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JLL Doubling Down on Growing Capital Markets Business

Robust Sales, Financing Activity Help Drive Jump in Quarterly Income
May 8, 2018
Christian Ulbrich, JLL CEO

Robust capital markets activity helped drive strong earnings and revenue growth for Jones Lang Lasalle Inc. in the first quarter, the global real estate firm reported today.

Net income attributable to common shareholders was $40.3 million, compared with $7.2 million in the first quarter last year, and adjusted EBITDA increased 51 percent to $107.7 million.

JLL attributed the boost in part to its multifamily lending and loan servicing businesses, while also crediting some notable investment sale transactions it arranged.

"Despite trade tensions and stock market volatility, transactions in global real estate capital markets reached $165 billion for the quarter, 15% above the same period last year and the highest level since the first quarter of 2007," said JLL CEO Christian Ulbrich.

As a result, Ulbrich stated JLL has made expanding its capital markets capabilities a priority in 2018. That will include new hires as well as potential merger activity.

Last week, JLL hired 14 investment sales and debt specialists in Denver, Phoenix and Seattle to boost its platforms in the western U.S. Moreover, the brokerage said it is hunting for similar talent in Southern California.

However, hiring top talent is not coming cheaply.

"The market cycle is very favorable for talented people," Ulbrich said. "And so, it's a very tough environment to hire people. Obviously, our brand helps, but it still is a tough environment. And so that's why we are open for all kinds of solutions, which will help us to drive results in that area."

The hiring push comes at perhaps an unlikely time - almost 10 years into the economic expansion while U.S. investment sales of single assets has become thinner than in previous quarters.

Negotiating transaction at this point in an extended cycle can be tricky, Ulbrich pointed out. Sellers expect to extract a top price because they know the cost of reinvesting in other assets is also going to be high. Buyers, on the other hand, are reluctant to pay top price this late in the economic recovery, Ulbrich noted.

"That cautious behavior, which we are seeing from some of the buyers, we believe is very healthy," he added. "We have a lot of discipline in the market. Buyers are very disciplined. Sellers also have a firm view on what they want to do. So that could actually drive that market forward for many more quarters."

JLL's representative wins in capital markets in the first quarter included structuring the $680 million, joint venture buy and financing of the 2.3 million-square-foot Prudential Plaza office complex in downtown Chicago to the American arm of Wanxiang Group Cos., a Chinese multinational investor, and Chicago-based Sterling Bay. That deal closed last week.

JLL's Capital Markets experts also arranged the sale of Precedent Office Park in Indianapolis to a partnership between Rubenstein Partners and Strategic Capital Partners. The 19-building, 1.1 million-square-foot portfolio sold for $132.75 million. JLL represented its affiliated seller, LaSalle Investment Management.

In terms of its multifamily business, JLL posted 24% growth year-over-year for the first quarter in its Fannie Mae and Freddie Mac loan underwriting, the company reported. A level that is meaningfully above the market, particularly as Fannie Mae's activity was down from the first quarter of last year.

JLL was Fannie Mae's third largest underwriter of loans in two categories last year: affordable multifamily housing and senior housing.

"We have the expectations that we are beating market [growth], and so even if the market is coming down a little bit, we would still expect to beat the market," Ulbrich told investors.

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