Good morning. At this time, I would like to welcome everyone to the Jones Lang LaSalle Incorporated Third Quarter Earnings Conference Call. For your information, this conference call is being recorded. All lines have been placed on mute to prevent any backgrounds noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Chris Stent, Executive Managing Director of Investor Relations. Please, go ahead.

Thank you and good morning. Welcome to our third quarter 2020 conference call, Jones Lang LaSalle Incorporated. Earlier this morning, we issued our earnings release, which is available on the Investor Relations section of our website, along with the slide presentation intended to supplement our prepared remarks. Please visit ir.jll.com.

Thank you, Chris. Good morning and welcome to our third quarter call. In what continues to be a challenging and volatile year, I remain impressed by the resilience of our employees across the world. Their dedication and success in providing unparalleled service to our clients has been nothing short of remarkable and I'm extremely proud and grateful for all that they have done. As cases begin to rise and impact the reentry process to various degrees across the world, we continue to monitor the situation, carefully and strictly adhere to the guidance of local and global health facilities, to help manage the spread of the virus. The health and well-being of our people, clients and communities remain our first priority. Turning to the market environment. Global economic activity recovered some ground in the third quarter, despite the pandemic's continuing impact on both global and regional real estate fundamentals. Improving economic indicators remain vulnerable to a potential resurgence of the virus, with cases and hospitalization rising in many countries around the world. Near-term uncertainty continues to dampen forecast into the severity and longevity of the effects of the pandemic, as the world await the broad-based distribution of an effective vaccine before we can begin to regain some semblance of normality. COVID-19 has accelerated in many workplace trends that were prevalent in the commercial real estate industry prior to the pandemic. These include experiential workspaces, outsourced real estate functions and increased focus on employee well-being. As a result of the changes the pandemic has had on how people work, C-suites and Boards have increased their focus on real estate decisions to ensure their office spaces will suit their future needs.

Thank you, Christian. Overall, I'm pleased with our third quarter performance given the current environment. There are three points I will highlight to summarize the quarter. First, while our consolidated year-over-year fee revenue percentage decline improved slightly from the second quarter on an organic basis, our top and bottom lines reflected meaningful growth in dollar terms over the second quarter. This is an important trend in an unusual year, when seasonal revenue growth is at risk of being disrupted. Second, we again generated strong cash flow, which we used to repay debt to below pre-HFF acquisition levels. Finally, we are taking actions to align our cost structure to the current environment, while continuing to invest in strategic priorities that we believe will drive long-term value. Our diversified business continues to be impacted in different ways by the pandemic economic shock. The most significant impact continues to be on our transactional businesses. While our pipelines in both Leasing and Capital Markets have increased since the end of June uncertainty remains regarding the evolution of the pandemic and its impact to decision-making by corporate occupiers and investors. Conversely, property and facility management remains a growth area driven largely by new business wins as corporate occupiers and investors seek our services due to increased building management standards. Partially offsetting, this top line growth were continued headwinds from our U.K. mobile engineering business and the late 2019 divestiture of our Continental Europe property management business.

Thank you, Karen. As we look to the rest of the year, a sharp rebound in global GDP growth experienced in the third quarter compared to the second quarter is expected to slow due to a combination of unwinding fiscal stimulus and ongoing caution leading to a more prolonged recovery period. With that backdrop and realizing the difficulty in forecasting the recovery from the pandemic, we expect the fourth quarter operating environment to be relatively consistent with previous quarters on a year-over-year comparison. We expect that our higher-margin transaction-based service lines will continue to face significant headwinds, which has a disproportionate impact on profitability. I'd like to take a minute to provide our latest thoughts regarding the future of commercial real estate and specifically the office. Commercial real estate remains a very valuable asset class for investors and a beneficiary of continued rising allocations of their capital as they are keenly aware of the long-term fundamentals that position the industry for growth. With regard to the future of office, we view the transition to a hybrid work environment as the new normal, one in which employees have a greater sense of empowerment in determining where and how they want to work. This sustained increasing remote work opportunities would largely be offset by a combination of job creation and the de-densification of the office space. Expanding upon this, we believe that the transformational hybrid work place will see a reallocation of office space to enable creation, collaboration, communication and culture. As I stated in the second quarter call, while it may look different and be utilized new ways, the office will continue to have a vital future, specifically as a key driver of corporate culture. These changes strengthen the value proposition of JLL as there are few corporations that can guide our clients through this evolution of the work space on a global scale. In summation, JLL's solid third quarter performance is a testament to our dedicated employees and our collective commitment to providing world-class advice and solutions to our clients regardless of market conditions. Our results demonstrate the strength of our business model, diversified exposure to both business lines and geographies, and our ability to transact across asset classes. We remain very well positioned to capitalize on not only the anticipated recovery from the pandemic, but the long-term macro trends that support robust commercial real estate growth. I'm confident in JLL's ability to succeed regardless of the circumstances in delivering sustainable long-term growth and achieving our goal of shaping the future of real estate for a better world. Operator, please explain the Q&A process.

Your first question comes from the line of Anthony Paolone with JPMorgan. Your line is open.

Okay. Thank you, and hi, everybody. My first question is on the cost savings, particularly with the government part of it. How should we think about that rolling off? Like is that -- like do you have a line of sight on when those dollars come back, I guess?

Hi, Tony. Good morning. Yeah. As we look at our future expectations around government relief, we don't expect that to be a significant portion of our expense savings. And as we look to the fourth quarter, we estimate approximately 25% of the amount in the third quarter will be available to us.

Okay. And then, in the remaining $120 million of non-permanent savings, can you talk a bit about what was in that just helping us understand just how quickly some of those costs can come back. So, was that like T&E that naturally has come down in this environment? Or is it stuff that you specifically had to action? Or just maybe a little bit more color there.

Sure. So, it's -- for the $120 million in third quarter that break -- that breaks down roughly to 30% from the government relief, 30% from non-permanent decisions on compensation and benefits in the fixed expense category, and 40% from OAL both fixed and variable.

Okay. And then, I think you talked about the fourth quarter top line looking pretty comparable to the third quarter. But your fourth quarter typically is going -- just seasonally have more volume and you would see margins go up. Do -- should we think about margins sequentially improving this year?

No. So thinking through the revenue story, yes, there's definitely seasonal impact to our revenues, and so we remain cautiously optimistic. We saw the pipelines increasing from the end of the second quarter to end of the third quarter. But in the current environment, every day we're hearing some additional bad news out there as it relates to different government lockdowns and actions taken to control the virus, so definitely an area to watch on our top line. As it relates to the expenses, we're going to continue to carefully manage those. Within that $120 million of non-permanent savings, there are different levers we can pull and flex in response to what's going on in the business environment. And so, we'll continue to do that being mindful of the fact that we have the government relief going away, some of our permanent savings coming through and that remaining bucket we will manage quite carefully.

Okay. And then last question for me. Leverage is back down to pre-HFF levels. Can you talk about your appetite for M&A or just investing in general?

Sure. It's Christian speaking. Hi. Listen, we are really determined to deliver value to our shareholders. And so we are cautiously evaluating the different opportunities we have for our capital allocation. M&A is one of them and the opportunities are increasing quite significantly at the moment. And so we will continue to stay very close to it. But for the time being, we haven't seen anything which we would think was worth spending our shareholders' money on.

Okay. Thank you.

Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open.

Good morning and thanks for taking my questions. I wanted to ask a couple of questions on the more permanent cost mitigation efforts. You talked about cost efforts last call, although I don't believe you quantified it. First, is there a way to frame how much you stepped up the more permanent fixed cost mitigation efforts relative to what you thought a few months ago? And then second, out of the $135 million on annualized cost reduction, how much of an impact did that actually have in the third quarter? Apologies if I missed that.

Sure. So we did – we referenced that that $135 million annual savings was based on actions taken year-to-date through October. And so a number of those actions did occur in the last 30 days. As it relates to how much of that actually flowed through the third quarter results, it's approximately 15% of the total.

15%?

15% 1-5. Yes.

Okay. Got it. Got it. And then really the pipeline detail on Leasing and Capital Markets really appreciate that. I want to ask about the factors behind the improvement. Is it more driven by the areas that have held up well so far this year like industrial and multifamily? Or is it being driven more by potential stabilization in the weaker areas like the office sector?

I think it's both. I mean obviously, we have some asset classes which are holding up really well, mostly coming from what we would call the alternative asset classes but also obviously on the logistics side. But we have seen also some strong deals on the offices side, mostly when we talk about super core buildings, where there is appetite. I mean as we have stated in our previous calls, there is a real strong overhang of capital which is waiting to be invested. And so when you have stable assets, which are very – with a very strong covenant, those assets are actually trading.

Okay. Got it. And then the last one for me, I know there are a lot of moving pieces and areas of uncertainty looking into 2021. But when you look at it broadly, have you become either, notably more optimistic or pessimistic over the last few months on a potential recovery in transaction activity next year? Or are there just I guess too many unknowns to gauge it right now?

I don't think that our view on 2021 has changed in any notable way. At the end of the day we need to have a vaccine and we need to have a clear way of treating infected people before something which is closer to what we would call normality is coming back. But we didn't expect that for this year. And the fact that we have now a second wave in at least Europe and the U.S. was kind of in range of our expectation for this year and that that second wave would probably go well into next year until – especially, for the more northern parts of the world. But climate is changing again and we are getting summer back. That was again expected. I think, as I just said, we have a very, very strong appetite for investors to get into real estate and we have a very strong appetite for corporate real estate outsourcing. Both of those trends will be there once the environment of the pandemic kind of allows more normality. So we are reasonably optimistic and we will weather the storm as long as it will be there.

Great. I appreciate the color.

Your next question comes from Jade Rahmani with KBW. Your line is open.

Thank you very much. I appreciate you are taking my questions. Something I get from investors, a lot is a comparison between, JLL and CBRE. And when we look at the company's results in the third quarter, stripping out the $120 million of non-permanent savings and compare JLL's adjusted EBITDA margin to CBREs. What do you think explains, CBRE's higher margins? Do you think its business mix? Do you think its scale or geographic footprint?

Well. Actually, Jade we are pretty much focused on, JLL and lesser focused on CBRE. But, you are there to make those comparisons.

Okay. I appreciate that. In terms of the permanent cost reductions also have been getting a lot of questions from some of your largest shareholders, so some insight would be helpful. How much is severance related versus a reduction in fixed operating and administrative costs?

Yeah. The majority is due to reductions in our headcount.

And so when you talk about the annual number of permanent cost reductions -- I'm sorry, I think that is about $135 million in permanent reductions, how much of that assumes an unchanged revenue outlook? In other words, flat revenues.

Yeah. We're really -- that's not how we made the decision. So as we looked ahead, we were really focused on two things. One orienting around improved cost efficiency for the business, and then also, looking ahead as it relates to which areas of our business, would return to growth in different periods of time. And so, the other thing to emphasize, around that $135 million number that I quoted, is that relates to salary and benefits only. It does not incorporate elements of variable compensation.

Could you give some color as to, how it breaks out amongst the various business lines which CBRE did on their call, on Thursday? Capital Markets Leasing, occupier outsourcing, property management et cetera?

Sure. I'll do it around the, four segments we report. So 50% of it was in EMEA, 40% of it in the Americas and then the remainder in APAC and LaSalle.

Okay. A bigger picture question around the office sector and I would note that Harvard Business Review just put out a study about, work from anywhere policies and commenting that there's productivity gains related to that. What are you hearing from your clients in terms of, how they're viewing office lease re-signings and generally office lease terms? I think last quarter Christian, you said office lease terms transactions were down about 16%, indicative of compression in the average lease duration that occupiers are willing to sign on to. Just was wondering if you could give an update on that sector.

Well, I kick it off and then, I hand it over to Karen. I think the large occupiers are largely still a bit in a holding pattern. We see smaller occupiers to be slightly more active. But that trend which I indicated in the last call is still around. And occupiers are obviously at the moment much more concerned around the question, what is their best use of office in the future, rather than the question, when can they get back into offices? But as many other people have already stated publicly, we see a pretty strong trend of de-densification and determination to make offices not only very inspirational, but also a very, very safe place where the users of offices are looking forward to get to. And that is something, which is needing a lot of advice and an area of our focus for us in our overall advisory practice and also around the corporate real estate outsourcing. Karen, do you want to add something?

Yes. There was a statistic that you quoted around the pipeline. That was for U.S. office leasing that Christian referred to in our second quarter discussion. And so it was interesting that was still pretty early on and to look at what actually transpired in the third quarter based on that pipeline in terms of the reduction in lease terms it was down approximately 8.5% compared to that 16% pipeline number. And so when we look into the details there were actually a handful of larger deals primarily done by tech companies that were larger longer term in duration and they made big commitments in the third quarter, which impacted that statistic. So we're still watching it very closely in terms of how that unfolds. But certainly seeing a higher probability higher frequency of renewals over new deals and shorter terms overall.

Thank you. And I was wondering are there any executives from the various business lines specifically markets and leasing who might be able to provide a market update as to what they are seeing?

We don't have anyone joining the call specifically this morning with us. But please feel free to ask any questions and we'll answer as best as we can.

Yeah. If you could just provide some color as to specifically on the markets side what you're seeing in terms of private equity and large real estate asset managers and their appetite. I think that various market participants have noted some increase in transaction pipelines on the very small deal front but curious if there's any update that you could provide there?

Well, on the capital markets side, as I noted earlier, we have a very large sum of capital waiting to be invested. For the time being that capital is focused on the super core deals and some of the more specific asset classes. And the transactions are happening mostly either domestically or by institutions who have people on the ground in a foreign market, because there is still a strong desire to have personal inspections before they sign up for those deals. This will continue as long as this pandemic is kind of impacting travel. But we expect -- and that may be a bit counterintuitive but we expect the capital markets business to actually come back earlier and stronger than the leasing business because of that massive capital overhang, which is waiting to be invested. On the corporate side, big organizations are at the moment relatively cautious to make decisions on outsourcing. And that is not because they don't believe in it. They very much believe in it, but it just takes a lot of physical interaction. People are looking into space and taking a lot of granular analysis before those contracts are being signed. Interestingly enough our own pipeline is significantly stronger at the moment than it was 12 months ago, which is just supporting that underlying strong trend towards that outsourcing where we are incredibly well-positioned for.

Thank you for taking the questions.

Sure.

Your next question comes from the line of Patrick O'Shaughnessy with Raymond James. Your line is open. Patrick O’Shaughnessy: Hey, good morning. So regarding working from home whether that's employees permanently working from home or having some hybrid approach, how does that vary for companies based off of regions? Is -- would you expect work-from-home to be as big of a component going forward in EMEA and Asia as you would in the Americas?

I think that depends very much where you are in the Americas and Asia and in Europe. I think what is generally true around the globe employees do want to get back to the office. They do enjoy the vibrancy, the exchange with their colleagues and also to a degree, the ability to have a clear difference between their working hours and their private hours. The big but is, what kind of working -- what kind of office environment do they have? Do they need to take public transportation to get to the office? Do they have to queue up at an elevator in a high-rise building? Can they take their private cars and have a parking place right next to their office space? So, these are many, many different factors. So if you put that into the mix, it is probably fair to say, if I were to generalize now that you will see less working from home in Asia, especially in the big cities of China and Japan and other very crowded places, but maybe not in Australia, where people will have the opportunity also to work from home. And the reason for the Asia piece is you also have to look at their living environment. If you have very spacious abilities to work from home, that creates a different working from home environment, than when you are sharing your apartment in downtown New York. And so, there are so many factors playing into that. I think, what is safe to say is that we will continue to see a hybrid between working from home and coming to the office. And that is something companies have to get their arms around how they can really stay, as productive in that hybrid model, than they were before.

Got it. Thank you. And then a question about the LaSalle business, AUM was down about $2 billion year-over-year. And I think your commentary was that was attributable to valuations and FX. But underlying that, how are flows looking in the LaSalle business? And how competitively do you think that business is faring relative to other major commercial real estate asset managers?

Yes. We've actually experienced continued capital flows into the LaSalle business. Within our release, we identified the $2 billion in the third quarter that $2 billion that was raised. And so, it's certainly a slower pace than we've experienced in the last couple of years, where we had really strong momentum within the LaSalle business, but it's continuing nonetheless. And as Christian mentioned earlier, there's still very strong interest in capital flows to real estate overall and significant dry powder available to deploy. And there are certain segments that are remaining quite active in the current environment.

Great. Thank you.

Your next question comes from the line of Anthony Paolone with JPMorgan. Your line is open.

Thanks. Just had a couple of follow-ons. One is, with regards to market share, it seems like you and some of your peers have talked about picking up some share here. Where do you think that's coming out of? Is it smaller regional names or other folks? Like where is the market share coming from?

Well, one of the reasons for picking up market share is that, the most active companies still doing deals are coming from the big tech sector and those companies tend to be advised by the likes of us. And so that helps. The other reason for that is that, we and some of our competitors have invested very heavily in technology, which allows us to serve our clients even in a work-from-home environment seamlessly and that obviously helps us now to win disproportionate market share in this current environment.

Okay. That's helpful. And then, just my other question is with regards to the outsourcing business. If we look ahead, do you think there's a point in time where companies are going to step back and say, okay we're now going to look to save money and either look for ways to cut footprints and fees? And if so, how do you think about the offsets on a contract-by-contract basis that you all think you can use to kind of protect that revenue stream?

Well listen corporate real estate outsourcing has evolved very much from the times where it was only about reducing cost to today's world where it's very much about increasing the quality, the experience the employees have in the work space, get best practice in as quickly as possible. Reducing cost is very often an additional plus. But depending on w hat industry you are in, in some industries the point about reducing costs is just less relevant for them. Real estate is a very important factor to retain and attract best talent. And for that there's a real need for best practice from around the world. And that is why we are having such big successes in that part of our business.

I'm sorry, just going to add as occupiers evaluate the real estate cost not everyone right now is within an outsourcing model. And so we'll also benefit from first-generation outsourcing new business wins.

Okay. So you don't think that there's -- this is something to look out and anticipate more headwinds as companies kind of get through the pandemic? You feel like there's other levers to keep that growth going?

Yes. Right now the trends are showing us good momentum. We'll continue to watch carefully, but nothing at the moment.

Thank you.

There are no further questions at this time. I will now turn the call back over to management for closing remarks.

Thank you, operator. With no further questions we will close today's call. On behalf of the entire JLL team we thank you all for participating on the call this morning. Karen and I look forward to speaking with you again following the fourth quarter. Stay safe and healthy.

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