CBRE Group, Inc. (CBRE) Q4 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter earnings call. (Operator Instructions) As a reminder, this call is being recorded. I'll now turn the conference over to Nick Kormeluk of Investor Relations.

About an hour ago, we issued a press release announcing our 2011 financial results. This release is available on the homepage of our website at www.cbre.com. This conference call is being webcast and is available on the Investor Relations section of our website. Also available is a presentation slide deck, which you can use to follow along with our prepared remarks. An archive audio of the webcast and a PDF version of the slide presentation will be posted to the website later today and a transcript of our call will be posted tomorrow. Please turn to the slide labeled Forward Looking Statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance, business outlook and ability to successfully integrate ING REIM businesses. These statements should be considered as estimates only and actual results may ultimately differ from these estimates. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that you may hear today. Please refer to our fourth quarter earnings report filed on Form 8-K, our current annual report on Form 10-K and our most recent quarterly report on Form 10-Q, in particular any discussion of risk factors or forward-looking statements which are filed with the SEC and available at the SEC's website, sec.gov, for a full discussion of the risks and other factors that may impact any estimates you may hear today. We may make certain statements during the course of this presentation, which include references to non-GAAP financial measures as defined by SEC regulations. As required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures, which are attached hereto within the appendix. Please turn to Slide 3. Participating with me today are Brett White, our Chief Executive Officer; and Gil Borok, our Chief Financial Officer. I’ll now turn the call over to Brett.

Thank you, Nick. Welcome everybody and please turn to Slide 4. The cyclical recovery in commercial real estate is now entering its third year. As we predicted in late 2010, the current recovery is slower, more uneven and more difficult to forecast than those we've experienced in the past. As a result, the relative contributions from our various service lines and geographies in 2011 were a bit different than we had originally envisioned. Nevertheless, we provided earnings guidance at the outset of 2011, reaffirmed that guidance during the course of the year and now have produced full year results at the high end of our guidance range. We are pleased with this outcome. It underscores our ability to deliver on the expectations we set for our shareholders as we do for our clients. And we thank and acknowledge our CBRE colleagues around the world for another in a series of terrific years. For the full year 2011, revenue increased 15% to almost $6 billion. And normalized EBITDA increased to $803 million both second best in company history behind 2007. Normalized EBITDA margin for the year grew to 13.6%. Normalized diluted earnings per share came in at $1.03 which is almost 40% above full year 2010 and as I mentioned near the top end of our $0.95 to $1.05 guidance range. Total Q4 2011 revenues were $1.8 billion, a 7% increase over Q4 2010, with positive revenue growth in every region. Outsourcing growth continued its strong pace with a total increase of 14% and double-digit contributions from all regions. Investment sales revenue increased 10%, driven by continued growth in the Americas and Asia-Pacific, while EMEA remained relatively flat in light of continued sovereign debt issues in the region. While recent revenues exceeded 2007 peak levels for the full year, in Q4…

Thank you, Brett. Please advance to Slide 6. As Brett already mentioned, total revenue was $1.8 billion for the fourth quarter of 2011, up 7% from last year. This increase was driven by growth in outsourcing, investment sales, investment management, commercial mortgage brokerage and development services. Normalized EBITDA grew at a much faster pace than revenue, up 24% to $314.9 million in the fourth quarter of 2011 from $253.1 million in the fourth quarter of 2010, delivering a normalized EBITDA margin of 17.8%, our highest quarterly normalized EBITDA margin since the second quarter of 2007. In the fourth quarter of 2011 in our regional segments, we recognized cost containment expenses totaling $31.1 million, of which $20 million was in cost of services and $11.1 million was in operating expenses. The Americas totaled $15.6 million, EMEA totaled $11.1 million and Asia-Pacific totaled $4.4 million. These costs were predominantly related to severance for approximately 500 positions globally. This action was taken to calibrate our staffing levels to the current market environment and was executed with care to among other things and showed no impact on the delivery of client service. We expect resulting savings of approximately $40 million in 2012 from these actions. Our cost of services increased to 57.2% of total revenue in the fourth quarter of 2011 versus 56.4% in the fourth quarter of 2010. Excluding the impact of the cost containment expenses just mentioned, cost of services as a percentage of revenue was 56.1% for the fourth quarter of 2011, a slight decrease versus 56.3% in the prior-year quarter. Fourth quarter 2011 operating expenses were 34.2% of total revenue versus 31.6% in the fourth quarter of 2010. Excluding the impact of the cost containment expenses and integration in other costs related to ING REIM, operating expenses as a percentage…

Thank you, Gil. And please turn to Slide 18. We believe that the commercial real estate market will continue to recover in 2012 despite continued macro challenges. As for our business, we expect to grow both earnings and normalized EBITDA margins even in this soft transaction environment. Outsourcing of revenue is likely to grow in the low-double digits, one of the faster growth rates among our service lines. Investment sales will grow in line with a broader economic recovery with core assets still being the driver, but with increasing contribution from secondary market recoveries. Leasing growth rates will likely be modest and heavily weighted toward the third and fourth quarters. Any revenue increase in this business would be driven by meaningful employment growth and rental rate improvement in the Americas and elsewhere. EBITDA in investment management will be higher than 2011 due to full year impact of the businesses acquired from ING, while development services EBITDA will be lower due to large gains Gil mentioned we achieved in 2011. By taking advantage of the revenue growth drivers just mentioned and continuing our focus on effective cost controls, our goal is to again achieve 2012 normalized EBITDA margins greater than we achieved in 2011. It is important to note that 2012 performance is likely to be more backend loaded than usual due to the slow transaction environment we have experienced in the heightened market uncertainty. Our outlook for 2012 assumes a pickup in job growth, economic activity and sentiment by the summer. Giving due consideration to all of these factors as well as anticipated higher interest depreciation and amortization expense mainly as a result of the inclusion of ING REIM for the full year, we currently anticipate that full year 2012 normalized earnings per share will be in the range of $1.20 to $1.25. As we told you last year, forecasting EPS in an environment such as this is exceptionally difficult. We may very well update this guidance throughout the year as full year trends become clear. With that, operator, we're ready for questions.

(Operator Instructions) Our first question will come from Anthony Paolone with JPMorgan.

Gil, I was wondering if you could help us with the OpEx and just cleaning that up and taking out some of the things like the severance and just charges related to ING and so forth and give us a sense as to where that number on clean basis was in the quarter and how to think about these cost cuts going into 2012.

Tony, I think the best way to talk through it is to go back to my comments, which suggested that if you take out the cost containment expenses that are in operating expenses, we get to a percentage of revenue that's 31% on a comparable basis to prior year of 31.2%. And that would take out what we've normalized essentially in the operating expense line. And in that line, I think we have $11 million of such costs. So whatever is on the P&L, you can take $11 million out for OpEx for cost containment. And in addition, we have about $45 million of integration cost in that line associated with ING REIM. So a total of about $55 million.

And you mentioned $40 million of savings in 2012 from the severance that you talked about in the quarter. Is there more to come there? Where are you with those expense cuts?

The $40 million is the savings from the action taken in the fourth quarter, which approximates to about 500 positions. So that's the run rate savings in '12 or full year savings that we project from these actions. And at the moment, that's what we have taken to rightsize expense against where we think revenues are going to be against the market environment.

So you're done in terms of those cost initiatives for now?

Correct.

On the leasing side, do you have a sense as to how your market share was in the key regions?

We believe that as we've mentioned before that we are by far leasing brokerage from in those financial world markets. I don't believe it has changed anywhere over the past few years. It is absolutely true, and we're excited about this. For a long time, we've got a competitor that is really nipping at our heels at leasing in certain markets, and it's great to have them. It's been a while since we've had anyone really anywhere where we're at in leasing business, and we look forward to a good fight for share going forward. But I would say that we picked up decent share in most markets and we remained by a pretty good margin the number one leasing firm in most of the major world markets.

When you look at your comps versus some of your competitors for the quarter, Brett, are you still satisfied by the performance there and really chalk it up to the tough comp from back in 2010, or do you think that's a business that is simply getting more competitive, as you alluded to, with competitor nipping at your heels?

I think the quarter is somewhat irrelevant. I think the full year numbers are more relevant. But the trend you're referring to exists in the full year numbers as well. And I think there is a lot of things going on in those numbers and it's different by geography both globally and within the United States. I think the bottomline for us is we have a very, very strong commercial leasing business in most of the major world markets, but there is no doubt that it's getting more competitive everyday. And I think what you're going to see by the way is, and this is very consistent with what we've been talking about for years, this business is rapidly consolidating down to a very small number of players. And the trend you're referring to, that player along with us I believe is going to capture the vast majority of the available share going forward. And I suspect the quarter-over-quarter, year-over-year, those numbers will move a bit back and forth. That trend is absolute. And I suspect that the mid-tier firms and the smaller firms, you're just going to see them lose more and more share every quarter and every year and move more of that share on board to these two firms that are the demonstrated market leaders. I think I'm pleased with the position we have in the major markets, and I think that at the same time, we've got a lot of work to do to retain that number one position in every major world market, because it's under attack everywhere and it's something that we pay attention to. But, yes, I'm generally pleased with results.

On the outsourcing side, the gross rate there has been quite high and I was wondering if you can break that out between how much of it is being driven from added contracts versus pricing, say changes for existing contracts or say, existing client expanding contract?

In Gil's script, he mentioned the number, new contracts, the number of expansions. And, Gil, do you want to just remind me with what those numbers where?

Yes, I have it for the quarter, Brett.

Do you have full year or no?

I don't have the full year handy, but we disclosed it every quarter, Anthony.

And so for the quarter, it was?

For the quarter, I believe it was 13 new, 10 renewals and 10 expansion.

And I would say that the general story on the corporate services space at the moment is that, this does remain a very, very competitive marketplace and there are lots of players that are in that marketplace. We believe we capture a very good share of that space both in terms of new clients entering market but also when existing clients to go re-bid. And I don't have the statistic for the fourth quarter. Our loss rate is almost zero. It's a very, very rare day that a client terminates us in that space and goes with somebody else and we un-board it, in 2011 and particularly in the fourth quarter, some very impressive clients. I think what you're going to see, Anthony, in 2012 and going forward is that this market is advancing much more quickly than we thought it would. That's good news and it's advancing globally, also more quickly than we thought it would and that's also very good news. Yet its no secret to you, these contracts come with significant upfront cost and they can be punishing to short term margins, although we price them and make absolutely certain as we price them that one those accounts stabilize, their run rates margins are very good. But you're going to see I think forever and going forward and you've seen in 2011 that these are very expensive accounts that come in with real cost and for quarter or two they can materially hurt a margins a bit but if you have an no problem, they're hit and run rate we can cover all that more with the terrific performance of the existing accounts. But we're really, really excited about that business. And you saw that more than half of our gross in the fourth quarter came from outsourcing. So its been extremely helpful to the company as well as you know last four years.

My question is more towards, I appreciate all that colors I wonder that well but when I look at for instance the 14% growth in revenue year-over-year, is it 10% or 14% is from adding contracts or expanding contracts. Or if you have an existing contract for say 1 million square feet and they renew for 1 million square feet, how much of that growth is from just charging them more for that.

I don't have the numbers in front of me, so this is going to be a gross generalization. It's a rare day that our outsourcing contract renews and we get paid more for doing the same work. We got paid to time before. These clients are heavily, heavily focused on cost that's why they put the contracts out and every time you renew it they're grind. So I would just tell you that in this business the ability to push pricing is almost non-existent which wouldn't therefore extrapolate to that 14% being primarily new accounts or the addition of new services to existing accounts. Now that is where the renewals get exciting for us because once we prove ourselves with newer generation accounts, we are allowed to perform additional services to them and many times the additional services could bring in the great margins not the original services we were hired for. I think, Anthony, we've gone over that with you and the other callers many times but facilities management many times is a lead. Facilities management is a decent margin business but nothing to get excited about. But it's the additional services that we can sell through that push those margins and those many times come at renewal or later.

And just one last one on the cash balance, can you maybe play that out over the next few quarters and any thoughts there?

Well I always give specifics but remember we take bonuses on the next few weeks and that will hit cash to the couple of hundred million.

It will be a little bigger than, Brett. But that's exactly, Brett's, on that course with seasonality in the business. You know you have to anticipate bonuses going out that will be a sizeable chunk of change. And also when you look at the balance sheet there is over $1 billion showing cash, we met about $200 million that is consolidated but we don't controls in entities that are all consolidated to investment management segment. And so forth. So there is about $800 million, a little bit over $800 million of which about a $500 is in the U.S., a big chunk goes out for bounces. There will be some left over. After that obviously and that would be held for now to access opportunities in the market and given uncertainties in Europe and so forth. We are leaning toward and tending toward having a cash balance available for use until we have some better visibility for the pursuable future.

And let me just add a little bit to that. I know you understand all this but we have some colors that are probably telling new story. For folks who understand, first of all we're seasonal business and we tend to onboard cash heavily in the third and fourth quarter as in very little in the first and second quarters. So we end up every year with a heavy cash balance, because of the seasonality. And also because we need to preserve a decent amount of cash to payout bonuses, we have 31,000 employees and many of those are bonusable and so, those numbers add up as Gil just mentioned. Given where we are in the cycle, we see lots of opportunity out there to grow the business not just organically but through acquisitions and so having this cash on the balance sheet as opposed to using it for other things. To us, it's a wise move at the moment. And that's, as Gil mentioned, you're seeing that the combined dynamics of saving for bonuses plus opportunities in market moving up that cash number a bit higher than we usually have it.

We will go next to Sloan Bohlen with Goldman Sachs.

May be just first the question on outsourcing, to what degree do you guys have visibility of the forward pipeline of what I guess new contracts rather negotiation with? And then I guess is a related question, of the growth you expect for next year is any of that locked in with what business you signed already to date, Brett, to your point about stabilizing those margins over time?

I just wanted to be very clear, when you say next year you mean this year.

Yes. 2011.

So first of all the pipeline information on outsourcing is very good for the next 60 days, because those are contracts that have been put out to the market for which we're competing presently. However the pipeline beyond that is almost non existent because the way in which these company's higher services. This is not a business, it's very interesting actually, Sloan, this is not a business. We have the big marketing force out cold calling major corporations and trying to convince them to outsource. But the process to get a company to do that is long-lived. And by the way the momentum to do it is so strong at the moment that most of our work is something responding to our fees that are coming in the door and making decisions around which I repeat we think are worth chasing and which we're just going to let go by the way side. I would tell you that the short-term pipeline looks really good and all the trends, long-term trends that we would look at to support future growth in that business look very strong as well. So said another way, it's purely subjective not objective. But I would tell you that if there were a 12-month or an 18-month pipeline, it would look very strong right now. And I get that by extrapolating the macros that we watch around that industry. We have a number of very significant contracts that we've won in the past two years. And we certainly expect those contracts at this point, it will be embedded down or getting close to be embedded down. But because this business is growing so fast right now and this is what I was trying to lead to earlier in probably not very well, because it's growing so fast right now. We've go a lot of business coming to door right now, this going to require some upfront cost. And I think that what the net of impact on all that is that because so much new business is coming in, the margins in that business might be a little bit soft until this rate of new business coming in plateaus and we have a chance to bid down these many, many clients, we've got coming in the door. I don't remember the specific number, and Gil, what comes to memory is something like a 173 accounts of one form or another that came-in in 2011. But you get a sense for the velocity this business and the way in which we have to approach those accounts and onboard cost for those accounts. And then manage them going forward. Gil, is that number relative?

Yes, 173 for the year.

173 for the year, so its accounted very two days, Sloan, and that's just an unprecedented rate of growth, but I think more important issue by far, is that because of the great of the on-boarding of these accounts. What we're looking at now is a very long run way of margins that should be moving up a little bit each year in that business as we at this bid down. And you can imagine we're very excited about the long-term prospects for outsourcing given the rate of growth like we're seeing right now.

I mean is it to the point that you're seeing so much demand that there is pricing power that you may have for those new accounts he may bring in.

It's not pricing power. But let me tell you, how we get there. We get there by not bidding on accounts that we think our price too low. So that there is no way in a competitive market environment like this one and that business is super competitive. We don't have any pricing power, none. And we get into the bid process and we know what the margins we want. As a client for whatever reason is unrolling to pay those margins we drop out. And so I suppose the net effect of all that is it kind of feels like pricing power but it's more turning down accounts that are not profitable in that force and only pursuing those that are. And I've talked about this I think it's going to be a long, long time before in the outsourcing business any provider really has a pricing power to speak of. I do believe that even right now in the first quarter of 2012, I do believe that all the service providers have done a much better job of educating these clients around the idea that it makes sense to pay reasonable pricing with a reasonable margin for these services, because what's happened to number of these clients is they've done and they've hired or they're consulting even worse, they're consultants find out and hired a low margin, low cost bidder. Six months into the contract they calls up and ask them to help them out because there provider is failing miserably. They don't have the platform, they didn't price it right. We make sure we'll remind those clients that we're happy to do it, but there is a reason why we dropped out of the bid. And that's happening less and less as those failures are more obvious and I think in public and that is allowing the marketplace I think the price, the business at our free process a bid better for us. They may did in the past. This is just not a business that I think any smart corporation or owner for that matter would want to choose a low cost provider. It is far too strategic to what they do. And the risks to choosing the wrong provider are far too large. And that helps pricing as well.

And then just one last question on capital markets. Brett, you talked a little bit about obviously core assets are still trading quite a bit, but what should we look for as the driver to really push those secondary market trades? Is it more a function of capital availability or is it going to be a function of banks finally deciding to do something with their balance sheets?

Well, it's all those things but what really it this is time without shock. And as you well know and most of the callers are very well aware, we're in this very odd recovery. Its fits and starts, it's incremental. And it is so skeptical at the moment to settlement either positive or negative, settlement at house outsized impacts on the market. So when we see a shock to this system which may actually but not be material. It can freeze the credit market. And certainly you folks know this even better than I do. And when you see a single good jobs report like what came out last week, this is euphoria that everything is gotten entirely better, neither a true. And so because of that what the capital markets need is just a period of time of quiet of no new big news. And I'm hopeful that 2012 may actually be the year where that happens and that what we get is a return to a more normal recovery/extension cycle, and we have not had one to date since the bottom of the downturn and that's what we need. So when you begin to see financing loosen up fairly quickly, you may recall and our callers may recall that by the spring of 2011, a sentiment was things were getting better quickly, the first quarter and most of the second quarter. And the secondary property markets being to see a lot of action in that kind of May, June timeframe. And then we get a shock again and everything shut down again, and all the money went back to core. That kind of bunker mentality, anytime there is a buy check, exists very much today, just as it did last year and the year before. And those secondary markets, I believe are not going to get real action and real traction until the recovery has a chance to operate in a normal fashion as without big negative shock.

And we now have a question from Will Marks with JMP Securities.

I want to start out asking, if you care to give further color on the bonus figure and $200 million is obviously too low. Is $300 million to $500 million range fair or I'll let you answer?

Gil do we comment on that number?

No, we don't. I guess the numbers we mentioned, it is north of $200 million, but that's and best as much as we're going to say.

I will tell you this Will, which is not, I don't think material to a number, but at least interesting. The senior management bonus, it will payout less money in 2011 than it did in 2010. And just as a reminder to everybody, the senior management is not paid out on a profit share bonus. In CBRE we believe that we need to raise the performance target objectively for management every year in recovery, so the net of impact to that is we have to do much, much better in 2011 over 2010 to get the bonuses we earned in 2010. And while we did much better, it wasn't enough to get us back to that level. So it's a material decrease. And the senior management bonuses in 2011 or what we received in 2010, it's a real good bonus program. And I think it's dead-on aligned with shareholders, who want to see improved performance every year and not the same performance every year.

On another note, can you, Gil, maybe talk about what operating and free cash flow was in 2011, maybe ex the integration cost?

Yes, it's approaching $300 million from operations.

And would you expect to grow that figure as EPS is growing in 2012?

Well that's a logical conclusion I'd like to, we would want to covert the cash, yes. So it should ought to grow in line with earnings, yes.

There was a question early about ING integration cost and it sounded almost so that you were done completely. And I thought I read in the prior quarter there was about $150 million of total integration cost. So is that correct or more importantly are there any other costs related to ING?

Gil, let me hit the front of that and you can remind him what you spoke to in the script. But, Will, I think from an operational standpoint I can tell you that the integration is complete. We've fully integrated the people, we are in the process of and the physical facility integration obviously takes a few months, but its well on its way. And I think I can tell you, as we sit here today that this integration may very well end being the best operational integration we've ever had. And we hold and you know, we are very, very focused on successful integrations. We haven't had a bad one yet, all of them have been very good. This one was damn close to flawless. And all that credit by the way goes to Jim Groch and our integration team, Cal Frese and others. It was really good. Now, there are remaining cost to be had and, Gil, would you just please give Will what you mentioned earlier.

You're right. The overall is about $150 million of overall integration cost, and we're about halfway through. In terms of cash expenditures, a lot of that is over time. So we're back-half. My comment was I believe in response to cost containment and with that action was all contemplated currently.

And then the co-investments, were those all made in the fourth quarter, Gil?

Thanks, but no. Once again there's a potential for about $70 million of additional co-investments, but it's not and certain things have to happen in order to have those trigger.

When you announced the acquisition you'd given the 2010 number for revenue and EBITDA. Can you comment now on 2011, was it above 2010 and how much?

I'm not going to comment on that. The 2010 numbers that we gave was a proxy for what that acquisition would do relative to the total. Obviously, 2011 is not a full year and a lot of that has now been integrated. So I don't want to get into bifurcating out the ING contribution from the rest of the investment management business. It will be accretive in 2012 and it is moderately accretive as we've said and it is all incorporated in throughout 2012 guidance.

And, Will, just subjectively, because I know what you're driving here. Just subjectively, I think I can give you comfort and the rest of callers comfort that we did not have any negative surprises in terms or performance for that business in 2011, either the time we owned it or prior to it being owned by us.

I just have one final question on the development gains I guess it sort of highlights how difficult it is to model your company. Does the guidance for 2012 assume the same level of development gains that we saw in 2011 on a full year basis? How lumpy is that gong to be in 2012?

Yes. It assumes actually a material diminution in gains in 2012 over 2011. 2011 we had some very large gains come through, which Gil spoke to on the call. But 2012 we're forecasting that we will not have as much in gains as we had last year. The business it's lumpy right now as is investors, because those markets are so muted. And so one or two gains really moves the needle. When we get back to a more normal market environment, both the CBRE global investors and the (channel core) development company will have a higher number of these coming through and one deal here and they're won't be as material as perhaps they were in 2011 or 2010. But the answer to your question, at the moment we're not seeing any big gains in 2012 around our development, but that could change. These markets do move very quickly and decisions around buying and selling properties can move very quickly as well. So I don't want to say it isn't going to happen, it could. Gil, anything more you'd like to say around that?

No. I think that's exactly, you're right on point, Brett.

Our next question will come from David Ridley-Lane with Bank of America Merrill Lynch.

I'm curious on some of the metrics on U.S. leasing. Did average lease term decline in the fourth quarter, did the average square footage decline, was there a turndown in the rental rates on average that you saw? Just sort of some color for the change in U.S. leasing and elsewhere?

For U.S. leasing it was purely a story of number of trends of velocity, number of transactions they were down 8% quarter-over-quarter. And that was the entirety of the change quarter-over-quarter in the leasing revenues rents were it was very little change in rents in the quarter. And there was a very little change in square footage. And by the way, what we're seeing in that marketplace, as you would expect with the type of economy we're dealing with right now is of all the business lines we have leasing in the U.S. is the one acting most abnormal through a typical recovery cycle. And the reason of course, and this is obviously, I know that you David and everyone else, the reason for that is the job growth is so muted. So in a typical recovery you have a combined impact of rental rate growth, which tends to move very quickly, up in recovery cycle and wrap a job growth, which tends to move very quickly up. We don't have either of those right now, because of the type of very, very incremental recovery rent. We believe both of those are coming. And I think as most of you know, in 2011, I believe the number was 56 million square feet of construction was brought to the market in United States, which is the absolute lowest amount of new constructions since the numbers were kept in 1960. What it tells you is, you have a lot of people out there right now, who are not willing to build a new building and lenders unwilling to lend on one. But what also tells us is, is that when the recovery gets its legs and we get real job growth, rents could move up very, very quickly, because the inventory number is artificially constrained right now. But, David, the answer to your question was, it was purely velocity. And our comments on the scripted portion of the call, way the leasing our expectation is, is that leasing is going to remain very muted until we see meaningful job growth. And our projections are based on a lot of different data points is that we think that's a Q3, Q4 event and Q1 and Q2 on leasing will be relatively flat perhaps nominally up or nominally down, it's not going to move much. The surprise, if we get, one will be up. I think the level leasing we're seeing right now is pretty much dial tone. We're also now working off of compares that are quite strong, as you saw, the leasing number for 2011 was a record high. So we are at a high level. I don't see a lot of growth in that until we see real job growth. And hopefully, we're going to see that second-half figure.

And I guess if we continue to have kind of U.S. job growth as we do in January, it would be a reacceleration and your leasing revenue should be lagged anyway, right?

Yes, they would. I think that for us when we'll know the January wasn't a head fake is when you get probably three months of these together. And I think that most large corporations will look for something generally like that as well. They're going to start ramping-up space acquisitions in a very serious way if these job numbers hold for another month or a month-and-a-half. The consumer numbers are pretty decent too. So again, we're more bullish than we are pessimistic on leasing globally in 2012. But we think it should be a bit more back-ended than normal.

And then if I could, just a quick numbers question. Do you have any thoughts on what a normalized interest expense run rate is, or what for 2012 total interest expense could be?

It's going to be around the $180 million all-in. So that's not just on corporate borrowing, so to speak, but also the entities that we consolidate and therefore run through interest expense on our P&L. So about $45 million a quarter.

Thank you. And Mr. White, we have no further questions. Please go ahead with any closing remarks.

Great. Thanks, everybody. We'll talk to you in three months.