Jones Lang LaSalle 4Q16 Earnings Call Notes

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Christian Ulbrich

Brexit vote has created uncertainty for real estate portfolios

“It is too soon to know just how Brexit, the new U.S. administration and other global political uncertainties might affect our own business. Still, it is fair to say that the Brexit vote, in particular, hasn’t created an environment which encourages our clients to take long-term decisions around their real estate portfolios.”

Development in UK has been exceeding our most negative expectations

“As we have outlined, we believe that going forward the transaction volumes will stabilize in the UK on that lower level what we have seen in 2016. We have already quietly not replaced people who were leaving us and have reduced a little bit on the costs. So I don’t expect any significant need to have further reductions in that space in the UK going forward. Now we are staying very close to the situation in the UK, but though the development has been clearly exceeding our most negative expectations which we got for the Brexit but at the end of the day, we are very hopeful that pragmatism will take over and that things will play out fine for the UK going forward.”

Despite all the geopolitical turmoil, pricing for M&A is still very high

“You know what, I think despite all the geopolitical turmoil and other factors which would drive a bit of caution, pricing for M&A is still at the very high end of it and there isn’t really a sign that this is easing. Frankly, we are very focused going forward on integrating our 48 acquisitions we have done in the past. So we’re not overly concerned about the current price levels”

Investor sentiment remains positive for real estate

“Investor sentiment over the course of 2016 went through a bit of the cycle. We saw during the course of the year a bit of an increase in caution. So when you usually had six or eight really strong bidders for a building, it kind of went down to maybe two or three. But at the end of the year, November-December, was very strong again with a very intense competition, and the way we see generally starting, this trend is continuing. So, I think, as I alluded to in my earlier comments, the attractiveness of real estate in that current environment is still very, very high, and we see an increase in allocations and that will at the end just drive further investor sentiment. Now we have to watch a little bit the interest rate environment, but it is incredibly hard to predict. We may see a bit of an increase in the U.S., but we believe still only to an extent which will not change that underlying positive trend for real estate. And with regards to other currencies, I can see very little reasons why these interest rates in those currencies should increase significantly. So, going forward, we are still pretty positive about investor sentiment.”

Time to close is longer though

“Well, frankly, that is not really the case. Because people are slightly concerned about where we are in the cycle, they are taking really their time to come to their final decision, and in contrary to maybe previous years, people are not accepting to be pushed into a decision. They rather walk away from a deal. Now, as I said, we tend to have more than one bidder. That is okay, but the cycle – the time cycle of closing a deal is continued to be slightly longer than we have seen it in 2015 or 2014, and frankly we don’t expect that to change in 2017.”

Christie Kelly

Capital markets revenues down 20% y/y

“Capital Markets revenues for the fourth quarter declined by 20% year over year. Performance reflects the slowdown in investment sales activity and softer investor sentiment, particularly in the UK where market volumes were down 39%. Excluding the UK, Capital Markets performance was comparable to the exceptional prior year in total.”