Jones Lang LaSalle Incorporated (JLL) Q4 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Fourth 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 10-K for the year ended December 31, 2011, and in other reports filed with SEC as well. 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'd like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir.

Well, thank you, operator and hello to everyone joining this review of our fourth quarter and full year 2012 results. I'm in Chicago today, and Lauralee Martin is with us in our San Francisco office. As you may know, on January 1, Lauralee stepped into the role of America's CEO, taking over from Peter Roberts, who served in that position very successfully for 10 years during which time we increased revenue sixfold in the region. Peter is now taking on new responsibilities as the firm's Chief Strategy Officer. The search for Lauralee's replacement as CFO is well underway, and she has agreed to continue in a dual role until the new CFO is on board. So before Lauralee reviews our performance in detail, let me summarize our results. Gross revenues totaled $1.2 billion in the fourth quarter, a 9% increase in both U.S. dollars and local currency from the fourth quarter of 2011. For the full year, gross revenue reached $3.9 billion, up 10% in U.S. dollars from 2011, 12% in local currency. Full year adjusted net income was $245 million or $5.48 a share, which is 13% higher than in 2011. Finally, during the fourth quarter, we completed a $275 million 10-year bond issue, further strengthening our investment-grade balance sheet. Revenue growth in the Americas was driven primarily by our property and facilities management business and by our brokerage and capital markets business lines, which both continued to take market share from competitors. Improved results in EMEA benefited from a strong finish to a year characterized by very difficult market conditions. Market share gains through the year, productivity improvements and the full year benefit of King Sturge contributed to these improved results. In Asia Pacific, our leasing and capital markets businesses also grew year-on-year, while market volumes and leasing…

Thank you, Colin, and good afternoon to everyone on the call. As Colin mentioned, we finished 2012 with a strong fourth quarter. We had another record-setting year of revenue and drove a 13% adjusted earnings per share growth compared with last year. We'd improved our transactional revenue performance, particularly in the Americas and Asia Pacific through investments and market share gains. And we're pleased with the improved margins in EMEA, reflecting early payback on the cost actions we've taken. We continue taking restructuring actions during the fourth quarter. Some of those related to the ongoing efforts to fully integrate the King Sturge merger, but we've also been aggressive in the areas of the business that are projected to remain economically challenged for an extended period of time. Approximately $8 million of the fourth quarter total of $13 million of restructuring charges was the result of those focused efforts. Turning to our regional results. In the Americas, fee revenue increased 11% in local currency over 2011, with the largest nominal contribution coming from leasing. Our efforts continue to be focused on building market breadth and depth of services and increasing our market share. We're pleased to report another quarter of improvement. Our fourth quarter growth in leasing of 8% compares favorably to overall office leasing volumes, which were down 32%. Capital Markets & Hotels also finished with a strong fourth quarter and delivered 25% growth for the full year compared with overall market investment volumes up only 11%. There were 2 significant unusual compensation expense items, both of which were acceleration, not additional cost, impacting our fourth quarter and full year results in the Americas, which resulted in a margin decline compared with the year ago. First, as we've explained in the previous quarters, our results were impacted by our 2012…

Thanks, Lauralee. Back to our slides, and Slide 5 shows a few examples of recent wins across our business and geographies. In our corporate outsourcing business, we won 9 new assignments in the fourth quarter, renewed 16 contracts and expanded 8 additional relationships. Full year totals include 48 new relationships, 47 renewals and 39 expansions. These numbers do not include wins in our local market level of corporate solutions business which serves the needs of mid-market corporate clients. During the quarter, we won 13 new assignments in this segment, representing more than 90 million square feet of space. For the year, we won 58 assignments, encompassing in total 180 million square feet. In terms of specific wins in the corporate sector, just last week, HSBC named us exclusive global facilities management provider for that bank's 58 million-square foot portfolio. This massive expansion of our relationship with HSBC more than doubles the square footage we'll manage for the bank, and the assignment represents the largest-ever outsourcing of facilities management service to a single provider by a financial company and follows an exhaustive and objective process by the bank to select a provider from amongst the industry's major players. In the fourth quarter, our European facilities management team also secured a global contract with Nippon Sheet Glass, covering 500 sites in 30 countries worldwide. And demonstrating our growing presence in China's domestic market, we were appointed by Sinotrans, a state-owned enterprise in shipping and logistics, to project manage a new 1-point-million square foot headquarters in Beijing. Turning to our investment sales activity, in the Americas, we represented the seller in the sale of 540 West Madison, which is 1.1 million-square-foot office tower in Chicago. The transaction was Chicago's largest office trade in 2012. In Switzerland's largest-ever single-asset real estate deal, we advised…

[Operator Instructions] And your first question comes from the line of William Marks from JMP Securities.

I wanted to start out with a question on margins. Did you -- I appreciate the color on the fourth quarter. Did you say anything about 2013, or can you just on expectations, whether it's Americas or global, if you expect the margins to improve?

Well, we showed -- if you add back the various points of correction, which we mentioned and included in that the accelerated amortization bonus payments and the Staubach compensation expense which Lauralee mentioned, we did see an improvement in our overall operating margin on an adjusted basis in 2012, both for the full year and for the fourth quarter. So on a true apples-to-apples comparison basis, we are pleased with the progress we made. As Lauralee said, we're particularly pleased with the results in LaSalle and in EMEA for the year where we showed good progress against, in EMEA's case in particularly, difficult background. I guess, in an overall sense, we had hoped to see a little bit more progress in the Americas. Frankly, we were surprised at how weak the leasing markets were in the fourth quarter, and so we stepped the business up to handle bigger volumes than we saw in Q4 to the numbers we just mentioned. We did show growth, but against the market it was down 30%. If the market in the U.S. have been anything like sort of normal, somewhere up between plus or minus 10%, we believe we would have shown a nice performance on our margins in both in Q4 and the full year. The mixed bag there, when we look forward, well, we said before, we'll continue to build and grow these margins. We believe we have been hitting the right thing and doing the right things to the progress we showed last year. We hope to see it continued into next.

Did the -- to take that a step further, you mentioned the $31 million is deferred acquisition obligation we paid in the first half of 2013. That could be a pretty significant hit to margin, but we'll be able to -- you'll be disclosing when that's paid, I assume?

That's a balance sheet number, so there's no impact to margin for that. That's purchase price.

It will not, okay.

That's correct.

But the $5 million from the quarter did impact [indiscernible]

That is correct. What -- when we set up the deferred payments, they were set up that we would accrete interest in. So we've been accreting interest in at about a 6% level as it came due to maturity of that deferred payment. Because of the fact that, in fact, we exchange that for some benefit in terms of employment, that changed interest into compensation. So it would have been an interest expense in 2013, it moved into a compensation expense in 2012.

Okay, that's clear. A question on investment management and just as you start to look at the significant quarters of 2013, you had a really strong first quarter of 2012. And I guess, you kind of implied we shouldn't expect that to be repeated, and there was something like a 50% -- or $0.50 EPS number, more normal years are single-digit EPS. I mean, I guess I know you're not going to guide, but am I thinking about this correctly?

It would be significantly lower. Yes, that's correct.

It was driven by debt payments and equity earnings in Q1 and Q2.

I think it was quarter 3 when we sold the large portfolio in Asia.

Yes.

Okay. And then just my last question on balance sheet typically does weaken in the first quarter because of bonus payments. Can you give us some indication of what we could see in the first quarter?

Well, you are correct. We pay our bonuses in the first quarter. That being said, we also have pretty aggressive receivable collections in the first quarter off of our year end numbers. We do...

Typically, it's a couple hundred million dollars up.

Yes. The balance sheet does have the accrued balances for compensation, if that's a helpful way for you to look at it.

Yes, I can look at that. Okay, that's all for me.

It will be the regular cyclical pattern, Will. Season, I should say, not cyclical.

Yes, if you look at the balance sheet, we had $30 million more of accrued compensation at the end of this year versus 2011, and you can look at last year's sort of bonus levels and probably work through that.

And your next question comes from the line of David Gold with Sidoti. David Gold - Sidoti & Company, LLC: So a couple of questions. One was I wanted to get a sense, there's some talk out there the way your fourth quarter, particularly domestically, of some delays in deal activity sort of on both sides, leasing, as well as a little bit of capital markets from the fiscal cliff issues that we had. And was curious if you can give a sense for, a, if that may be weighed on your numbers a little bit in the fourth quarter and, b, if to the extent that's sort of coming back if we might see some of that in the first quarter?

We arrived in terms of the perverse and diverse impacts of the fiscal cliff issue. It looks as though it drove leasing volumes down as uncertainty caused the companies to wait to see what the implications of the fiscal cliff would be on overall demand. And it drove leasing -- it drove capital markets activity up. We think that's because people are trying to get out before any changes in tax regimes, so you have this plus 40% in the market for investment sale and minus 30% in the overall leasing activity markets. Against those numbers, we were very pleased with our performance in leasing because we went up 9%. As I said, in a regular market, that would have been a bigger growth we believe. Whilst in capital markets, our growth was up in the 20s percent, so not quite as steepy as the market as a whole. I would -- you would logically expect, although this isn't a prediction, that you would logically expect that with resolution of the fiscal cliff deal, you'll see some of the leasing activity which might have taken place in Q4 come through in Q1. And again, logically you'd expect that perhaps the capital markets got ahead of itself and it might be a little bit of a fallback in Q1. Having said that, there does seem to be a lot of momentum in the capital markets as I reflected in my comments, and so it just may pick up where it left off. David Gold - Sidoti & Company, LLC: Perfect. That's helpful. And then just I guess part 2 of that question. I know you don't typically offer guidance.

We have never offered guidance. David Gold - Sidoti & Company, LLC: Although years ago you might have. Just either following up, I guess, a little bit on Will's question. If even though last year was pretty strong with some sort of onetimes, if you will, as we think about this year with the momentum continuing, do we think about it more as a traditional nearly breakeven first quarter? Or do you think we could have some upside from that continued momentum?

I think that leads you to draw your conclusions from the next year of the comments on the numbers and last year comparisons, David. But what we try and do in the way we present our market -- our forward market view, we try to do that as helpfully and comprehensively as possible for you, perhaps reflecting how we're thinking about the world we're trading in. And so you can take those comments and spread them across our numbers and, as I said, draw your conclusions. David Gold - Sidoti & Company, LLC: Perfect. One last. Presumably, as I think you said, the Staubach -- the accelerated payment was a function of contract renewals. Can you give us a sense for if you can put out there an average time period for the renewals? In other words, when is the next time you'll have to worry about that?

Well, we haven't disclosed that. We will not. But what we can say is that the acceptance rate, if you like, the willingness rate for people to sign on for longer periods was extraordinarily high.

And David, what we will say is they were to end mid '13, so clearly that gives you an idea it's got to be if it's worthwhile for us that's sort of when this -- it would have been before. David Gold - Sidoti & Company, LLC: Say that again, I'm sorry?

The contract expiration would have been when the payment was to have been paid, which would have been July of 2013. So obviously it's going to definitely move it out beyond this entire year period.

And your next question comes from the line of David Ridley-Lane with Merrill Lynch.

Just was wondering on the restructuring actions that you've sort of taken already in EMEA. What would be the full year benefit that you'd see in 2013?

Typically, it's about an 18-month payback period for Europe.

Okay. And can you remind us the total restructuring charges taken in Europe for the full year?

Yes, I can get that for you, just one sec. For the entire period 2012, we took $35 million. And I was just going to say that was a combination of people actions, and then also we took pretty aggressive actions on lease consolidations and other things. So those benefits beat in much more rapidly.

Got it, okay. And then you've got a number of moving pieces, you've got the lower deferred acquisition payment and then you also have a new bond. Any sort of help you can give us on interest expense?

Well, the Staubach payment was -- interest was accreting in at a 6% rate. The bond interest will be at a 4.4% rate. Our revolving line of credit is really at an insignificant rate in 1 percentage kind of range.

Okay, that's helpful. And then are you seeing demand broaden out at all into secondary markets in the Americas capital markets business?

Just a little bit. It's a slow process because particularly in the institutional investor class. They are really looking for security. They had far too much fun losing money in the great financial crisis to be too adventurous too quickly. But gradually, as pricing creeps up in the most attractive sectors and begins to look a little rich and full for many investors, we're seeing people look outside of the very highest quality assets. And David, that's inevitable when you see these sorts of activity volume growth that we see in this year. So a normal cycle we'd see only 3 years into it, 7-ish year cycle. Normal activity would see -- normal cyclical activity would seek to move out along the risk curve and move out along the quality curve, if you like, into secondary assets. But it's a slow process in the U.S. It's even slower in Europe.

Okay. All right, well that's a little bit helpful. The sense was a little bit more optimistic in Americas at least. And then maybe I'll take one last cut at the margins. In 2012, this was a year where the G&A -- SG&A growth was outpacing revenue. Would you expect 2013 to be a year where you see less SG&A cost come back in?

There were a couple of factors in 2012, which were important. We've mentioned these through the course of the year. One was that we made a very deliberate effort in Asia to increase salaries to compensate for some heavy inflationary pressures in India and China, which were causing us retention issues. So that's one sort of excess factor on a year-on-year basis comparison. And the second was we actually built our people base in the Asian region in expectation of faster growth that actually came through because Asia slowed remarkably through -- in Chinese and Indian factors that I referred to in my prepared comments, so there was an exceptional kind of a backdrop in Asia. And as it turns out, the spurts at the year end, as confidence began to come back, helped us through that. But nevertheless, we're running with a higher cost base that we would normally have planned in Asia. And I made my comments as well about the way that the Q4 numbers in the U.S. came through in the leasing area at a slower level than we would have expected given normal markets. And that was driven by this market depression due to the fiscal cliff issue, which we discussed a moment ago with David, David Gold's question. So those things were attenuating issues or mitigating issues for the cost base in 2012. Now going into the next year, we've got no particular increase in the cost base which I -- such as the Asia ones I described, and that against the market which we believe with the exception of some European countries is feeling better than it did 12 months ago. So you put all that together, you can again draw some conclusions.

Okay, all right. I lied, one more. Given the cost restructuring actions that you've taken in EMEA, would you -- is there a range of revenue outcomes that could happen in EMEA where you would still be expecting margins to be up? And for example, if revenues were down 5% in that segment, would you still expect margin expansion there?

I think the way to answer that is it depends on where revenues are down because clearly we've taken actions in places to just to where we think the markets are going to be. So it's always that mix question, but we had a modest amount of revenue to help us in Europe this year. But clearly, we made a dramatic improvement in the margin activity. So we feel pretty good about where we are unless markets take a big step back again.

When your hypothetical 5% arises, it's not just a geographical issue, it's also which service lines it impacts. The 5% reduction in capital markets business has a bigger impact than, for example, a 5% reduction in Property Management business just because of the margin impact.

Your next question comes from the line of Brandon Dobell with William Blair. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: I wanted to make sure I heard you correct, Colin. You're going through the geographic expectations for the leasing business. I think you said EMEA kind of flat, Americas up 5% and APAC down 5% to 10%. But it also sound like you expect to outperform those numbers. I'm just trying to make sure I heard that correctly. Then also with those back to, I think it's Slide 7, with the rental values you guys have laid out for expectations for 2013.

Well, taking the leasing markets, first of all, we said overall leasing volumes to rise around 5%, so another overall terribly blind market. If you estimate volumes projected to be up about 5%, Europe flat and Asia Pacific 5% to 10% decline. That's the numbers more or less, right? Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Yes. Okay, that makes sense. So and then now I guess that overall 5% would be a combination of, let's call it, velocity and rental values. So kind of volume and price, or is there some other factor we need to think about in terms of how to model your leasing revenues this coming year?

No, these volumes are square footage or square meters, so the basic things. And you refer against that, the comments we made on the overall market price. I think we expect -- we said we expected on the global basis rental rates would increase by 2% to 3%. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Okay, perfect. And it doesn't sound like there's -- we should anticipate any, I guess any noticeable changes in headcount trajectory in any of the geographies based on the kind of growth rates you are expecting, but I just want to make sure that that's how I should think about it. Or if there's, given your -- the potential for secondary markets to improve this year, if there's an eye towards adding some people in markets where you don't have a big enough presence either in Americas or EMEA?

Well, we take a very dissected view of what we do in adding people. So if we see opportunities in the cities of Germany to add teams, and we think the market will be positive then we'll go ahead and do that. If we think that in some cities in the U.S., volumes activity will be flat, then we'll just simply, in overall sense, hold our numbers. We've taken an overall approach, which is particularly this time at the beginning of the year, we're looking to keep our cost and therefore headcount tight, watching for market developments and direction, and then we can move to our numbers rapidly in some areas such as project management or property management where we're seeing new contracts of business coming through. It's harder and slower in the transaction business areas where we have to -- where we have a different approach, which is to have a constant list, if you like, of people we have in mind to hire good operators in specific markets and when lesser market is actually turning down. We'll take the opportunity to hire those people as and when we can, as and when they're prepared to move from their existing employers. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Okay, that makes sense. And then maybe one for Lauralee. The kind of year-on-year delta around stock compensation or incentive compensation on the compensation line, given that there is kind of a step up, it's a bit nonrecurring. How do we think about next year as a delta versus this year modeling stock compensation? And then maybe even on a longer-term basis, is there a way we should think about it relative to other headcount growth or overall G&A expense that we can get a little more visibility into?

Well, the -- I think what you're referencing is the share ownership plan, our SOP program. And what you have there is a portion of the current year bonuses would have been deferred, so not in the expense of the current period. And then that amount would get amortized over a 30-month period. We now have 2 comparable years where there is not a deferral. There's a little bit of tail of amortization left from the prior 2011, but I would say generally, for modeling purposes, I would look at it and say 2012 now can be used as a proxy. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Okay, perfect. And then final one for me. Any thoughts on CapEx and co-investments in '13? Should we think about it like '12? Or is there going to be a step up in either one of those line items?

Right. We have CapEx of about $80 million this year. We have some planned technology investments in 2013, so we think that $80 million will go to about $90 million. We actually had a robust coinvestment outflow for LaSalle Investment Management, one of the most robust we had in a long period of time over $105 million. We also had, because of the portfolios we sold, a lot of money coming back. So net-net, it was not that large of a number. I think about $27 million, if I remember correct. I would say we typically tell you net $40 million to $45 million, and I think that's probably a good place. If something were to change, we would advise you on a quarterly basis, but right now I think that's probably a good number for modeling purposes. We were very pleased, by the way, with the money going out because it's a start of building that new portfolio to get the potential for the coinvestment fees and building the portfolio and obviously getting equity earnings as well.

And your next question comes from the line of Todd Lukasik with MorningStar.

Just on the leasing volumes. I guess, first of all, I think in recent years, maybe 2010, 2011, there was a feeling that some tenants may have tried to take advantage of the low lease rates at that time coming out of the downturn by renegotiating leases maybe 1 year or 2 or perhaps even longer before their existing leases expired. And I was just curious what your sense was for how that played out in 2012, and whether or not that phenomenon is still ongoing at all or whether it's back to more of a normalized environment?

Yes, there was a little bit of that behavior, Todd, in earlier years. It didn't seem to impact 2012 too badly until we got to Q4. In other words, we were looking at fairly regular lease markets in the U.S. until this big dip in Q4. So I think it's one of those things, one of these phenomenons which was a lot of talk and a lot of fear that didn't seem to play out too much, in fact. And of course, as we get into 2013, we're getting that much further away from those low and advantageous lease rates.

Right, okay. And then just on the drivers of your leasing revenue, and you talked about the square footage and the rents, is there a third driver in terms of lease term? And if so, what do you see in terms of average lease term for leases today? Is it sort of in line with what you would expect or historical norms or are the lease terms getting longer or shorter?

Two further factors. There's lease terms and then there's substantive fee rate. You can take the latter as being sort of flat year-on-year. Some places we're seeing a bit more competition than others. For example, Britain has a lot of competition because there's such pressure in the market there and middle sized providers are fee cutting in order to preserve or try to preserve some market position. And in general, the rate is flat. As to terms, they have tended to come in and be sure sort of the bottom of the cycle, and people are less confident and therefore want to take short renewals or just extensions. But as the cycle progresses, which is what we're seeing now, people take and confidence picks up, people take longer lease terms. So we're in an extending period, but this is not a dramatic impact.

Okay. And then just last for me. I was particularly curious with regards to HSBC. If you'd be willing to disclose a number of sort of viable competitive bids for that global business you won?

Well, I wouldn't comment specifically on HSBC because I wouldn't be correct. But what typically would happen in those sorts of big global bids is that they will put an RSP out. They will be on a global scale, not really more than 5 credible competitors and not all of them will be equally credible. And typically, they will go down through a process of elimination to 4 and 2 and then make a choice. So it's either the final rounds tend to be 2 or 3 players. They rarely go beyond that because it gets to be a lot of work to a professional on the part of the client to do a professional job in evaluating more than that in the sort of detail we get into in those final rounds. But this, like many others, most others, was a very professionally run process, and those take a lot of work on both sides, both the client and the providers.

Your next question comes from the line of Mike Mueller from JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: I guess sticking with HSBC for a second. If we're looking at, I guess, the geography of the portfolio, can you talk about how it's going to be divided up or split up between, say, the Americas, Asia Pacific? Is it heavily skewed toward one region?

No, that's why they picked us. There's lots in America. There's lots in Europe and there's lot in Asia, and we're good in all 3. So in fact, we tend to be the best in all 3. So that's why we were chosen, and we're very pleased to have been chosen. We now have to perform of course. And then typically just to add some more financial color to it, these contracts don't start making money for it immediately. It will take a while to crank up, there's a period of investment which can take up to a year. And then only be on that do we start to see a gradual increase in returns, which improves during the course of the final years of the contract.

And I might add on that one. We currently, in the U.S., do HSBC's work so we've retained that business and are expanding it and will have a broader reach in the Americas moving into South America. But yes, Colin's correct, it's a global portfolio. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Got it. And what's the overall square footage base for the, I guess, Property & Facilities Management business?

Globally? Michael W. Mueller - JP Morgan Chase & Co, Research Division: Yes.

2 billion. 2 billion feet.

That -- yes, I think that includes property. Are you looking for... Michael W. Mueller - JP Morgan Chase & Co, Research Division: Facilities Management.

You said property and facilities. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Oh, yes, property and facilities. Yes, both.

Yes, okay. And we could provide you with the split between the facilitates which is corporate work and property which tends to be investor work. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay.

Or maybe not straightaway. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay. And then I guess going to the market share and leasing, particularly in the Americas, can you talk about what areas you were specifically doing significantly better in the market? Is it certain geographies, certain asset types? Can it wrap just any areas there?

Well, into the asset types, core business had always been the office leasing market, so that would be the most important. Though we've had a policy of investment, both in the retail area and more recently in the industrial markets, not only within the U.S. but also worldwide. So that's the comment. It's overwhelmingly office-oriented still. In terms of geographies, you can see our geographical footprint. The biggest cities we do, obviously proportion -- we do the biggest proportion of our business and within individual cities such as Washington, we're market leaders. New York we'll be #2 or 3 and so you'll see us vying in those top -- somewhere in the top 3 positions in all of the major markets we represented. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay, great. And I guess the last question, what was the trigger for the accelerated Staubach payment to happening, I guess, in Q4 as opposed to just in August?

Lauralee?

Well, it clearly is advantageous for anyone receiving income in the United States if it was done in 2012 versus '13. And for us to have an opportunity to give the benefit to our colleagues and also have a benefit for the firm seemed to us like a very good option.

And additionally, we got -- and that was a -- as a recognition of their commitment to us, we've got this sort of overwhelming confidence in extending the commitments from those people, so it's a good 2-way balance.

And your next question comes from the line of Will Marks with JMP Securities.

A couple of follow-ups. One, tax rate, should we expect kind of ongoing around 25%?

Yes.

Yes.

Okay. And then lastly, I don't believe you mentioned this medium-term margin target, EBITDA margin target of 14% to 15%, maybe it's in the slides. Any thoughts on that?

We've not changed the target, if that's the base of the question. And we've always said a great deal of when it would be achieved would be when we saw more normal markets. To Colin's comment on markets being down year-on-year in leasing, that clearly slowed some of that achievement but it doesn't change the fact that we're on track and are making productivity impacts across the business as we get more normal markets.

And for us, Will, the most pleasing -- I mean, as I said, fully normalized, we did progress by 0.75 percentage point last year on an overall sense. But perhaps the most pleasing one was to see a couple of percentage points progress in Europe, which by [indiscernible] into its high cost of labor, its fragmented market structure because of the individual country, fiscal and legal structures that you need to run and the limited options for synergy of -- for cost synergies across the geography, we were pleased to see that progress there, and we're trying to work hard to continue that momentum.

And there are no further questions at this time.

Good. Well, thank you, operator, for your help, and thank you, everybody, for your interest in Jones Lang LaSalle. We look forward to seeing you in a couple of month at the end of our first quarter for our Q1 2013 results. We wish everybody a good evening.

Thank you for your participation, everyone. This does conclude today's conference call. You may now disconnect.