our business for our clients and in the way in which our clients want to interact with the markets. And Corrigo is a platform which brings subcontractors in a sort of semi-automated way into contact with ourselves and our clients and we can use the preapproved suppliers on that platform to service our medium and small-sized corporate clients more efficiently. So you’ve got a lot going on in technology and data management. We’ve invested in a team of several dozen people whose sole role is to go around our business globally and over more of our service lines and organize and clean and filter our data so that it’s on a uniform basis, and therefore can form a uniform and consistent information feed for the sorts of technology tools which we’ve been developing which I described a moment ago. So we’ve got a broad-based level of activity in both operational spend, acquisition and capital expenditure in and around the technology sphere.

Got it. And then maybe last one for me. I think the last quarter you talked about watching closely the speed of transactions, the number of bidders on capital market transactions and this quarter you did see some hesitations and pause. Was there any particular theme around that and was that pause more around, say, obtaining debt financing, general placing concerns or bid-ask spreads? Any color that you could place on that will be very helpful. Thank you.

Yes, you can take the debt piece out of the equation. Debt is freely available and it’s still fairly conservatively underwritten my lending institutions. So no issue there. What we did see is something of a cooling in demand at the high-end, in particular, our investment sales markets, a bit more selective purchasing, buyers not chasing risk as much as they might have done earlier in the cycle. We saw transactions indeed tending to slow and that’s one of the reasons why Q4 was a little weaker because we believe that a lot of transactions went through the year end and we’ll continue to complete in Q1 of this year. Certainly that will be the case for us. And your point about the bid-ask spread is an interesting one as well because sellers’ expectations of price have continued to kind of push upwards whilst buyers’ willingness to pay those continuing increased prices have become slightly more hesitant. So when you put all that together and that’s sort of the demand mix that’s swirling around out there. Come back to our other statement, the amount of money, equity in particular, seeking to find its way into real estate is still robust. If you take our own LaSalle business, the 56 billion of assets under management and over $10 billion of funds available to invest in real estate. So they won’t invest that foolishly but it’s going to get invested over the next two, three years selectively in markets around the world. And that’s typical of what you see in other institutions and investment funds.

Thank you very much.

Thanks, David.

Thank you. Our next question or comment comes from the line of Brandon Dobell from William Blair. Your line is open.

Thanks. Good morning, Colin. Good morning, Christie.

Hi, Brandon.

I wanted to focus a bit on incremental margins in the Americas and EMEA. Maybe, Christie, if you could give some color on your level of satisfaction with how the year progressed and how we should think about incrementals looking out ‘16, ‘17 as well?

Sure. I think first of all, Brandon, in the Americas, incremental margin performance for the year was outstanding. If we look at the positive incremental margin drivers in terms of volume across leasing, ISM business, capital markets, I mean we highlighted the outperformance and as well as the hotels business. So absolutely outstanding. When we take a look at the timing of the incremental investments and align it with our strategic plans that Colin, for example, was highlighting, investments in areas such as spread [ph], which is a real enabler and value-add contributor to our clients, I am exceedingly pleased with the market performance in the business. So all in all, positive incremental margin drivers, reinvesting in the platform consistent with our strategic plan, coupled with some slight FX impacts, great job.

Okay.

As it relates to EMEA, EMEA was substantially year-over-year, from an incremental margin perspective, we delivered, as I mentioned in my comments, outstanding performance including the impact of exchange. We’ve had significant productivity gains, nice volume mix, we’ve executed exceedingly well on capital markets transactions, driving incentive performance fees. And all the like, again, consistent with our strategic plan invested in the platform in areas of technology and our people to really drive productivity for the future. As it relates to future performance, we’ve got an excellent base going into 2016. And we’ve got excellent people behind us who are all working to drive performance on behalf of our clients and investors.

Is it a relief to see the same kind of, I guess, headcount additions this year, excluding M&A, I recognize it’s a little bit difficult to predict on a forward basis for how it adds to headcount but across the transaction businesses and maybe should we continue to see you guys pick up people or is there a plan to act differently in ‘16 versus ‘15?

We are always welcoming exceptional performers around the globe. And to that point, our leasing and capital markets businesses consistently have added 5% to 10% around the globe, consistent with what we’ve done in years past. And as well, while bringing those folks in, we’re driving incremental revenue per head of 5% to 10% as well. So fantastic performance as we welcome new producers into our business.

Okay. And then final one for me. As you think about capital spending, recognizing there’s a lot of components in that in ‘16 versus ‘15, or any kind of color on what we should think about for free cash flow ‘16 versus ‘15 would be helpful. Thanks.

Sure, Brandon. Consistent with the last five years of our performance, our capital allocation strategy is centered around $0.50 to $0.55 on the dollar being allocated towards M&A, $0.27 to $0.30 allocated towards CapEx, another 10% to 11% in co-investments to support our investors in our LaSalle business, 5% dividends. For example, this year we had an 18% year-over-year increase in our dividends, reflecting the confidence in our cash flow. And I think you can expect more of the same from us in the future.

Okay, good. Thanks a lot.

Thanks, Brandon.

Thank you. Our next question or comment comes from the line of Michael Mueller from JP Morgan. Your line is open. Just a second. Your line is open, sir.

Okay, great. Thanks. Just a few quick questions. First, for 2015 -

Hey there, Michael.

Hello, good morning. What was the total acquisition volume in terms of dollars for 2015 first? And then secondly, thinking about EBITDA margins, do you think you’re going to be able to improve those in 2016 on a year-over-year basis just given the outlook laid out in the slide deck for cap markets and leasing, and then just what the expectation is with incentive fees and gains relative to last year?

The sum spent last year was $604 million for our M&A. That’s as referred to in our prepared remarks. As to the EBITDA margins, I mean, the market dynamics will be what they’ll be and we’ve made comments on those earlier on. There’s continued predictable strong growth in leasing and we’re expecting capital markets to be at or around the same levels as 2015. But in addition to that, as we grow all of our business, but as we grow in particular in our annuities business, we’re also driving productivity gains across the platform. Christie referred to those. We’ve instilled the culture of productivity improvements across the business. And so, that covers a vast array of types of projects. Christie cared to have mentioned a few of them as a follow-up here. But that will also help to continue this pace of this drive to build our margins down through the years.

Got it. Okay, that’s helpful. Thank you.

Thanks, Michael.

Thank you. Right now, I’d like to turn the conference back over to management for any closing remarks.

Well, thank you, operator. With no further questions, we will end today’s call. Thanks to everyone for participating and for your continued interest in JLL. And we look forward to speaking with you again at the end of the first quarter. Have a good day.

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