2016 Performance

JLL delivered diversified revenue increases for 2016. The Company’s full-year 2016 consolidated revenue performance of $6.8 billion and consolidated fee revenue of $5.8 billion for the year represented double-digit percentage increases over a robust 2015. Revenue growth occurred across all geographic segments and LaSalle, fueled by recent acquisitions that contributed over $470 million of incremental fee revenue in 2016. Annuity businesses led revenue growth while transactional businesses also grew against a global decline in market volumes, which was notably impactful in the UK.

Each of JLL’s three Real Estate Services operating segments contributed to the results:

  • Americas total revenue was $3.0 billion, a 15 percent increase compared with last year. Fee revenue for the year was $2.8 billion, an increase of 15 percent from 2015. Fee revenue growth compared with last year was broad-based across all business lines, reflecting balanced organic and acquisition-driven expansion. Operating expenses for the year were $2.7 billion, up 16 percent from $2.4 billion in 2015. Fee-based operating expenses for the year, excluding restructuring and acquisition charges, were $2.5 billion, up 18 percent from $2.1 billion in 2015. Operating income for the year was $260.7 million, up 6 percent from $245.2 million in 2015. Adjusted EBITDA was $322.0 million for the year, compared with $309.3 million in 2015. Adjusted EBITDA margin, calculated on a fee revenue basis, was 11.7 percent in USD and local currency for the year, compared with 12.9 percent in 2015. The decline in Adjusted EBITDA margin was driven by continued spend in data, technology, and people, partially offset by the contributions from recent acquisitions.
  • EMEA’s total revenue for the year was $2.1 billion, an increase of 24 percent from last year. Fee revenue for the year was $1.5 billion, an increase of 16 percent from 2015. Revenue expansion compared with 2015 was most notable in Property & Facility Management, driven by approximately $175 million of incremental fee revenue from the August 2016 acquisition of Integral, along with Project & Development Services. Partially offsetting the increase in revenue was the impact of a 39 percent year-over-year decrease (measured in US Dollars) in capital markets investment volumes in the UK. Revenue growth in the region was led by Germany and France combined with the acquisition of Integral in the UK. Operating expenses for the year were $2.0 billion, up 30 percent from $1.7 billion in 2015. Fee-based operating expenses, excluding restructuring and acquisition charges, were $1.4 billion, up 24 percent from $1.3 billion in 2015, primarily reflecting the impact of the Integral acquisition. Operating income for the year was $79.1 million, down from $144.7 million in 2015. Adjusted EBITDA was $115.7 million for the year, compared with $170.9 million in 2015. Adjusted EBITDA margin, calculated on a fee revenue basis, was 7.6 percent in US Dollars (7.0 percent in local currency) for the year, compared with 12.2 percent in 2015. The decline in profitability was primarily UK-focused and driven by the decline in capital markets transaction volumes, nearly $35.0 million of capital markets performance fees earned in 2015 that did not recur in 2016, and approximately $13.0 million of additional contract expenses incurred during the wind-down of operations in a non-core market. The decline in Adjusted EBITDA margin also reflected the shift in service mix associated with the Integral acquisition.
  • Asia Pacific’s total revenue for the year was $1.4 billion, an increase of 18 percent from last year. Fee revenue for the year was $1.1 billion in 2016, an increase of 13 percent from 2015. Revenue growth compared with last year was driven by Property & Facility Management; Advisory, Consulting & Other; and Project & Development Services. Growth in the region, led by Japan, Australia, and Greater China, was balanced between organic expansion and acquisitions of annuity businesses such as property management, facilities management, and valuations. Operating expenses for the year were $1.3 billion, up 19 percent from $1.1 billion in 2015. Fee-based operating expenses, excluding restructuring and acquisition charges, were $1.0 billion, up 14 percent from $881.8 million in 2015. Operating income for the year was $86.4 million, consistent with 2015. Adjusted EBITDA was $104.8 million for the year, compared with $102.7 million in 2015. Adjusted EBITDA margin, calculated on a fee-revenue basis, was 9.7 percent in US Dollars (9.6 percent in local currency) for the year, compared with 10.6 percent in 2015, and reflected increases in data and technology investments.

LaSalle, our investment management business that constitutes our fourth operating segment, posted an increase in total revenue for the year up 3 percent from last year, and included $260.8 million of advisory fees, $95.9 million of incentive fees, and $51.1 million of transaction fees. Equity earnings for the year were $31.5 million, as compared with $70.1 million in the prior year. While activity in both periods reflected net valuation increases of assets within the co-investment portfolio, gains recognized in 2015 from the disposition of legacy investments that did not recur in 2016 contributed substantially to the year-over-year decline. Operating income for the year was $82.9 million, a decrease from $87.5 million in 2015. In 2016, LaSalle’s capital raising momentum continued with $5.1 billion for the year. Assets under management reached a record high of $60.1 billion as of December 31, 2016, up from $56.4 billion as of December 31, 2015.

In 2016, the Company completed 28 new acquisitions that expanded its capabilities in key regional markets. The Company maintained a balance sheet for growth, reflecting the Company’s strong cash generation. It also maintained its investment grade credit rating of BBB+ with S&P and Baa2 with Moody’s.

Also during 2016, JLL continued to win numerous awards that reflected the quality of the services it provides to our clients, the integrity of its people and its desirability as a place to work, including awards recognizing its (1) superior service to clients, (2) ethics program and corporate governance, (3) outsourcing capabilities, (4) consultancy capabilities, (5) ‘‘best place to work’’ environment, and (6) environmental and energy management work for clients.

See Annex A for a reconciliation of non-GAAP financial measures to our results as reported under accounting principles accepted in the United States.

The following table illustrates the three-year relationship between Company performance and the compensation of our Named Executive Officers. The overall growth of the business as represented by basic earnings per share and adjusted net income has exceeded Named Executive Officer total direct compensation on a relative basis. We selected earnings per share and adjusted net income because of their high correlation with creating shareholder value and selected our Named Executive Officers because of our 2016 Chief Executive Officer transition.

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(1) As defined by the Compensation Committee, adjusted net income represents net income attributable to common shareholders excluding certain significant restructuring and acquisition charges. See Annex A for a reconciliation of adjusted net income to our results as reported under accounting principles accepted in the United States.

(2) This table includes only the Named Executive Officers and excludes Mr. Dyer, who retired during 2016. It represents total direct compensation earned for the year indicated. The compensation reflected above may differ from the Summary Compensation Table (the Table) due to certain timing reasons indicated in the notes to the Table.
Return to shareholders

The following graph compares the cumulative 5-year total return to shareholders of JLL’s common stock relative to the cumulative total returns of the S&P 500 Index. The graph below assumes that the value of the investment in JLL’s common stock and the S&P 500 Index (including reinvestment of dividends) was $1,000 on December 31, 2011.

Highlights of compensation committee actions

The Summary Compensation Table indicates the specific amounts we paid to the Named Executive Officers in respect of their 2015 performance. Highlights from the decisions the Committee made include the following:

Base salaries

  • We increased the base salary for Mr. Ulbrich to the Euro equivalent of U.S. $750,000 based on his promotion to Chief Executive Officer.

Annual incentives

  • Under the Annual Incentive Plan, we awarded $10.2 million in total to the Named Executive Officers. Asia Pacific Operating Income and LaSalle Operating Income were above target, while AIP Adjusted EBITDA, Americas Operating Income, and EMEA Operating Income were below target. Accordingly, the awards were 81% of planned budget and we delivered them entirely in cash.

Long-term incentives

  • Under the GEB Long-Term Incentive Plan (GEB LTIP), we awarded $4.8 million in total to the Named Executive Officers. Performance on the 2020 measures was above target, while LTIP Adjusted EBITDA and Relative TSR were below target. The awards were 81% of planned budget. With the exception of Mr. Jacobson, we issued the awards in time-vested restricted stock units (RSUs), which vest ratably over 3 years. Mr. Jacobson’s award under the GEB LTIP was deferred and notionally invested in LaSalle’s total assets under management in order to align his compensation with the investment performance that LaSalle produces for its clients. In addition to the GEB LTIP, Mr. Jacobson also received an award of $1,001,000 under the LaSalle Long-Term Incentive Plan (LaSalle LTIP)

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