UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 1999 Commission File Number 1-13145
JONES LANG LASALLE INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland 36-4150422
(State of organization) (I.R.S. Employer Identification No.)
200 East Randolph Drive, Chicago, IL 60601
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/782-5800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock ($.01 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ]
As of March 24, 2000, there were outstanding 30,342,018 shares of the
Registrant's Common Stock. The aggregate market value of the Registrant's
Common Stock held for non-affiliates on March 24, 2000 was approximately
$353,591,560 based on the closing price of $14.00 per share. The aggregate
market value of all of the Registrant's 30,342,018 shares of Common Stock
outstanding on such date was approximately $424,788,252.
Portions of the Registrant's Proxy Statement for its 2000 Annual Meeting of
Stockholders to be held on May 15, 2000 are incorporated by reference in
Part III of this report.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 20
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 21
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 21
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . 22
Item 6. Selected Financial Data . . . . . . . . . . . . 23
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . 30
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . 43
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . 45
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . 84
PART III
Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . . 84
Item 11. Executive Compensation. . . . . . . . . . . . . 84
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 84
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 84
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 85
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS . . . . . . 85
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 87
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PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle"; formerly
LaSalle Partners Incorporated) founded in 1968, is a leading full-service
real estate services firm that provides investment management, hotel
acquisition and disposition, strategic advisory and valuation, property
management, corporate property services, development services, project
management, tenant representation, agency leasing, investment disposition
and acquisition, financing and capital placement services on a local,
regional and global basis. Jones Lang LaSalle manages approximately 700
million square feet of property, provides investment management services
for $21.5 billion of assets, and operates a business with more than 7,000
employees across 100 markets on five continents. Jones Lang LaSalle has
grown by expanding both its client base and its range of services and
products in anticipation of client needs, as well as through a series of
strategic acquisitions and a merger. By offering a broad range of real
estate products and services, and through its extensive knowledge of
domestic and international real estate markets, Jones Lang LaSalle is able
to serve as a single source provider of solutions for its clients' full
range of real estate needs. The ability to provide this network of
services around the globe was solidified effective March 11, 1999 with the
merger of the businesses of the Jones Lang Wootton companies ("JLW") with
those of LaSalle Partners Incorporated ("LaSalle Partners") (see
Organization section below for discussion). In connection with this
merger, the name of the company was changed from LaSalle Partners
Incorporated to Jones Lang LaSalle Incorporated.
ORGANIZATION
Prior to its incorporation in Maryland on April 15, 1997 and its
initial public offering (the "Offering") of 4,000,000 shares of common
stock on July 22, 1997, Jones Lang LaSalle transacted business as LaSalle
Partners Limited Partnership and LaSalle Partners Management Limited
Partnership (collectively, the "Predecessor Partnerships"). Immediately
prior to the Offering, the general and limited partners of the Predecessor
Partnerships contributed all of their partnership interests in the
Predecessor Partnerships in exchange for an aggregate of 12,200,000 shares
of common stock.
On March 11, 1999, Jones Lang LaSalle (at the time known as LaSalle
Partners Incorporated) merged its businesses with those of JLW and changed
its name to Jones Lang LaSalle Incorporated. JLW was an employee owned
international real estate services firm with approximately 4,000 employees
and operations in 32 countries. It provided a wide range of real estate
advisory, transactional and asset management services to local, national
and international clients in both the private and public sectors and had
approximately 280 million square feet under management and approximately
$6.3 billion in assets under management. The operations, headquartered in
London, were managed geographically with four main regions in Europe, Asia,
Australasia and the United States. JLW had a culture, long-term strategy
and service capability which were compatible with those of LaSalle
Partners. In accordance with the purchase and sale agreements related to
the merger, Jones Lang LaSalle issued 14.3 million shares of common stock
and paid cash consideration of $6.2 million (see Management's Discussion
and Analysis of Financial Condition and Results of Operations and Notes to
Consolidated Financial Statements provided elsewhere herein for further
discussion regarding this transaction).
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In October 1998, Jones Lang LaSalle acquired all of the common stock
of the following real estate service companies (collectively referred to as
"COMPASS") formerly owned by Lend Lease Corporation Limited ("Lend Lease"):
COMPASS Management and Leasing, Inc. and its wholly owned subsidiaries, The
Yarmouth Group Property Management, Inc., ERE Yarmouth Retail, Inc.
(formerly COMPASS Retail, Inc.), and COMPASS Management and Leasing
(Australia) Pty Limited. The acquisition of COMPASS elevated Jones Lang
LaSalle's position in the property management and corporate property
services industry to that of the largest management services company in the
United States and expanded its international presence into Australia and
South America.
In April 1997, Jones Lang LaSalle acquired all of the common stock of
the Galbreath Company, a property management, corporate property services
and development services company with operations in the United States. The
principal objectives for the acquisition were to expand Jones Lang
LaSalle's geographic presence, add additional client relationships and
provide for economic synergies with the leasing and management services
group. In addition, Jones Lang LaSalle acquired the project management
business of Satulah Group Inc., a project management and facilities
conversion company, in January 1998. The objective of this acquisition was
to enhance project management services and to support the long-term growth
strategy of expanding service capabilities.
BUSINESS SEGMENTS
Jones Lang LaSalle manages its business along a combination of
functional and geographic lines. In the fourth quarter of 1999, Jones Lang
LaSalle consolidated its operations in Asia and Australasia into a unified
region now known as Asia Pacific. Accordingly, operations are now
classified into five business segments: two global businesses, (i)
Investment Management and (ii) Hotel Services; and three geographic regions
of Owner and Occupier Services, (iii) the Americas, (iv) Europe and (v)
Asia Pacific. The Investment Management segment provides real estate
investment management services to institutional investors, corporations,
and high net worth individuals. The Hotel Services segment provides
strategic advisory, sales, acquisition, valuation and asset management
services related solely to hotel, conference and resort properties. The
Owner and Occupier Services business is operated on a geographical basis
and consists primarily of tenant representation and agency leasing, capital
markets and valuation services (collectively, "implementation services")
and property management, corporate property services, development services
and project management services (collectively, "management services"). For
financial information and a discussion of the operating performance of each
segment refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Consolidated Financial
Statements provided elsewhere herein.
OWNER AND OCCUPIER SERVICES
To effectively address the local, regional and global needs of real
estate owners and occupiers, Jones Lang LaSalle provides a full spectrum of
integrated transaction, property management and corporate property
services. These services can be grouped into two types: implementation
services and management services. Operations are managed geographically in
three regions: the Americas, Europe and Asia Pacific. In addition, the
Global Services Management unit supports the regions of Owner and Occupier
services on a global basis for marketing, consulting and delivery of best
practices to multi-national clients. The following is a discussion of the
primary services provided, as well as Global Services Management:
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IMPLEMENTATION SERVICES
Implementation services consist primarily of tenant representation,
agency leasing, capital markets and valuation services. Implementation
services produced 52.1%, 40.1% and 40.8% of Jones Lang LaSalle's total
revenue for 1999, 1998 and 1997, respectively.
TENANT REPRESENTATION SERVICES. Jones Lang LaSalle's Tenant
Representation Services units assist clients by defining space
requirements, identifying suitable alternatives, recommending appropriate
occupancy solutions and negotiating lease and ownership terms with third
parties. Jones Lang LaSalle seeks to assist its clients to lower real
estate costs, minimize real estate occupancy risks, improve occupancy
flexibility and control and create more productive office environments. A
multi-disciplined approach is used to develop occupancy strategies that are
linked to its clients' core business objectives. In 1999, Jones Lang
LaSalle completed over 1,700 tenant representation transactions involving
approximately 26.0 million square feet.
The tenant representation industry includes a large number of service
providers offering a wide range of service quality and capabilities. The
Tenant Representation Services units, particularly in the United States,
direct their marketing efforts toward developing "strategic alliances" with
clients whose real estate requirements include on-going assistance in
meeting their real estate needs and also toward clients who have the need
to consider multiple real estate options and to execute complex strategies.
In many cases, Jones Lang LaSalle develops a strategic alliance with
clients to deliver fully integrated real estate services, including
comprehensive on-going strategic planning and transaction execution
services across multiple office locations via the assignment of dedicated
client teams. Jones Lang LaSalle views its strategic alliances as a
competitive advantage since these long-term relationships lower business
development costs for Jones Lang LaSalle and create recurring revenue
sources. Through these relationships, Jones Lang LaSalle gains a better
understanding of its clients' portfolio and occupancy requirements since
the same professionals service the client's needs nationwide. Jones Lang
LaSalle believes that these relationships enable it to deliver more
consistent services and better results than single-transaction,
commissioned brokerage service providers.
In addition to its strategic alliances, Jones Lang LaSalle also
represents clients in large, complex transaction assignments that typically
involve relocations of headquarters facilities or major office
consolidations. In such assignments, Jones Lang LaSalle draws on its broad
depth of other capabilities to assist its clients with development, buy or
lease decisions and the evaluation of long-term financing options.
Jones Lang LaSalle intends to further the growth of this business by
continuing to increase its strategic alliance relationships and by
expanding the relationships to cover multinational clients that have
occupancy needs around the world and are looking for a single source
provider.
Jones Lang LaSalle is generally compensated for Tenant Representation
Services on a negotiated fee basis. Although fees are generated by lease
commissions, they are often also determined by performance related to
targets set by Jones Lang LaSalle and the client prior to Jones Lang
LaSalle's engagement and, in the case of strategic alliances, at annual
intervals thereafter. Quantitative and qualitative measurements assess
progress relative to these goals, and Jones Lang LaSalle is compensated
accordingly, with incentive fees often awarded for superior performance.
Jones Lang LaSalle's Tenant Representation Services professionals do not
earn commissions, but are compensated by means of a base salary and
performance bonus that is determined primarily by their contribution to
achieving predetermined client performance objectives.
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AGENCY LEASING SERVICES. Jones Lang LaSalle's Agency Leasing
Services units create and execute marketing and leasing programs to
identify tenants and negotiate leases with terms in the best interests of
our clients. Clients are typically investors, property companies,
developers or public bodies. In 1999, Jones Lang LaSalle completed
approximately 11,000 agency leasing transactions representing approximately
90.0 million square feet of space.
Agency leasing fees are typically based on a percentage of the value
of the lease revenue commitment for leases consummated.
CAPITAL MARKETS SERVICES. Jones Lang LaSalle's Capital Markets
Services include real estate finance, private equity placements, portfolio
advisory activities, corporate finance and institutional property sales and
acquisitions. In 1999, Jones Lang LaSalle completed institutional property
sales and acquisitions, debt financings, equity placements and portfolio
advisory activities on assets and portfolios valued at over $23.0 billion.
Jones Lang LaSalle believes that its Capital Markets Services units
have a number of competitive strengths, including their broad accumulated
base of real estate investment banking knowledge and an ability to draw on
Jones Lang LaSalle's access to global capital sources. Jones Lang LaSalle's
Agency Leasing, Property Management and Investment Management units are
valuable resources for the Capital Markets Services units in providing
local market and property information and local capital markets expertise.
As a result of the merger with JLW, the Capital Markets Services units have
expanded access to international market and property information which
creates the platform necessary for these business units to offer their
expertise to multinational clients.
The Capital Markets Services units are integral to the business
development efforts of Jones Lang LaSalle's other businesses by
researching, developing and introducing innovative new financial products
and strategies. This includes the development of Jones Lang LaSalle's
hotel investment capability, which is currently performed within Jones Lang
LaSalle's Investment Management group through the management of LaSalle
Hotel Properties, a Real Estate Investment Trust ("REIT").
Jones Lang LaSalle is typically compensated for Capital Markets
Services on the basis of the value of transactions completed or securities
placed, but in certain circumstances Jones Lang LaSalle receives retainer
fees for portfolio advisory services.
VALUATION SERVICES. Jones Lang LaSalle's Valuation Services units
provide clients with professional valuation services, helping them to
determine accurate values for office, retail, industrial and mixed-use
properties. Such services may involve valuing a single property or a
worldwide portfolio of multiple property types. Valuations typically
involve commercial property, investment grade residential property and land
for purposes including acquisition, disposition, debt and equity financing,
mergers and acquisitions, securities offerings and privatization. Clients
include occupiers, investors and financing sources from the public and
private sectors. Jones Lang LaSalle has valuation specialists capable of
providing valuation advice to clients in nearly every developed country.
During 1999, Jones Lang LaSalle performed over 32,000 valuations of
properties valued in the aggregate at approximately $194.0 billion.
Compensation for valuation services is generally negotiated for each
assignment based on its scale and complexity and will typically relate in
part to the value of the underlying assets.
<PAGE>
MANAGEMENT SERVICES
Management services include property management, corporate property
services, development and project management services. With a portfolio of
approximately 700 million square feet of property under management
worldwide, Jones Lang LaSalle is the world's largest property manager.
Revenue from management services was 30.9%, 27.3% and 21.5% of total
revenue for 1999, 1998 and 1997, respectively.
PROPERTY MANAGEMENT SERVICES. Jones Lang LaSalle's Property
Management Services units provide on-site management services for office,
industrial, retail and specialty properties, leveraging their market share
and buying power to deliver superior service for clients. Jones Lang
LaSalle's goal, as a pioneer in the development of value-creating property
management services, is to enhance its clients' property values through
aggressive day-to-day management focused on maintaining high levels of
occupancy and tenant satisfaction, while lowering the operating costs of
such properties. During 1999, Jones Lang LaSalle provided on-site Property
Management Services for office, retail, mixed-use and industrial properties
totaling approximately 450.0 million square feet.
Jones Lang LaSalle's property management services are typically
provided by an on-site general manager and staff supported through regional
supervisory teams as well as central resources in areas such as training,
technical and environmental services, accounting, marketing and human
resources. Property general managers assume full responsibility for
property management activities, client satisfaction and financial results
and are compensated, not by fees or commissions, but through a combination
of base salary and performance bonus that is directly linked to results
produced for clients.
Increasingly, management agreements provide for incentive compensation
relating to operating expense reductions, gross revenue or occupancy
objectives or tenant satisfaction levels. As is customary in the industry,
management contract terms typically range from one to three years, but are
cancelable at any time upon a short notice period, usually 30 to 60 days.
Jones Lang LaSalle's acquisitions of COMPASS and Galbreath and the
recent investment in a new property information system in the Americas,
provides opportunities for Jones Lang LaSalle to leverage its size to offer
high quality, low cost services over a wider geographic area. The marketing
efforts of the Property Management Services business are directed toward
pursuing new third-party management assignments, expanding Jones Lang
LaSalle's relationships with existing clients and capitalizing on new
business opportunities which may arise from Jones Lang LaSalle Investment
Management's initiatives, such as the continuation of its co-investment
strategy. Further, the merger with JLW has provided an opportunity to
combine best practices around the globe to enhance current client
satisfaction and margin objectives as well as to serve new multinational
clients.
CORPORATE PROPERTY SERVICES. Jones Lang LaSalle was a pioneer in the
corporate property services business. Jones Lang LaSalle's Corporate
Property Services units provide comprehensive portfolio and property
management services to corporations and institutions that outsource their
real estate management functions. The properties under management range
from corporate headquarters to industrial complexes. Jones Lang LaSalle's
target clients typically have large portfolios (usually over one million
square feet) with significant opportunities to reduce costs and improve
service delivery. Performance measures are generally developed to quantify
progress made toward the goals and objectives that are set mutually with
clients. At December 31, 1999, Jones Lang LaSalle had approximately 250.0
million square feet under management relating to Corporate Property
Services clients.
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Jones Lang LaSalle's Corporate Property Services units also serve as
an important "port of entry" for Jones Lang LaSalle's other business units.
Depending on client needs, the Corporate Property Services units, either
alone or through Jones Lang LaSalle's other business units, provide
services such as portfolio planning, property management, leasing, tenant
representation, acquisition, finance, disposition, project management,
development management and land advisory services.
The Corporate Property Services units are compensated on the basis of
negotiated fees, which are typically structured to include a base fee and a
performance bonus. The performance bonus compensation is based on a
quantitative evaluation of progress toward performance measures and
regularly scheduled client satisfaction surveys. Corporate Property
Services agreements are typically three to five years in duration.
Jones Lang LaSalle believes that the global corporate trend of
outsourcing non-core business functions represents an important long-term
business opportunity. Jones Lang LaSalle also believes that its broad-
based service capabilities will become an increasingly valuable competitive
advantage in pursuing Corporate Property Services assignments. Jones Lang
LaSalle believes that its demonstrated experience in improving clients'
operating expense levels and client satisfaction also provide it with an
important competitive advantage. In order to efficiently provide all
services required to manage and operate large corporate property
portfolios, Jones Lang LaSalle partners with major building services and
architecture firms. The Corporate Property Services units have been
actively pursuing, and have had success with obtaining new business
opportunities with universities, health care institutions and government
agencies.
DEVELOPMENT SERVICES. Jones Lang LaSalle's Development Services units
manage all aspects of the development, redevelopment and renovation of
commercial projects, principally on a fee basis. Jones Lang LaSalle
prepares feasibility studies, negotiates contracts, develops and monitors
budgets and coordinates and manages the architects, engineers and attorneys
related to the project. Jones Lang LaSalle also undertakes entitlement,
zoning and a variety of other development-related responsibilities.
Clients are generally corporations with significant office space needs.
Jones Lang LaSalle has extensive experience in ground-up development in the
office, retail, industrial and special-purpose sectors. The Development
Services units frequently manage development initiatives for clients of
Jones Lang LaSalle's Corporate Property Services and Tenant Representation
Services units, as well as for clients of the Jones Lang LaSalle Investment
Management segment which are pursuing development-related investment
strategies.
The Development Services units generate development and advisory fees,
which are negotiated based upon the cost of the developments or
improvements. In addition, the units generate performance fees based on
investment returns generated for clients. Assignments are typically multi-
year in nature.
PROJECT MANAGEMENT SERVICES. Jones Lang LaSalle's Project Management
Services units provide facility build-out and conversion management, move
management and strategic occupancy planning services to tenants of leased
space, owners in self-occupied buildings and owners of real estate
investments. The Project Management Services units frequently manage the
relocation and build-out initiatives for clients of Jones Lang LaSalle's
Property Management Services, Corporate Property Services and Tenant
Representation Services units.
Jones Lang LaSalle is one of the largest providers of project
management services in the United States. Jones Lang LaSalle intends to
grow its Project Management Services business via expansion into additional
markets and by increasing the number of Jones Lang LaSalle's current
clients it provides services for.
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The Project Management Services units are typically compensated on the
basis of negotiated fees. Contracts are typically multi-year in nature for
clients with individual projects being completed in less than one year.
GLOBAL SERVICES MANAGEMENT
The Global Services Management unit was created to support the
geographical Owner and Occupier Services segments. It is composed of three
management functions: Global Client Services, Global Services Development
and Global Consulting.
Global Client Services is a dedicated firm-wide marketing
organization, which acts as a catalyst in assisting Jones Lang LaSalle
professionals in all groups in marketing multiple services of the firm to
existing and prospective clients. Global Services Development identifies
and institutes best practices throughout Jones Lang LaSalle, making skilled
resources available to clients wherever such expertise may be needed, and
supporting the expansion of Jones Lang LaSalle's business specialties
globally. The Global Consulting team of senior real estate consultants
provides clients with specialized, value-added real estate consulting
services and strategies in seven areas: mergers and acquisitions, ports and
transit, development, public institutions, e-commerce, occupier portfolio
and organizational strategy and work process design.
The Global Services Management unit performs a global support function
for the regional Owner and Occupier Services businesses, and therefore, for
purposes of segment reporting, the revenue and expenses of this unit are
allocated back to the regions.
INVESTMENT MANAGEMENT
Jones Lang LaSalle's Investment Management business, which operates
under the name of LaSalle Investment Management, provides real estate
investment management services to institutional investors, corporations and
high net-worth individuals. As of December 31, 1999, Jones Lang LaSalle
managed approximately $21.5 billion of real estate assets, making it one of
the largest managers of institutional capital invested in real estate
assets and securities. Investment Management revenue was 11.2%, 29.0% and
34.5% of total revenue in 1999, 1998 and 1997, respectively. The reduction
in the business's contribution to total revenue was principally the result
of the fact that the businesses acquired over the period, as well as the
businesses of the JLW Companies, were primarily Owner and Occupier Services
businesses.
LaSalle Investment Management serves its clients through a broad range
of real estate investment products and services in the public and private
capital markets to meet various strategic, risk/return and liquidity
requirements, with a wide variety of equity and debt products. This
business is organized along two functional lines, private equity and debt
investments and public equity and debt investments. LaSalle Investment
Management offers its clients a range of investment alternatives, including
private direct investments in multiple real estate property types (e.g.,
office, retail, industrial, residential, land and parking) and indirect
investments, primarily in publicly traded REITs and other real estate
equities. The success of LaSalle Investment Management is built on the
foundation of fully integrated research, innovative investment strategies
and a strong client focus. LaSalle Investment Management's strategy is
focused on three fundamentals: (i) developing and executing tailored
investment strategies to meet a variety of client objectives, (ii)
providing superior performance for its clients and (iii) delivering a high
level of service.
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The investment and capital origination activities of the
Investment Management business are becoming increasingly non-U.S. based.
As of December 31, 1999, 50% of LaSalle Investment Management's assets
under management were invested outside of the United States. Additionally,
approximately 67.4% of capital under management by LaSalle Investment
Management at December 31, 1999 originated from investors outside of the
United States. Jones Lang LaSalle expects its Investment Management
activities outside of the United States, both fund raising and investing,
to continue to increase as a proportion of total capital raised and
invested and sees a growing trend of cross border capital movement. In
1999, LaSalle Investment Management's application for Approved Fund Manager
status was approved by the Monetary Authority of Singapore. This marked
the first major step in the plan to build an investment management
operation to service clients in the Asia Pacific region.
Investment Management activities generate significant additional
business for other parts of Jones Lang LaSalle's operations, particularly
in the areas of Agency Leasing, Property Management, Development Services
and Capital Markets Services.
Jones Lang LaSalle maintains an extensive real estate research
department, which monitors real estate and capital market conditions around
the world to enhance investment decisions and identify future
opportunities. In addition to drawing on public sources for information,
the research department utilizes the extensive local presence of Jones Lang
LaSalle's professionals throughout the world to gain proprietary insight
into local market conditions.
PRIVATE EQUITY AND DEBT INVESTMENTS. On behalf of its investment
management clients, LaSalle Investment Management oversees the acquisition,
management, leasing, financing and divestiture of real estate investments
across a broad range of real estate property types. LaSalle Investment
Management introduced its first institutional investment fund in 1979 and
currently has a series of commingled investment funds, including three
funds which invest in properties in the United States and two commingled
funds that are fully invested in assets located in continental Europe.
LaSalle Investment Management also has single client account relationships
("separate accounts") with investors for whom LaSalle Investment Management
manages private real estate investments. As of December 31, 1999, Jones
Lang LaSalle had $18.1 billion in assets under management in these funds
and separate account clients.
To take advantage of the trend toward globalization of real estate
capital sources, LaSalle Investment Management strengthened and extended
its international investment activities with the acquisition, in October
1996, of CIN Property Management. This acquisition made LaSalle Investment
Management one of the largest managers of pension fund real estate
investments in the United Kingdom, and provided the basis for it to expand
its investment activities and capital raising in the United Kingdom and
continental Europe. LaSalle Investment Management currently has
approximately $10.5 billion in assets under management in Europe. LaSalle
Investment Management is leveraging its organizational strength and access
to global capital, to take advantage of the accelerating interest in
international investment, to expand investment activity to new countries
within Europe and Asia Pacific and to strengthen its position as a leading
investment manager for real estate capital in the United States.
Jones Lang LaSalle furthered its endeavors with respect to investment
management in the hotel industry with the completion of the initial public
offering of LaSalle Hotel Properties ("LHO"). LHO is a REIT which was
formed to own hotel properties and to continue and expand Jones Lang
LaSalle's hotel investment management activities by investing principally
in upscale and luxury full service hotels located primarily in major
business and urban, resort and convention markets. Jones Lang LaSalle
provides advisory, acquisition and administrative services to LHO for which
it receives a base advisory fee calculated as a percentage of net operating
income, as well as performance fees based on growth in funds from
operations on a per share basis.
<PAGE>
In 1999, LaSalle Investment Management launched and funded two new
investment products: the Income & Growth II Fund and the Euro5 Fund. The
Income & Growth II Fund is a private equity commingled fund, which invests
in properties within the United States. This fund had its first and second
closings during 1999 and received commitments which represent more than
$220.0 million in buying power. A target has been set for the first half
of 2000 to secure additional funding of $150.0 million to $200.0 million.
The Euro5 Fund also had its first closing in 1999. This diversified
value-added investment vehicle focuses on office, business park, retail and
industrial properties in areas with above-average growth in France, Italy,
Portugal, Spain and Germany. With leverage, it is expected that the Euro5
Fund will acquire assets valued in excess of 300 million euros by mid 2000.
Currently, commitments are pending that involve the acquisition of eight
investments for this fund.
Certain investors continue to favor investment managers that co-invest
in newly formed investment vehicles in order to more closely align the
interests of the investor and the investment manager. Jones Lang LaSalle
believes that co-investment will continue to be important in certain
regions of the world as a factor in retaining and expanding its competitive
position. Jones Lang LaSalle also believes that its co-investment strategy
will greatly strengthen its ability to raise capital for new investment
funds. By increasing assets under management, Jones Lang LaSalle also
gains the opportunity to provide additional services related to the
acquisition, financing, property management, leasing and disposition of
such assets.
Jones Lang LaSalle Investment Management's operations are conducted
with teams of professionals dedicated to achieving client objectives. All
investment decisions for private market investments must be approved by
LaSalle Investment Management's five-member investment committee. The
investment committee approval process is utilized for both LaSalle
Investment Management's investment funds and for all of its separate
account clients.
LaSalle Investment Management is generally compensated for investment
management services for private equity and debt investments based on
initial capital invested, with additional fees tied to investment
performance above benchmark levels. The terms of LaSalle Investment
Management's contracts vary by the form of investment vehicle involved and
the type of service provided. LaSalle Investment Management's investment
funds have various lifespans, typically ranging between three and seven
years. Separate account advisory agreements generally have three year terms
with "at will" termination provisions.
PUBLIC EQUITY AND DEBT INVESTMENTS. LaSalle Investment Management
offers its clients the ability to invest in separate accounts focused on
public real estate equity and debt securities. LaSalle Investment
Management principally invests its clients' capital in publicly traded
securities of Real Estate Investment Trusts ("REITs") and property company
equities but is also active in private placement investments in publicly
traded real estate companies and selected investments in private real
estate companies seeking capital to ultimately gain access to the public
markets. As of December 31, 1999, LaSalle Investment Management had $3.4
billion of assets under management in these types of investments, of which
$.3 billion was invested in equities outside of the United States. LaSalle
Investment Management is typically compensated by its securities investment
clients on the basis of the market value of assets under management with
increasing use of incentive fees tied to performance of investments above
benchmark levels.
<PAGE>
HOTEL SERVICES
Hotel Services is a new business for Jones Lang LaSalle as a result of
the merger with JLW. The segment specializes in providing global real
estate services to investors, financiers and operators of hotel, conference
and resort properties. These services include sales, acquisitions,
strategic consulting, valuation and appraisal, operator selection, debt and
equity sourcing, asset management and research. Principal clients of the
group include government agencies, institutional investors, corporations,
hotel groups and private investment companies and individuals. The group
has approximately 100 hotel professionals, based primarily in London,
Frankfurt, New York, Los Angeles, Sydney, Brisbane, Auckland, Jakarta and
Singapore.
The Asian hotel market has been negatively impacted by poor economic
conditions over the last two years, but was showing strong signs of
recovery in the latter half of 1999, due to a renewed interest in tourism
growth and a return to hotel profitability. The Australian hotel market
continues to show strong activity, due to the recent exodus of Japanese
investors from this market. The United States and European hotel markets
continue to benefit from strong global economic growth. In 1999, the Hotel
Services group completed over 600 corporate advisory transactions on
properties with a total value of approximately $17.0 billion and
approximately 100 investment sales transactions involving properties with a
total value of approximately $900.0 million. One of these investment sales
transactions was the sale of the Seoul Hilton for $230 million, which
represented one of the largest property transactions in Asia in many years.
COMPETITIVE ADVANTAGES
Jones Lang LaSalle believes that it has several competitive
advantages, which have established it as a leader in the real estate
services and investment management industries. These advantages include the
following:
RELATIONSHIP ORIENTATION. Jones Lang LaSalle's client-driven focus
enables Jones Lang LaSalle to develop long-term relationships with owners
and users of real estate. By developing such relationships, Jones Lang
LaSalle generates repeat business and creates recurring revenue sources.
Jones Lang LaSalle's relationship orientation is supported by an employee
compensation system, which it believes is unique in the real estate
industry. Jones Lang LaSalle compensates its professionals with a salary
and bonus plan designed to reward client relationship building, teamwork
and quality performance, rather than on a commission basis which is typical
in the industry.
FULL RANGE OF SERVICES. By offering a wide range of high quality,
complementary services, Jones Lang LaSalle can combine its services to
develop and implement real estate strategies that meet the increasingly
complex needs of its clients. In addition, business units are able to
develop revenue synergies for other units within Jones Lang LaSalle.
WORLD-CLASS RESEARCH. Jones Lang LaSalle invests in and relies on
comprehensive top-down and bottom-up research to support and guide the
development of real estate and investment strategy. The Global Research
Committee oversees and coordinates the activities of more than 150 research
professionals who cover market and economic conditions in 36 countries
around the world. Jones Lang LaSalle produces more than 100 research
publications annually. Research will also play a key role in the new,
company-wide intranet, keeping colleagues throughout Jones Lang LaSalle
attuned to important events and changing conditions in world markets.
<PAGE>
GEOGRAPHIC REACH. With approximately 100 corporate offices on five
continents, Jones Lang LaSalle possesses in-depth knowledge of local and
regional markets and can provide its full range of real estate services
around the globe. This geographic coverage positions the firm to serve its
multinational clients.
REPUTATION. Based on its industry knowledge, commissioned marketing
surveys, industry publications and its number of long-standing client
relationships, Jones Lang LaSalle believes that it is widely recognized by
large corporations and institutional owners and users of real estate as a
provider of high quality, professional real estate services and investment
management products. Jones Lang LaSalle believes its name recognition and
reputation for quality services are significant advantages when pursuing
new business opportunities.
INDUSTRY TRENDS
INCREASING DEMAND FOR GLOBAL SERVICES; GLOBALIZATION OF CAPITAL FLOWS.
Many corporations, both those based in the United States and those based in
other countries, have pursued growth opportunities in international
markets. This has increased the demand for global real estate services,
such as corporate property services, tenant representation and leasing and
property management. Jones Lang LaSalle believes that this trend will
favor those real estate service providers with the capability to provide
services in many markets around the world. Additionally, real estate
capital flows have become more global as more investors seek real estate
investment opportunities beyond their existing borders. This trend has
created new markets for investment managers that can facilitate
international real estate capital flows and execute cross-border real
estate transactions.
CONSOLIDATION. The real estate services industry has gone through a
high degree of consolidation in recent years, although the pace of
consolidation has slowed in the last year. Many large real estate service
firms engaged in the property management business, including Jones Lang
LaSalle, believe that, as a result of substantial existing infrastructure
investments and the ability to spread fixed costs over a broader base of
business, it is possible to recognize incrementally higher margins on
property management and corporate property services assignments as the
amount of square footage under management increases.
Large users of commercial real estate services continue to demonstrate
a desire for a single source service provider across local, regional and
global markets. The ability to offer a full range of services on this
scale requires significant corporate infrastructure investment, including
information technology and personnel training. Smaller regional and local
real estate service firms, with limited resources, are less able to make
such investments.
GROWTH OF OUTSOURCING. In recent years, outsourcing of professional
real estate services on a global level has increased substantially as
corporations have focused corporate resources, including capital, on their
core competencies. In addition, public and other non-corporate users of
real estate, such as government agencies and health and educational
institutions, have begun outsourcing real estate activities as a means of
reducing costs. As a result, there are significant growth opportunities for
firms that can provide integrated real estate services across many
geographic markets.
<PAGE>
ALIGNMENT OF INTERESTS OF INVESTORS AND INVESTMENT MANAGERS.
Institutional investors continue to allocate significant portions of their
investment capital to real estate and many investors have shown a desire to
commit their capital to investment managers willing to co-invest with them
on specific investments. In addition, investors are increasingly requiring
that the fees paid to investment managers be more closely aligned with
investment performance. As a result, Jones Lang LaSalle believes that those
investment managers with co-investment capital will have an advantage in
attracting real estate investment capital. Co-investment typically brings
with it the opportunity to provide additional services related to the
acquisition, financing, property management, leasing and disposition of
such investments.
GROWTH STRATEGY
Jones Lang LaSalle intends to capitalize on its expanded global
presence to pursue the following growth strategy:
EXPANDING CLIENT RELATIONSHIPS. Based on its ability to deliver high
quality real estate services, Jones Lang LaSalle has been able to
successfully leverage discrete client assignments into more comprehensive
relationships utilizing some or all of its business groups. Current
industry trends, particularly the globalization of corporate clients and
the increased outsourcing of real estate services on a global basis,
provide a favorable environment for Jones Lang LaSalle to increase the
scope of its current client relationships and to develop new relationships
through its broad array of services. Jones Lang LaSalle's business groups
identify new clients and markets and pursue opportunities to sell the
products and services of many of Jones Lang LaSalle's business units. Jones
Lang LaSalle's Global Services Management group, created in 1999, acts as a
catalyst in assisting Jones Lang LaSalle professionals in all groups in
marketing multiple services of the firm to existing and prospective
clients.
STRENGTHENING INTERNATIONAL PRESENCE. To take advantage of the
increasing globalization of real estate capital sources and investment
opportunities and the international business expansion of many of its
corporate clients, Jones Lang LaSalle intends to focus its near term
efforts on further developing and strengthening the global platform which
was created by the merger of the LaSalle Partners and JLW businesses. In
December, Jones Lang LaSalle combined its former Australasia and Asia
regions into the Asia Pacific region. This combination is intended, among
other things, to position the firm to use its talent and expertise in the
relatively mature market in Australia to pursue growth opportunities in
Asia. Similarly, Jones Lang LaSalle plans to leverage its talent and
expertise in the United States and Western Europe to pursue growth
opportunities in Latin America and Central and Eastern Europe,
respectively. In order to serve its clients' increasingly global real
estate needs, and to pursue new business opportunities, the firm will
pursue selective acquisitions in product categories and geographic niches.
PROVIDING CONSISTENT, HIGH QUALITY SERVICE. The firm has created a
Global Services Management Group designed to ensure the worldwide
operations work and interact at the best-in-class levels clients have grown
to expect. Through the delivery of consistent, high quality service, the
firm aims to expand its current client relationships and grow the business
organically.
<PAGE>
PURSUING CO-INVESTMENT OPPORTUNITIES. Jones Lang LaSalle intends to
continue its strategy of co-investing with its investment management
clients. As of December 31, 1999, Jones Lang LaSalle had a total net
investment of $67.3 million in 34 separate property or fund co-investments
with additional capital commitments of $28.7 million for future fundings of
co-investments. The acquisition cost of the properties acquired through
these co-investments exceeds $2.0 billion. Existing co-investments consist
primarily of office properties, land, development properties and commingled
fund investments purchased within the last five years and the investment in
LaSalle Hotel Properties, the public real estate investment trust advised
by Jones Lang LaSalle.
Jones Lang LaSalle's co-investment strategy is supported by its broad
fundamental real estate research capabilities, which include identifying
trends in geographic regions and property types. Jones Lang LaSalle's
extensive knowledge of local markets drawn from its presence and work in
these markets facilitates the identification and evaluation of specific
investment opportunities. Co-investments provide Jones Lang LaSalle with
the opportunity to participate in returns generated by such investments and
provide services related to the acquisition, financing, property
management, leasing and disposition of such investments. As a result of
the merger, the combined firm has an increased access to international
market knowledge, positioning the firm to take advantage of recovering
markets in various regions throughout the world.
DEVELOPING A TECHNOLOGY AND E-BUSINESS STRATEGY. Jones Lang LaSalle's
technology strategy is to create an open, advanced technology platform that
enables clients to achieve their real estate and broader business
objectives. This includes utilizing the internet to enhance existing
services provided to clients and to develop entirely new services via e-
commerce. Jones Lang LaSalle is in the final stages of implementing a
global data network, a reliable, high-speed system that will enable clients
and employees around the world to communicate with each other efficiently.
In addition, Jones Lang LaSalle plans to utilize the internet to aggregate
purchases in its managed property portfolio; to invest in software
applications for the Project Management and Development Management
businesses; to expand the use of electronic auction sites and to offer
clients online access to portfolio performance data.
Jones Lang LaSalle is also working with many pre-IPO "dot-com"
companies. The strategy is to make real investments in relevant companies
to shape the products and services they deliver. The transactions include
entering into consulting and advisory agreements, in addition to making
cash equity investments.
EMPLOYEES
Jones Lang LaSalle employs approximately 7,200 people, including 5,400
professional staff members and 1,900 support personnel. None of Jones
Lang LaSalle's employees are members of any labor union. Satisfactory
relations have generally prevailed between Jones Lang LaSalle and its
employees.
Jones Lang LaSalle has entered into an agreement with LPI Service
Corporation ("LPISC"), a company controlled by a former employee of Jones
Lang LaSalle, pursuant to which LPISC provides the services of
approximately 3,000 janitorial, engineering and property maintenance
workers for certain properties managed by Jones Lang LaSalle. Jones Lang
LaSalle has an option to purchase LPISC. Approximately 550 of the
employees of LPISC are members of labor unions.
<PAGE>
OTHER MATTERS IMPACTING JONES LANG LASALLE'S BUSINESS
The following matters represent risks that Jones Lang LaSalle faces as
a result of the merger with JLW.
OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION ARE SUBJECT TO
NEW RISKS RESULTING FROM INCREASED INTERNATIONAL OPERATIONS. As a result
of the merger with JLW, we have significantly greater international
exposure. After giving pro forma effect to the merger with JLW and the
acquisition of the COMPASS businesses, we would have derived approximately
57.8% and 53.7% of our total revenue from sales outside the United States
in the fiscal years ended December 31, 1999 and 1998, respectively. The
combined businesses have operations in 32 countries, and employ 2,500
employees in the United States and 4,700 employees in other countries
(excluding, in both cases, on-site personnel responsible for the
maintenance of properties on behalf of clients). The increased scope of
our international operations may lead to more volatile financial results
and difficulties in managing the combined businesses because of, but not
limited to, the following:
. political instability;
. greater difficulty in collecting accounts receivable in certain
geographic regions;
. unexpected changes in regulatory requirements;
. currency restrictions;
. delays and tariffs;
. difficulties and costs of staffing and managing international
operations;
. potentially adverse tax consequences;
. foreign ownership restrictions with respect to operations in
certain countries;
. currency fluctuations;
. the burden of complying with multiple and potentially conflict-
ing laws;
. the impact of business cycles and economic instability; and
. the geographic, time zone, language and cultural differences
between personnel in different areas of the world.
We have committed additional resources to expand our worldwide sales
and marketing activities, to globalize our service offerings and products
in selected markets and to develop local sales and support channels. If we
are unable to successfully implement these plans, to maintain adequate
long-term strategies which successfully manage the risks associated with
our global business or to adequately manage operational fluctuations, our
business, operating results and financial condition could be materially and
adversely affected.
<PAGE>
OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION ARE SUBJECT TO
PARTICULAR RISKS IN CERTAIN REGIONS OF THE WORLD. We may experience an
operating loss in one or more regions of the world for one or more periods,
which could have a material adverse effect on our business, operating
results and financial condition. Our ability to manage such operational
fluctuations and to maintain adequate long-term strategies in the face of
such developments will be critical to our continued growth and
profitability. After giving pro forma effect to the merger with JLW and
the acquisition of the COMPASS businesses, we would have generated 43.3% of
our revenue in the United States, 40.0% in Europe and 16.7% in Asia Pacific
for the year ended December 31, 1999 compared to 46.3% in the United
States, 37.3% in Europe and 16.4% in Asia Pacific for the year ended
December 31, 1998. See the Notes to Consolidated Financial Statements
included herein for further geographical financial information.
During 1998 and 1997, Southeast and East Asia were impacted by
financial turmoil which was initially reflected in rapidly falling exchange
rates relative to the U.S. dollar. This led to falling stock market
indices and asset values and reduced economic growth prospects.
Additionally, some property markets were affected by speculative
developments resulting in an oversupply of completed or partially completed
space. Property prices fell along with prices of other investments and
asset values. Although there is evidence of recovery in economic
conditions in many Asian markets, the pace of recovery has been generally
slow and uneven between various countries. The recovery of property
markets in various countries will depend upon both economic conditions as
well as the level of oversupply in the particular market. Although current
evidence suggests that most markets in Asia have bottomed out and are
recovering, there can be no assurance that conditions will not again
worsen. Additionally, although sound conditions currently prevail in most
of the significant markets in which we operate, there can be no assurance
that this will continue. A worsening of conditions in Asia or in other
markets in which we operate could have a material adverse effect on the
business, operating results and financial condition of Jones Lang LaSalle.
WE ARE EXPOSED TO CURRENCY LOSSES FROM CURRENCY FLUCTUATIONS. Due to
the constantly changing currency exposures to which we are now subject
after the expansion of our operations outside of the United States, and the
volatility of currency exchange rates, we cannot be sure that we will not
experience currency losses in the future. We also cannot predict the
effect of exchange rate fluctuations upon future operating results. JLW
historically generated revenues, incurred expenses and made distributions
and dividends to partners and shareholders in the local currency where the
associated revenue was earned, thus limiting fluctuations in revenues and
earnings due to corresponding fluctuations in foreign currency exchange
rates. With the integration of the operations of JLW, our exposure to
currency rate fluctuations has significantly increased. For the year ended
December 31, 1999, on a pro forma basis (excluding the effect of stock
compensation expense related to the merger with JLW), 142% of our net loss
was attributable to operations with U.S. dollars as their functional
currency and (42%) was attributable to operations having other functional
currencies. Fluctuations in the value of the US dollar relative to the
other currencies in which we generate earnings could materially adversely
affect our business, operating results and financial condition.
Fluctuations in currencies relative to the US dollar may make it more
difficult to perform period-to-period comparisons of our reported results
of operations.
<PAGE>
We have in the past undertaken hedging transactions only on a limited
basis. The management of Jones Lang LaSalle may decide to use currency
hedging instruments, including foreign currency forward contracts,
purchased currency options and borrowings in foreign currency. Economic
risks associated with these hedging instruments include: (i) unexpected
fluctuations in interest rates impacting Jones Lang LaSalle's future buying
power for purchasing foreign currencies; and (ii) unexpected changes in the
timing and collection of funds related to the hedging instruments, both of
which can cause hedging instruments to be ineffective. An ineffective
hedging instrument may expose Jones Lang LaSalle to currency losses, which
could have an adverse effect on Jones Lang LaSalle's business, financial
condition and results of operations. There can be no assurance that such
hedging will be effective.
OPERATING LOSSES REFLECTING NON-CASH CHARGES FOR ACQUISITION-RELATED
COMPENSATION EXPENSE COULD AFFECT TRADING PRICE. Jones Lang LaSalle
incurred compensation expense totaling approximately $101.6 million in the
year ended December 31, 1999 and expects to incur $72.3 million in the year
ended December 31, 2000, as a result of the accounting treatment applied to
the issuance of shares in connection with the merger with JLW. The
estimated 2000 compensation expense of $72.3 million includes expense of
$11.0 million, which is subject to fluctuation based on quarterly changes
in the price of Jones Lang LaSalle common stock. We anticipate that this
compensation expense will cause Jones Lang LaSalle to report a net operat-
ing loss for the year ended December 31, 2000.
THE STOCKHOLDER AGREEMENTS, THE DEL STOCKHOLDER AGREEMENTS, THE
CHARTER AND THE AMENDED BYLAWS OF JONES LANG LASALLE AND THE MARYLAND
GENERAL CORPORATE LAW COULD DELAY, DEFER OR PREVENT A CHANGE OF CONTROL.
The Stockholder Agreements and the DEL Stockholder Agreements entered into
in connection with the merger and the charter and bylaws of Jones Lang
LaSalle include provisions that may discourage, delay, defer or prevent a
takeover attempt that may be in the best interest of stockholders of Jones
Lang LaSalle and may adversely affect the market price of its common stock.
The Stockholder Agreements and the DEL Stockholder Agreements require each
of the parties thereto to vote all shares of Jones Lang LaSalle common
stock owned or controlled by such stockholder:
. for persons nominated by the Jones Lang LaSalle board of
directors pursuant to the amended bylaws; and
. in accordance with the recommendations of a majority of the
Jones Lang LaSalle board of directors on all matters (1) submitted to the
vote of the stockholders of Jones Lang LaSalle which have been proposed by
any stockholder as to which the Jones Lang LaSalle board of directors has
recommended against approving and (2) relating to any merger, sale of all
or substantially all of Jones Lang LaSalle's assets, or any similar
transactions as to which the Jones Lang LaSalle board of directors has
recommended against approving.
Additionally, the Stockholder Agreements and DEL Stockholder
Agreements require the persons bound by them to take reasonable actions to
assure that they do not transfer shares to a person which is, or would as a
result of the transfer become, the owner of 5% or more of the outstanding
Jones Lang LaSalle common stock. This requirement does not apply to the
extent shares are sold in accordance with certain securities regulations.
As a result, during the term of the Stockholder Agreements and the DEL
Stockholder Agreements, as long as persons who hold a majority of the
issued and outstanding common stock of Jones Lang LaSalle continue to be
bound by these agreements, the Jones Lang LaSalle board of directors will
be composed of individuals nominated in accordance with the procedures set
forth in the amended bylaws, and stockholders of Jones Lang LaSalle will
have a limited influence on the outcome of votes of the stockholders of
Jones Lang LaSalle on the matters covered by such agreements. The persons
bound by the Stockholder Agreements and DEL Stockholder Agreements hold, as
of March 29, 2000, approximately 65% of the issued and outstanding shares
of Jones Lang LaSalle common stock.
<PAGE>
In addition, pursuant to the charter of Jones Lang LaSalle, Jones Lang
LaSalle has a classified board of directors, pursuant to which directors
are divided into three classes, with three-year staggered terms. The
classified board provision could increase the likelihood that, in the event
an outside party acquired a controlling block of Jones Lang LaSalle's
capital stock or initiated a proxy contest, incumbent directors
nevertheless would retain their positions for a substantial period, which
may have the effect of discouraging, delaying or preventing a change in
control of Jones Lang LaSalle. In addition, the charter and bylaws provide
for:
. the ability of the Jones Lang LaSalle board of directors to
establish one or more classes and series of capital stock including the
ability to issue up to 10,000,000 shares of preferred stock, and to
determine the price, rights, preferences and privileges of such capital
stock without any further stockholder approval;
. a requirement that any stockholder action taken without a
meeting be pursuant to unanimous written consent; and
. certain advance notice procedures for Jones Lang LaSalle stock-
holders nominating candidates for election to the Jones Lang
LaSalle board of directors.
Under the Maryland General Corporate Law (the "MGCL"), certain
"Business Combinations" (including a merger, consolidation, share exchange
or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and
any person who beneficially owns 10% or more of the voting power of the
corporation's shares or an affiliate of the corporation who, at any time
within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation (an "Interested Stockholder") or an
affiliate of the Interested Stockholder are prohibited for five years after
the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such Business Combination must be
recommended by the board of directors of such corporation and approved by
the affirmative vote of at least (1) 80% of the votes entitled to be cast
by holders of outstanding voting shares of the corporation and (2) 66-2/3%
of the votes entitled to be cast by holders of outstanding voting shares of
the corporation other than shares held by the Interested Stockholder with
whom the Business Combination is to be effected, unless, among other
things, the corporation's stockholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or
in the same form as previously paid by the Interested Stockholder for its
shares. Pursuant to the MGCL, these provisions also do not apply to
Business Combinations which are approved or exempted by the board of
directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
The provisions of the agreements described above, as well as our
charter and bylaws, and the MGCL, could discourage bids for common stock as
well as adversely affect the market price of common stock.
<PAGE>
RISKS INHERENT IN THE INDUSTRY OR PARTICULAR TO JONES LANG LASALLE
GENERAL ECONOMIC CONDITIONS AND THE REAL ESTATE ECONOMIC CLIMATE POSE
RISKS FOR OUR BUSINESS. Our business is negatively impacted by periods of
economic slowdown or recession, rising interest rates or declining demand
for real estate. These economic conditions could have a number of effects
which could have a material adverse impact on certain segments of our
business, including the following:
. a decline in leasing activity;
. a decline in the supply of capital invested in commercial real
estate;
. a decline in the value of real estate and in rental rates
(which would cause us to realize lower revenue from (1) investment manage-
ment fees (typically based upon the value of the managed investments), (2)
property management fees (which in certain cases are calculated as a
percentage of the revenue of the property under management) and (3)
commissions or fees derived from property valuation, sales and leasing
(which are typically based on the value, sale price or lease revenue
commitment, respectively); and
. a general decline in sales prices and the supply of capital
invested in commercial real estate and related assets.
The real estate market tends to by cyclical and related to the
condition of the economy as a whole or, at least, to the perceptions of
investors and users as to the economic outlook. For example, if property
owners believe that an economic downturn is likely to occur in the near
future, some may sell their properties in anticipation. This could result
in the new owners changing property and investment management firms which
could cause us to lose some clients or assignments or to make the clients
or assignments we retain less profitable. Jones Lang LaSalle operates in
markets throughout the world. An economic downturn in several of them or
in significant markets could have a material adverse effect on our
business, results of operations and financial condition.
REAL ESTATE SERVICES MARKETS ARE HIGHLY COMPETITIVE. Jones Lang
LaSalle competes across a variety of business disciplines within the
commercial real estate industry, including investment management, tenant
representation, corporate property services, construction and development
management, property management, agency leasing, valuation and capital
markets. In general, with respect to each of our business disciplines,
Jones Lang LaSalle cannot assure that we will be able to continue to
compete effectively, will be able to maintain current fee arrangement or
margin levels or will not encounter increased competition. Each of the
business disciplines in which we compete is highly competitive on an
international, regional and local level. Depending on the industry
segment, we face competition from other real estate service providers,
institutional lenders, insurance companies, investment banking firms,
investment managers and accounting firms. Many of our competitors are
local or regional firms, which are substantially smaller than us. However,
they may be substantially larger on a local or regional basis. Jones Lang
LaSalle is also subject to competition from other large global firms.
The advent of the internet has introduced new ways of providing real
estate services, as well as new competitors to the industry. We cannot
currently predict who these competitors will be nor can we predict what our
response to them will be. This response could require significant capital
resources, changes in Jones Lang LaSalle's organization or technological
changes. Although, we cannot predict what the impact on our business will
be, Jones Lang LaSalle is currently developing a strategy to address the
risks and to capture the related opportunities (see Developing a Technology
and E-business Strategy in the Growth Strategy section).
<PAGE>
WE MAY LOSE SERVICE AGREEMENTS OR CLIENT RELATIONSHIPS. As a result
of our strong, long-term client relationships, many of our clients use our
services consistently for new assignments and many also use a variety of
different services. If we fail to maintain existing relationships or fail
to develop and maintain new client relationships, we could experience a
material adverse effect on our business, financial condition or results of
operations. We are substantially dependent on long-term client
relationships and on revenue received for services under various service
agreements. Many of these agreements are cancelable by the client for any
reason on as little as 30 to 60 days' notice. These contracts may be
cancelled prior to their expiration or not renewed when their respective
terms expire.
We provide related services such as property management and leasing
services to our investment management clients and earn substantial fees for
providing these services. If our investment management clients terminate
or do not renew our services or if a property which is part of an
investment management portfolio is sold, other related services provided to
the investment management clients may also be terminated or not renewed.
The loss of a substantial number of service agreements or client
relationships could have a material adverse effect on our business,
operating results and financial condition.
WE DEPEND ON PROPERTY PERFORMANCE FOR REVENUE GENERATION. Our revenue
will be adversely affected by decreases in the performance of the
properties we manage. This is because our revenue from property management
services will generally be based upon percentages of the revenue generated
by the properties that we manage and our leasing commissions typically will
be based on the value of the lease revenue commitments. Property perfor-
mance typically depends upon our ability to attract and retain creditworthy
tenants, our ability to control operating expenses (some of which are
beyond our control), financial conditions generally and in the specific
areas where properties are located and the real estate market generally.
OUR CO-INVESTMENT ACTIVITIES SUBJECT US TO REAL ESTATE INVESTMENT
RISKS. An important part of our investment strategy includes investing our
capital in real estate investments with our investment management clients.
Our participation in real estate transactions through co-investment
activity could increase fluctuations in our earnings and cash flow. Other
risks associated with such activities include:
. loss of our investments;
. difficulties associated with international co-investment
described in "Our Business, Operating Results and Financial Condition Are
Subject to New Risks Resulting from Increased International Operations;"
and "We Are Exposed to Currency Losses from Currency Fluctuations;" and
. our potential loss of control over the timing of the recogni-
tion of gains, losses or potential incentive participation
fees.
YEAR 2000 ISSUES MAY ADVERSELY AFFECT OUR OPERATIONS. Many computer
systems and software products were coded to accept only two digit entries
in the date code field. As a result, such computer programs and systems
had the potential to recognize a date using "00" as the year 1900 rather
than the year 2000. This could have resulted in system failure or
miscalculations causing disruption of operations, including, among other
things, a temporary inability to process transactions, pay invoices or
engage in similar normal business activities. We successfully modified our
software and hardware to meet Year 2000 requirements and experienced no
significant disruption of our operations. Although we are not aware of any
threatened claims related to the Year 2000, we may be subject to litigation
from such claims. Adverse outcomes of any such litigation could also have
a material adverse effect on our business, operating results and financial
condition. It is not clear whether insurance coverage would be adequate to
offset these and other business risks related to the Year 2000.
<PAGE>
THE CONCENTRATION OF OUR INCOME IN THE FOURTH QUARTER MAY CAUSE A LOSS
IN OTHER QUARTERS. Our operating income and earnings have historically
been substantially lower during the first three calendar quarters than in
the fourth quarter. The reasons for the concentration of income and
earnings in the fourth quarter include a general, industry-wide focus on
completing transactions by calendar year end, as well as the constant
nature of our non-variable expenses throughout the year versus the
seasonality of our revenues. This has historically resulted in a small
loss in the first quarter, a small profit or loss in the second and third
quarters and a larger profit in the fourth quarter, excluding the
recognition of investment generated performance fees.
WE MAY INCUR LIABILITIES RELATED TO OUR SUBSIDIARIES BEING GENERAL
PARTNERS OF NUMEROUS GENERAL AND LIMITED PARTNERSHIPS. We have
subsidiaries which are general partners in numerous general and limited
partnerships which invest in or manage real estate assets. Any subsidiary
which is a general partner is potentially liable to its partners and for
obligations of its partnership. If our exposure as a general partner is
not limited, or if our exposure as a general partner is expanded in the
future, any resulting losses may have a material adverse effect on our
business, results of operations and financial condition. We own our
general partnership interests through special purpose subsidiaries. We
believe this structure will limit our exposure to the total amount we have
invested in and the amount of notes from or advances and commitments to,
such special purpose subsidiaries. However, this limited exposure may be
expanded in the future based upon, among other things, changes in our
operating practices, changes in applicable laws or the application of
additional laws to our business.
WE MAY INCUR ENVIRONMENTAL LIABILITY IN OUR ROLE AS ON-SITE PROPERTY
MANAGER. Various national, state and local laws and regulations impose
liability on current or previous real property owners or operators for the
cost of investigating, cleaning up or removing contamination caused by
hazardous or toxic substances at the property. We may be held liable as an
operator for such costs in our role as an on-site property manager. In
addition, we could be held liable for liability incurred at the properties
managed by JLW prior to the merger. The liability may be imposed even if
the original actions were legal and we did not know of, or were not
responsible for, the presence of such hazardous or toxic substances. We
may also be solely responsible for the entire payment of the liability if
we are subject to joint and several liability with other responsible
parties who are unable to pay. We may be subject to additional liability
if we fail to disclose environmental issues to a buyer or lessee of
property or if a third party is damaged or injured as a result of
environmental contamination emanating from the site (including the presence
of asbestos containing materials). Additionally, some environmental laws
create a lien on the site in favor of the government for damages and costs
it incurs in connection with the contamination. We may also be liable
under common law to third parties for damages and injuries resulting from
environmental contamination emanating from the site, including the presence
of asbestos containing materials. We can not be sure that any of such
liabilities to which we or any of our affiliates may become subject will
not have a material adverse effect upon our business, results of operations
or financial condition.
ITEM 2. PROPERTIES
Jones Lang LaSalle's principal holding company headquarters is located
at 200 East Randolph Drive, Chicago, Illinois, where Jones Lang LaSalle
currently occupies over 100,000 square feet of office space pursuant to a
lease that expires in February 2006. Jones Lang LaSalle's principal
operational headquarters is located at 22 Hanover Square, London, England
where approximately 83,000 square feet are leased under a lease expiring in
<PAGE>
June 2004. Regional headquarters are located in Chicago, London and Hong
Kong. Jones Lang LaSalle has approximately 100 local offices worldwide
located in 94 major cities and metropolitan areas as follows: 31 in the
United States, 37 in 18 countries in Europe and 26 in 9 countries in Asia
Pacific. Jones Lang LaSalle's offices are each leased pursuant to
agreements with terms ranging from month-to-month to ten years. In
addition, Jones Lang LaSalle has property and other offices located
throughout the world. On-site property management offices are generally
located within properties under management and are provided without cost.
ITEM 3. LEGAL PROCEEDINGS
Jones Lang LaSalle is a defendant in various litigation matters
arising in the ordinary course of business, some of which involve claims
for damages that are substantial in amount. Many of these matters are
covered by insurance. In the opinion of Management, the ultimate resolution
of such litigation is not expected to have a material adverse effect on the
financial position, results of operations and liquidity of Jones Lang
LaSalle.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Jones Lang LaSalle's
stockholders during the fourth quarter of 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Jones Lang LaSalle's Common Stock is listed for trading on the New
York Stock Exchange under the symbol "JLL."
As of March 7, 2000, there were approximately 3,500 beneficial holders
of Jones Lang LaSalle's Common Stock.
The following table sets forth the high and low sale prices of the
Common Stock as reported on the New York Stock Exchange.
1999 High Low
------ ------
First Quarter. . . . . . . . . . . . . . . . . . $36.50 $27.56
Second Quarter . . . . . . . . . . . . . . . . . $32.00 $25.94
Third Quarter. . . . . . . . . . . . . . . . . . $30.00 $12.63
Fourth Quarter . . . . . . . . . . . . . . . . . $16.69 $ 9.19
1998 High Low
------ ------
First Quarter. . . . . . . . . . . . . . . . . . $36.81 $30.50
Second Quarter . . . . . . . . . . . . . . . . . $48.00 $31.38
Third Quarter. . . . . . . . . . . . . . . . . . $44.50 $32.69
Fourth Quarter . . . . . . . . . . . . . . . . . $32.69 $21.94
Jones Lang LaSalle has not paid cash dividends on its common stock to
date. Jones Lang LaSalle intends to retain its earnings to support the
expansion of the business and therefore does not intend to pay cash
dividends for the foreseeable future. Any payment of future dividends and
the amounts thereof will be at the discretion of the Board of Directors and
will depend upon Jones Lang LaSalle's financial condition, earnings and
other factors deemed relevant by the Board of Directors. See Management's
Discussion and Analysis of Financial Condition and Results of Operations
for information regarding restrictions on Jones Lang LaSalle's ability to
pay dividends.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED)
The following table sets forth summary historical consolidated financial data for Jones Lang LaSalle. The
information should be read in conjunction with Jones Lang LaSalle's consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included
elsewhere herein.
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1999 1998
Adjusted Adjusted 1997 1996
Pro Forma Pro Forma Pro Forma Pro Forma
1999 1998 1997 1996 1995 (1) (2) (3) (3)
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement
of Opera-
tions Data:
Total
revenue
(4). . .$ 755,439 304,464 224,773 159,453 138,618 813,899 848,325 232,984 189,398
Total
operat-
ing ex-
penses
before
merger re-
lated non-
recurring
charges
(4) . . . 675,341 256,601 189,659 132,552 118,502 741,458 760,942 198,333 159,221
Merger re-
lated non-
recurring
charges
(1)(2). . 151,401 10,021 -- -- -- 160,528 163,504 -- --
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
Operating
income
(loss). . . (71,303) 37,842 35,114 26,901 20,116 (88,087) (76,121) 34,651 30,177
Interest
expense . . 18,211 4,153 3,995 5,730 3,806 18,118 14,736 1,000 1,075
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
<PAGE>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1999 1998
Adjusted Adjusted 1997 1996
Pro Forma Pro Forma Pro Forma Pro Forma
1999 1998 1997 1996 1995 (1) (2) (3) (3)
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share data)
Earnings (loss)
before pro-
vision for
income
taxes . . . (89,514) 33,689 31,119 21,171 16,310 (106,205) (90,857) 33,651 29,102
Net provision
for income
taxes . . . 5,328 13,224 5,279 1,207 505 2,065 16,850 12,956 11,204
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
Net earnings
(loss). . .$ (94,842) 20,465 25,840 19,964 15,805 (108,253) (108,365) 20,695 17,898
========== ========== ========== ========== ========== ========== ========== ========== ==========
Adjustments
(1) (2):
Merger re-
lated non-
recurring
charges. . 160,528 163,504
Tax benefit
associated
with merger
related non-
recurring
charges. . (20,004) (10,877)
---------- ---------- --------------------- ---------- ---------- ---------- ---------- ----------
Adjusted
net earn-
ings (1)(2) 32,271 44,262 20,695 17,898
========== ========== ========== ========== ========== ========== ========== ========== ==========
<PAGE>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1999 1998
Adjusted Adjusted 1997 1996
Pro Forma Pro Forma Pro Forma Pro Forma
1999 1998 1997 1996 1995 (1) (2) (3) (3)
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share data)
Basic
earnings
(loss) per
common (5) (6) (6)
share . . .$ (4.20) 1.26 1.50 1.28 1.10
========== ========== ========== ========== ==========
Basic
weighted
average
shares
outstand-
ing . . . .22,607,35016,215,478 16,200,000 30,144,521 30,469,594 16,200,000 16,200,000
========== ========== ========== =========== ========== ========== ==========
Diluted
earnings
(loss) per
common (5) (6) (6)
share . . .$ (4.20) 1.25 1.49 1.27 1.10
========== ========== ========== ========== ==========
Diluted
weighted
average
shares
outstand-
ing . . . .22,607,35016,387,721 16,329,613 30,298,332 30,644,227 16,329,555 16,329,555
========== ========== ========== =========== ========== ========== ==========
<PAGE>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1999 1998
Adjusted Adjusted 1997 1996
Pro Forma Pro Forma Pro Forma Pro Forma
1999 1998 1997 1996 1995 (1) (2) (3) (3)
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share data)
Other Data:
Adjusted
EBITDA
(7). . . .$ 116,774 61,318 44,207 32,317 24,356 112,164 123,800 44,407 37,624
Cash flows
provided by
(used in):
Operating
activi-
ties . . .$ (32,766) 19,238 40,577 13,964 13,553 29,114 83,658 33,027 13,646
Investing
activi-
ties . . . (67,143) (235,365) (14,126) (32,478) (5,706) (108,463) (318,467) (14,367) (31,852)
Financing
activi-
ties . . . 106,717 202,377 (3,128) 17,189 (12,365) 110,051 209,011 (10,996) 37,605
Investments
under
management
(8) . . . .21,500,00014,200,000 14,700,000 15,200,000 11,500,000 21,500,000 20,300,000 14,700,000 15,200,000
Square feet
under manage-
ment-Corporate
Property
Services
(9) . . . . 250,000 188,000 98,900 66,700 66,700 250,000 220,000 98,900 97,500
Total square
feet under
management
(10). . . . 700,000 400,500 202,700 131,600 125,700 700,000 650,000 202,700 200,000
========== ========== ========== ========== ========= ========== ========== ========== ==========
<PAGE>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1999 1998
Adjusted Adjusted 1997 1996
Pro Forma Pro Forma Pro Forma Pro Forma
1999 1998 1997 1996 1995 (1) (2) (3) (3)
---------- --------- ---------- --------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share data)
Balance
Sheet
Data:
Cash and
cash equi-
valents . .$ 23,308 16,941 30,660 7,207 8,322
Total
assets. . . 924,800 490,921 219,887 156,614 115,001
Long-term
debt. . . . 159,743 202,923 -- 55,551 40,805
Total
liabil-
ities . . . 600,275 321,349 72,990 132,367 100,004
Total
partners'
capital/
stockholders'
equity. . . 323,936 169,572 146,897 24,247 14,997
<PAGE>
<FN>
(1) Adjusted Pro Forma results for 1999 give effect to the operations of
the Jones Lang Wootton companies for the two months ended February 28,
1999, the period prior to their merger with LaSalle Partners Incorporated,
amortization expense of the goodwill resulting from the merger as if the
merger occurred on January 1, 1999 and a benefit for taxes as if the Jones
Lang Wootton companies and LaSalle Partners Incorporated were taxable
entities at an effective tax rate of 40% as of January 1, 1999. No effect
has been given to the compensation expense incurred associated with the
issuance of shares to former employees of Jones Lang Wootton. Management
believes that Adjusted Pro Forma is useful to investors as a measure of
operating performance, cash generation and ability to service debt.
However, Adjusted Pro Forma should not be considered as an alternative
either to: (i) net earnings (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity.
(2) Adjusted Pro Forma results for 1998 give effect to the operations of
COMPASS and the Jones Lang Wootton companies for the twelve months ended
December 31, 1998 as if the acquisition and merger occurred on January 1,
1998, amortization of intangible assets and goodwill resulting from the
transactions, incremental interest expense resulting from borrowings used
to fund the COMPASS acquisition and a benefit for taxes as if COMPASS, the
Jones Lang Wootton companies and LaSalle Partners Incorporated were taxable
entities at an effective tax rate of 38% as of January 1, 1998. No effect
has been given to the compensation expense incurred associated with the
issuance of shares to former employees of Jones Lang Wootton. Management
believes that Adjusted Pro Forma is useful to investors as a measure of
operating performance, cash generation and ability to service debt.
However, Adjusted Pro Forma should not be considered as an alternative
either to: (i) net earnings (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity.
(3) Pro forma results give effect to: (i) the acquisition of Galbreath
on April 22, 1997, as adjusted for the Tenant Representation and Investment
Banking units which were not acquired, as if such acquisition had occurred
on January 1, 1996; (ii) the provision for income taxes as though Jones
Lang LaSalle and Galbreath were taxable entities as of January 1, 1996 at
an effective tax rate of 38.5%; and (iii) estimated incremental general and
administrative costs associated with operations as a public company and the
repayment of Jones Lang LaSalle's long-term notes payable out of the
proceeds of the initial public offering as if the Offering had occurred on
January 1, 1996.
(4) Historical revenue and operating expenses have been reclassified to
reflect personnel cost reimbursements received on property management or
specific client assignments on a net rather than gross basis. There was no
effect on operating income or net earnings as historically reported.
(5) Basic and diluted earnings per common share for 1997 are calculated
based on net earnings for the period from conversion to corporate form,
July 22, 1997, through December 31, 1997.
(6) Pro forma basic earnings per common share are calculated based on the
16,200,000 shares outstanding upon completion of the initial public
offering. Pro forma diluted earnings per common share give further effect
to the impact of outstanding dilutive options in accordance with SFAS No.
128.
<PAGE>
(7) Adjusted EBITDA represents earnings before interest expense, income
taxes, depreciation and amortization and merger related non-recurring
charges. Management believes that Adjusted EBITDA is useful to investors as
a measure of operating performance, cash generation and ability to service
debt. However, Adjusted EBITDA should not be considered as an alternative
either to: (i) net earnings (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity.
(8) Investments under management represent the aggregate fair market
value or cost basis of assets managed by the Jones Lang LaSalle Investment
Management segment as of the end of the periods reflected.
(9) Represents the square footage of properties for which Jones Lang
LaSalle provided corporate property services as of the end of the periods
reflected.
(10) Represents the total square footage of properties for which Jones
Lang LaSalle provided property management and leasing or corporate property
services as of the end of the periods reflected.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle"; formerly
LaSalle Partners Incorporated) is a leading full-service real estate
services firm that provides investment management, hotel acquisition,
disposition, strategic advisory and valuation, property management,
corporate property services, development services, project management,
tenant and agency leasing, investment disposition, acquisition, financing
and capital placement services on a local, regional and global basis. With
over 7,000 employees in more than 100 markets on five continents, Jones
Lang LaSalle is able to satisfy local, regional and international service
needs. The ability to provide this network of services around the globe was
solidified effective March 11, 1999 with the merger of the businesses of
the Jones Lang Wootton companies ("JLW") with those of LaSalle Partners
Incorporated. In connection with this merger, the name of the company was
changed from LaSalle Partners Incorporated to Jones Lang LaSalle
Incorporated.
Jones Lang LaSalle has grown by expanding both its client base and its
range of services and products in anticipation of client needs as well as
through a series of strategic acquisitions, of which the acquisition of
COMPASS was the most significant, and the merger with JLW, as described
below. LaSalle Partners completed its initial public offering ("Offering")
on July 22, 1997, raising net proceeds of $82.8 million, which were used
primarily to repay its long-term debt and related interest of $63.5
million.
The acquisition of COMPASS, which was combined with Jones Lang
LaSalle's various businesses, created the largest real estate management
services company in the United States, adding approximately 200 million
square feet of property and corporate property services assignments to
Jones Lang LaSalle's portfolio. Jones Lang LaSalle paid $180.0 million in
cash for the acquisition with provisions for an earnout payment of up to
$77.5 million over five years. The consideration, in addition to
transaction costs of approximately $3.2 million, was financed with a new
$175.0 million acquisition facility and borrowings on Jones Lang LaSalle's
existing revolving credit facility. Jones Lang LaSalle incurred transition
and integration costs related to the acquisition of $5.2 million in 1998
and $4.8 million in 1999, on an after-tax basis.
On March 11, 1999, LaSalle Partners Incorporated and JLW merged their
businesses. JLW was an employee-owned international real estate services
firm with approximately 4,000 employees and operations in 32 countries. The
operations, headquartered in London, were managed geographically with four
main regions in Europe, Asia, Australasia and the United States. JLW had a
culture, long-term strategy and service capability which were compatible
with those of LaSalle Partners and had approximately 280 million square
feet under management and approximately $6.3 billion in assets under
management. Jones Lang LaSalle incurred merger related transition and
integration costs during 1998 and 1999 totaling $.9 million and $27.0
million, respectively, on an after-tax basis. See Jones Lang Wootton Merger
below for further discussion of this transaction.
Jones Lang LaSalle intends to continue to increase its level of co-
investment with its investment management clients. This strategy should
serve to grow the assets under management, generate returns on investment
and create potential opportunities to provide services related to the
acquisition, financing, property management, leasing and disposition of
such investments. As of December 31, 1999, Jones Lang LaSalle had a total
investment of $67.3 million in 34 separate property or fund co-investments
with additional capital commitments of $28.7 million for future fundings of
co-investments.
<PAGE>
Included in the investments noted above is an investment in LaSalle
Hotel Properties ("LHO"), a real estate investment trust which completed
its initial public offering in April 1998. LHO was formed to own hotel
properties and to continue and expand the hotel investment activities of
Jones Lang LaSalle by investing principally in upscale and luxury full-
service hotels located primarily in major business and urban, resort and
convention markets. Jones Lang LaSalle provides advisory, acquisition and
administrative services to LHO for which it receives a base advisory fee
calculated as a percentage of net operating income, as well as performance
fees based on growth in funds from operations on a per share basis. Such
performance fees, if any, will be paid in the form of LHO common stock or
units, at Jones Lang LaSalle's option. LHO was formed with 10 hotels, nine
of which Jones Lang LaSalle had a nominal co-investment in and acted as the
investment advisor for. In accordance with the individual investment
advisory agreements, Jones Lang LaSalle earned and received performance
fees totaling $15.2 million on the disposition of certain of the assets
which were shared between Jones Lang LaSalle's Investment Management and
Capital Markets units. Jones Lang LaSalle contributed its ownership
interests in the hotels as well as the related performance fees to LHO for
an effective ownership interest of approximately 6.4%.
JONES LANG WOOTTON MERGER
On March 11, 1999, Jones Lang LaSalle (at the time known as LaSalle
Partners Incorporated) merged its businesses with those of JLW and changed
its name to Jones Lang LaSalle Incorporated. In accordance with the
purchase and sale agreements, Jones Lang LaSalle issued 14.3 million shares
of common stock and paid cash consideration of $6.2 million (collectively,
the "Consideration"). Included in the 14.3 million shares were 1.2 million
shares subject to the post-closing net worth adjustment. The procedures
related to the post-closing net worth calculation were completed during the
third quarter and resulted in .5 million shares being retained by Jones
Lang LaSalle and an additional $.5 million in cash consideration being due
to certain of the former JLW shareholders. Of the original 14.3 million
shares issued, approximately 12.5 million of the shares were issued to
former JLW equity owners and 1.8 million shares were placed in an employee
stock ownership trust ("ESOT") to be distributed by December 31, 2000 to
selected employees of the former JLW entities. Included in the total ESOT
shares were .9 million shares that were allocated on March 11, 1999 and .2
million shares that were allocated on December 31, 1999, with the remaining
.7 million shares to be allocated on December 31, 2000. Issuance of the
shares was not registered under the U.S. securities laws, and the shares
are generally subject to a contractual one year restriction on sale.
The merger, which was principally structured as a share exchange, has
been treated as an acquisition and is being accounted for using both APB
Opinion No. 16, "Business Combinations" and APB Opinion No. 25, "Accounting
for Stock Issued to Employees." In accordance with the purchase and sale
agreements, the merger is effective for accounting purposes as of March 1,
1999. Accordingly, the results of operations for the former JLW entities
have been included in the first quarter results of Jones Lang LaSalle from
that date. Giving effect to the adjustment shares retained, the following
table summarizes the accounting treatment applied to the issued shares:
Net Net
Shares Shares
Net Allocated to be
Shares at Allocated at Total
Accounting Method Issued at December 31, December 31, Net
(shares in millions) Closing 1999 2000 Shares
- -------------------- ---------- ------------ ------------ ------
APB Opinion No. 16 7.2 -- -- 7.2
APB Opinion No. 25 -
Fixed Award 4.4 .2 .7 5.3
Variable Award 1.3 -- -- 1.3
---- --- --- ----
Net Shares Issued 12.9 .2 .7 13.8
==== === === ====
<PAGE>
As a general matter, the accounting treatment of the Consideration is
dependent on whether the recipient (i) had a legal ownership interest in
the JLW entities prior to the integration of those entities ("Current JLW
Owners"), (ii) obtained their legal ownership interest in the JLW entities
as part of the JLW integration ("New JLW Owners") or (iii) will receive
their shares from the ESOT. The accounting treatment is further dependent
on whether the shares issued are non-restricted ("Non-restricted Shares"),
issued from the ESOT ("ESOT Shares"), or are subject to: (i) forfeiture
provisions ("Forfeiture Shares"), (ii) indemnification provisions
("Indemnification Shares") or (iii) closing net worth requirements
("Adjustment Shares").
All Consideration paid to Current JLW Owners, excluding Forfeiture
Shares, has been accounted for using the purchase method of accounting
under APB Opinion No. 16. Such Consideration consists of 7.2 million shares
and $6.2 million in cash. The shares were valued based on the average price
of Jones Lang LaSalle common stock of $24.66 per share for the five-day
period that includes the two trading days immediately preceding, the
trading day of, and the two trading days immediately following the date of
substantial completion of negotiations regarding the principal financial
terms of the merger (October 9, 1998) discounted at a rate of 20%, to
account for transferability restrictions applicable to such shares. The
total value attributed to the issuance of shares, $141.9 million, in
addition to the cash payment and capitalizable transaction costs of
approximately $15.8 million, have been allocated to the identifiable assets
acquired and liabilities assumed with the excess value being allocated to
goodwill which is being amortized over its estimated useful life of 40
years. The liabilities assumed included employee termination costs of $9.3
million and office rental payments in excess of sublease rental income of
$.3 million related to the closing of offices with geographic overlap in
the United States. As of December 31, 1999, $.9 million of employee
termination costs remain unpaid and will be paid in 2000. Approximately $.3
million of office closure costs remain unpaid as of December 31, 1999.
These amounts will be recognized over the remaining terms of the leases
through 2002.
Accounting under APB Opinion No. 25 is being applied to the remaining
6.6 million shares, which represent all shares issued to New JLW Owners,
shares allocated from the ESOT and Forfeiture Shares issued to Current JLW
Owners. Shares issued or allocated from the ESOT at March 11, 1999 were
valued at $35.38, the market price of Jones Lang LaSalle common stock on
March 10, 1999. Shares issued or allocated from the ESOT on December 31,
1999 were valued at $11.88, the market price on December 31, 1999. Shares
to be allocated from the ESOT on December 31, 2000, totaling .7 million,
will be valued based on the market price of the common stock on that date.
Of the 5.7 million shares issued or allocated from the ESOT on
March 11, 1999, after giving effect to the adjustment shares retained, 1.3
million shares, which are deemed to be contingently returnable, are being
accounted for as a variable stock award plan. Such shares include
Forfeiture Shares issued to the JLW Asia Shareholders (which are subject to
indemnification provisions) in addition to Indemnification Shares issued to
New JLW Owners and allocated from the ESOT at March 11, 1999. 1.2 million
shares subject to forfeiture or vesting provisions have been accounted for
as deferred compensation with compensation expense to be recognized over
the forfeiture or vesting period. The value of the remaining .1 million
shares was accounted for as compensation expense during 1999. Under a
variable stock award plan, the amount of compensation expense and value of
deferred compensation will be adjusted at the end of each quarter based on
the change in stock price from the previous quarter until the final number
of shares to be issued is known.
<PAGE>
The remaining 4.4 million shares, after giving effect to the
adjustment shares retained, issued or allocated from the ESOT on March 11,
1999 are subject to accounting under APB Opinion No. 25 and are being
accounted for as a fixed stock award plan. Such shares include Forfeiture
Shares issued to Current JLW Owners (excluding Forfeiture Shares issued to
JLW Asia Shareholders which are subject to indemnification provisions) and
New JLW Owners in addition to shares allocated from the ESOT on March 11,
1999 and December 31, 1999 which are not subject to indemnity provisions.
Of these shares, 3.4 million are subject to forfeiture or vesting
provisions and have been accounted for as deferred compensation with
compensation expense to be recognized over the forfeiture or vesting
period. The value of the remaining 1.0 million shares, in addition to a
cash payment of $.4 million, was accounted for as compensation expense
during 1999.
Compensation expense incurred for the year ended December 31, 1999
related to the issuance of shares and the amortization of deferred
compensation totaled $101.6 million, net of the quarterly adjustment for
the change in stock price. Deferred compensation at December 31, 1999
totaled $70.1 million, including the effect of the quarterly adjustment for
the change in stock price, which will be amortized into compensation
expense during 2000. Such compensation expense, in addition to compensation
expense anticipated to be incurred at December 31, 2000 associated with the
final allocations of ESOT shares, is expected to result in a significant
non-cash net loss for Jones Lang LaSalle for the year.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Operating results in 1999 include the results of the acquired COMPASS
businesses for a full twelve months (the acquisition was completed in
October 1998) and the results of JLW effective March 1, 1999.
REVENUE
Total revenue, after elimination of intersegment revenue, increased
$450.9 million, or 148.1%, to $755.4 million in 1999 from $304.5 million in
1998, primarily as a result of the acquisition of COMPASS and the merger
with JLW. In addition, a $7.5 million gain was recognized in 1999, relating
to the disposition of Jones Lang LaSalle's former construction subsidiary,
which was sold in a leveraged buyout in 1996. These increases were
partially offset by lower management fees and leasing commissions, as well
as lower performance fees generated on the disposition of assets under
management during 1999 as compared to 1998.
OPERATING EXPENSES
Total operating expenses, after elimination of intersegment expenses
and excluding the effect of merger related non-recurring charges, increased
$418.7 million, or 163.2%, to $675.3 million in 1999 as compared with
$256.6 million in 1998, substantially as a result of the acquisition of
COMPASS and the JLW merger. These two transactions also resulted in
increases in personnel and office occupancy costs related to the global
infrastructure added to support the larger size of the combined company, as
well as increased global management and coordination costs associated with
a global organization. In addition, operating expenses increased as a
result of additional goodwill amortization expense relating to the
acquisition of COMPASS and the merger with JLW.
<PAGE>
Merger related non-recurring charges totaled $151.4 million in 1999.
$101.6 million of these charges for 1999 represent non-cash compensation
expense recorded as a result of shares issued to certain former employees
of JLW in connection with the merger. $49.8 million of these charges
represent non-recurring transition and integration costs in 1999, of which
approximately $8.1 million is attributable to the completion of the
integration of the acquired COMPASS businesses in 1999. The remaining
transition expense relates to the merger with JLW and represents non-
capitalizable expenses such as rebranding, office consolidations and
information technology initiatives.
OPERATING INCOME
The resulting operating income in 1999, excluding the effect of merger
related non-recurring charges, totaled $80.1 million compared to $47.9
million in 1998, an increase of $32.2 million, or 67.2%. Operating income
as a percentage of total revenue, exclusive of merger related charges, was
10.6% for 1999 as compared to 15.6% in 1998. The operating results for 1999
have been negatively affected by four primary factors: (i) management
distractions caused by the integration of the COMPASS and JLW operations,
resulting in less generation of new business, (ii) increased infrastructure
costs associated with the acquisition of COMPASS and the merger with JLW,
(iii) a delay in the realization of anticipated cost savings from the JD
Edwards property accounting and information system and (iv) lower
performance fees generated on the disposition of certain assets under
management.
Including the effect of the merger related non-recurring charges, the
operating loss in 1999 totaled $71.3 million compared to operating income
in 1998 of $37.8 million.
SEGMENT OPERATING RESULTS
As a result of the merger with JLW, Jones Lang LaSalle is managing its
business along a combination of functional and geographic lines. In the
fourth quarter of 1999, Jones Lang LaSalle consolidated its operations in
Asia and Australasia into a unified region now known as Asia Pacific.
Accordingly, operations are now classified into five business segments: two
global businesses, (i) Investment Management and (ii) Hotel Services; and
three geographic regions, (iii) the Americas, (iv) Europe and (v) Asia
Pacific. The Investment Management segment provides real estate investment
management services to institutional investors, corporations and high net
worth individuals. The Hotel Services segment provides strategic advisory,
sales, acquisition, valuation and asset management services related solely
to hotel, conference and resort properties. The geographic regions for the
Americas, Europe and Asia Pacific each provide Owner and Occupier Services
which consist primarily of tenant representation and agency leasing,
investment disposition and acquisition, and valuation services
(collectively, "implementation services"), and property, corporate
property, development and project management services (collectively,
"management fees"). Results for 1998 and 1997 have been realigned based
upon the current business segments.
OWNER AND OCCUPIER SERVICES
AMERICAS
Revenue for the Americas region increased $78.0 million, or 36.3%, to
$293.1 million in 1999 compared to $215.1 million in 1998. Increased
revenues were driven substantially by the acquisition of COMPASS and the
merger with JLW, and to a lesser extent by an increased volume of
transactions completed by the Project Management and Tenant Representation
business units, which posted a $7.6 million increase in revenue from
strategic alliance clients. In addition, the Americas region recognized a
gain of $7.5 million associated with the disposition of Jones Lang
LaSalle's former construction subsidiary, which was sold in a leveraged
buyout in December 1996. U.S. GAAP accounting requirements governing the
accounting for this transaction did not permit the recognition of the gain
in prior years.
<PAGE>
These revenue gains were partially offset by a reduction in management
fees and leasing commissions generated by the region's Leasing & Management
unit. The reductions are primarily a function of the timing of property
dispositions by clients, as compared to the timing of start dates for new
assignments, in addition to slower new business generation in late 1998 and
early 1999 as a result of management's integration efforts on the COMPASS
acquisition and JLW merger. Leasing commissions have been further impacted
by the high occupancy rates of properties within the portfolio coupled with
a lack of new construction or existing large blocks of office space. This
has resulted in more lease renewals, which generate lower fees than new
leases, than in prior years. To a lesser extent, the revenue for the
Americas region decreased as a result of performance fees generated during
1998 related to the LHO initial public offering.
Operating expenses for the Americas region increased $78.7 million, or
42.5%, to $263.7 million in 1999 from $185.0 million in 1998. The increase
is primarily attributable to the acquisition of COMPASS and the merger with
JLW and the resulting increase in personnel, office occupancy and goodwill
amortization costs, in addition to added infrastructure to support the
increased size of the combined company. Operating expenses increased to a
lesser extent as a result of the continued expansion into South America and
Canada, resulting in investments in personnel and infrastructure for those
units and incremental depreciation and infrastructure costs associated with
the implementation and rollout of the JD Edwards property accounting and
information system. These costs were partially offset by a cost reduction
program which was initiated in the second half of 1999 and expanded in
early 2000 that is anticipated to yield annualized savings of $20 million
beginning in 2001. In conjunction with this cost reduction program, the
Americas region recorded employee termination costs of approximately $4.7
million in 1999. These costs were reflected as integration and transition
expenses in the Consolidated Statement of Earnings.
EUROPE
Revenue for the Europe region, which is substantially a new reportable
segment as a result of the JLW merger and the acquisition of COMPASS,
totaled $253.2 million in 1999. The revenue generated by the region
primarily reflects robust activity within the United Kingdom primarily in
the form of tenant and agency leasing activities and investment sales and
acquisition transactions. In addition, property management, corporate
property services and agency leasing activity in Germany and France, as
well as investment sales and acquisition transactions in Germany and
valuation transactions in France, were strong in 1999, particularly in the
latter half of the year. The effect of a strong transaction flow was
partially offset by a weakening of both the British pound and the euro
during 1999. Activity in Central and Eastern Europe remained flat due to a
lack of substantial economic growth.
Operating expenses for the region totaled $223.9 million in 1999.
These expenses are composed primarily of personnel and office occupancy
costs, as well as added infrastructure to support the increased size of the
combined company. In addition, these expenses include amortization of
goodwill associated with the merger with JLW.
ASIA PACIFIC
The Asia Pacific region was formed in the last quarter of 1999 through
a consolidation of the Asia and Australasia regions of the Owner and
Occupier Services segment, in order to capitalize on efficiencies in the
regional infrastructure, promote sharing of best practices throughout the
region and improve the delivery of products and services to clients.
Revenue for the Asia Pacific region, also substantially a new reportable
segment for Jones Lang LaSalle as a result of the JLW merger, totaled
$114.2 million in 1999. This revenue was primarily generated by strong
activity within Hong Kong, representing property management, agency leasing
<PAGE>
activity, consulting and valuation services, as well as management and
leasing activity in Australia and investment sales transactions in
Singapore. This region continues to benefit from several positive trends in
the Australian real estate market, including continued economic growth
funded by strong consumer spending and the outsourcing of property
management functions by corporations and the Australian government. A
revival in Asia's real estate activity was boosted by a gradual economic
recovery within the Asian markets in 1999, including a renewed interest
from international investors, primarily in the latter half of the year.
However, conditions vary from country to country, and the benefits from the
recovery in the areas noted above were partially offset by the stagnant
market conditions in other areas of Asia. The currency valuation throughout
most of Asia remained stable for the period, inflation remained low, and
property prices and rents in a number of the Asia markets have begun to
stabilize.
Operating expenses totaled $106.6 million in 1999. These expenses
mainly represent personnel costs and office occupancy costs, as well as
added infrastructure to support the increased size of the combined company.
In addition, these expenses include amortization of goodwill associated
with the merger with JLW.
INVESTMENT MANAGEMENT
Investment Management revenue decreased $3.3 million, or 3.7%, to
$85.0 million in 1999 from $88.3 million in 1998. The decrease for 1999 is
primarily attributable to strong performance fees generated in 1998 on the
disposition of certain assets under management in which Jones Lang LaSalle
had co-investments, including certain hotel properties in connection with
the formation of LHO. In addition, for a portion of 1998, advisory fees
were earned in relation to $1.0 billion in assets under management related
to the CalPERS portfolio. These assets were transferred to the client's new
investment advisor during the third quarter of 1998 and thus, no fees were
earned on these assets in 1999. This decline was partially offset by
increased revenue, resulting from the merger with JLW and to a lesser
extent to a significant acquisition fee earned in 1999, and increased
equity earnings related to co-investments. In the latter half of 1999, the
Investment Management segment had its first closing on the Euro5 Fund and
its first and second closings on the Income and Growth Fund II. Equity
earnings are expected to increase in 2000 as a result of an anticipated
gain on the disposition of a large portfolio, which was delayed from
closing in late 1999.
Operating expenses increased $3.7 million, or 5.3%, to $73.4 million
in 1999 as compared with $69.7 million in 1998, primarily as a result of
the merger with JLW and added infrastructure to support the increased size
of the combined company. The increase was partially offset by lower levels
of incentive bonuses in 1999 as compared to 1998 as a result of the lower
performance fees generated.
HOTEL SERVICES
Hotel Services, a new reportable segment as a result of the recent
merger, had total revenue of $13.8 million in 1999, representing a
combination of valuation, disposition and acquisition services. This
segment experienced good activity in 1999, primarily relating to
disposition and acquisition services. The segment benefited late in 1999
from the recovering Asian real estate market and in late 1999 completed the
sale of the Seoul Hilton. This was a sizable single transaction, generating
a large transaction fee for this segment. However, in Europe and the United
States, several major transactions failed to close in 1999 as expected,
thus creating a strong backlog at the end of the year. These transactions
are expected to close in 2000.
Operating expenses for the segment totaled $11.5 million in 1999.
These expenses mainly represent personnel costs and office occupancy costs.
<PAGE>
INTEREST EXPENSE
Interest expense, net of interest income, increased $14.0 million to
$18.2 million in 1999 as compared to 1998, primarily as a result of the
acquisition of COMPASS and the related borrowings on the acquisition credit
facility. To a lesser extent, additional borrowings on the revolving credit
facilities as a result of the transition and integration expenses
associated with the acquisition of COMPASS and merger with JLW contributed
to the increase in interest expense. In addition, on October 27, 1999 Jones
Lang LaSalle replaced its five-year unsecured $150.0 million revolving
credit facility, $175.0 million term credit facility and $30.0 million
short-term facility with a new $380.0 million unsecured credit agreement
(see Liquidity and Capital Resources for discussion), which bears a higher
rate of interest. Interest expense is expected to be significantly higher
in 2000 as a result of an increase in the average level of debt
outstanding, generally increasing interest rates and the likely refinancing
of the portion of the credit facilities due October 15, 2000 at a higher
rate of interest.
PROVISION FOR INCOME TAXES
The provision for income taxes decreased $7.9 million, or 59.8%, to
$5.3 million in 1999 as compared to $13.2 million in 1998. The decrease is
primarily attributable to the generally lower level of earnings before
provision for income taxes, exclusive of the compensation expense
associated with the issuance of shares to former JLW employees in
connection with the merger, which is largely nondeductible for tax
purposes. Excluding the impact of merger related compensation expense and
non-recurring transition and integration expense, the effective tax rate on
recurring operations increased from 39.3% in 1998 to 40.5% in 1999. The
increase in the effective tax rate is primarily due to an increase in
nondeductible goodwill amortization related to the merger with JLW and to
the provision of valuation allowances on the tax benefits of certain
foreign net operating loss carryforwards.
NET EARNINGS (LOSS)
Net earnings, excluding the effect of merger related non-recurring
charges, was $36.8 million for 1999 as compared to $26.6 million for 1998,
an increase of $10.2 million or 38.3%. This increase was primarily the
result of the acquisition of COMPASS and the merger with JLW, partially
offset by the decline in the operating results of the Americas Owner and
Occupier Services segment as discussed previously.
Including the effect of the merger related non-recurring charges, the
net loss for 1999 was $94.8 million compared to net earnings of $20.5
million for 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE
Jones Lang LaSalle's total revenue, after elimination of intersegment
revenue, grew $79.7 million, or 35.5%, to $304.5 million in 1998 from
$224.8 million in 1997. Increased revenues were driven, in part, by the
acquisitions of COMPASS, Satulah and Galbreath, as well as by the
completion of the LHO initial public offering. In addition, growth was
driven by strong capital flows into the U.S. real estate market, in spite
of a market correction which occurred during the latter half of 1998,
continued underlying demand for real estate by users across the spectrum of
property types, and Jones Lang LaSalle's ability to cross-market real
estate services to its clients.
<PAGE>
These increases were partially offset by a decline in property
management, leasing and investment management fees from four of Jones Lang
LaSalle's multiple investor funds ("Commingled Funds") formed by Jones Lang
LaSalle in the 1980s. The decline is a result of the disposition of the
funds' assets, in accordance with the strategic plan. These asset
dispositions were completed by December 1998. Revenue generated from these
funds compared with total revenue was .8% for 1998 and 4.5% for 1997.
OPERATING EXPENSE
Jones Lang LaSalle's operating expenses, after elimination of
intersegment expenses, increased $77.0 million, or 40.6%, to $266.6 million
in 1998 from $189.7 million in 1997. Operating expenses include $10.0
million in merger related non-recurring charges as a result of the COMPASS
acquisition and the merger with JLW. Jones Lang LaSalle's operating
expenses, exclusive of these charges, totaled $256.6 million and
represented an increase of $66.9 million, or 35.3%, over the prior year. As
a percentage of total revenue, operating expenses, exclusive of the merger
related charges, remained constant at approximately 84.3%.
OPERATING INCOME
As a result of the factors noted above, Jones Lang LaSalle's operating
income, including merger related non-recurring charges of $10.0 million,
increased $2.7 million, or 7.7%, to $37.8 million in 1998 from $35.1
million in 1997. Exclusive of the merger related charges, Jones Lang
LaSalle's operating income increased $12.7 million, or 36.3%. As a
percentage of total revenue, operating income, exclusive of merger related
charges, remained constant at approximately 15.6%.
SEGMENT OPERATING RESULTS
As a result of the merger with JLW in 1999, Jones Lang LaSalle changed
the way it manages its business to a combination of functional and
geographic lines. Segment operating results for 1998 and 1997 were
realigned based upon these new business segments, however, for 1998 and
1997 the Europe and Asia Pacific regions of the Owner and Occupier Services
segment were immaterial to Jones Lang LaSalle as a whole and the Hotel
Services segment was nonexistent. Consequently, the discussion below
focuses on the Americas segment of Owner and Occupier Services and the
Investment Management segment.
OWNER AND OCCUPIER SERVICES
AMERICAS
Revenue for the Americas segment of Owner and Occupier Services
increased $67.3 million, or 45.5%, to $215.1 million in 1998 from $147.8
million in 1997. This increase was primarily due to five factors: (i) the
acquisitions of COMPASS, Satulah and Galbreath, (ii) higher volumes of
activity within the Agency Leasing, Property Management, Tenant
Representation and Capital Markets business units, (iii) the addition of
nine new Corporate Property Services clients, (iv) new strategic alliance
relationships formed by the Project Management and Tenant Representation
businesses and (v) a higher volume of projects being managed by the
Development Services business. In addition, the growth in revenue
experienced by the Capital Markets business includes incentive fees of $5.6
million related to the initial public offering of LHO. These increases were
partially offset by a decline in revenue related to the sale of the
Commingled Fund properties discussed previously, in addition to the
volatility in the capital markets during the latter half of 1998.
<PAGE>
Operating expenses for the Americas region increased $61.5 million, or
49.8%, to $185.0 million in 1998 from $123.5 million in 1997. This increase
was primarily a result of the effects of the COMPASS, Satulah and Galbreath
acquisitions, including personnel and facility costs and the amortization
of intangibles resulting from the acquisitions. Additionally, higher
compensation and benefit costs associated with increased incentive
compensation earned by the Capital Markets and Tenant Representation
businesses, consistent with the increased levels of operating income
generated contributed to the increase. Other contributing factors included
increased staffing to support new business initiatives and incremental
corporate infrastructure costs as a result of higher staffing levels and
technology enhancements.
INVESTMENT MANAGEMENT
Investment Management segment revenue increased $10.7 million, or
13.8%, to $88.3 million in 1998 from $77.6 million in 1997. The net gain in
revenue was primarily attributable to performance fees generated on the
disposition of certain assets under management in which Jones Lang LaSalle
had a co-investment, including certain hotel properties in connection with
the formation of LHO, and, to a lesser extent, to increased acquisition and
advisory fees generated on international fund activity and a higher volume
of activity performed by the securities business. These increases were
partially offset by a decline in revenue related to the sale of the
Commingled Fund properties discussed previously, in addition to the
transition of approximately $1.0 billion in assets under management related
to the CalPERS portfolio to the client's new investment advisor during the
third quarter of 1998 and the reduction in publicly traded REIT values
during the latter half of 1998.
Operating expenses for the Jones Lang LaSalle Investment Management
segment increased $3.5 million, or 5.3%, to $69.7 million in 1998 from
$66.2 million in 1997. The increase was primarily a result of increased
incentive compensation, consistent with the increased level of operating
income generated. To a lesser extent, costs associated with new business
initiatives contributed to the increase. These increases were partially
offset as a result of a one-time reserve of $1.5 million established in
late 1997 related to the pending liquidation of a mid-1980 investment
vehicle.
INTEREST EXPENSE
Interest expense increased $.2 million, or 5.0%, to $4.2 million in
1998 from $4.0 million in 1997, principally as a result of the COMPASS
acquisition and the resulting borrowings on the new acquisition facility
and existing revolving credit facility. This was partially offset by the
repayment of Jones Lang LaSalle's long-term debt from the net proceeds of
the Offering and the subsequent repayment of outstanding debt under its
working capital facility in July 1997.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $7.9 million to $13.2 million
in 1998 from $5.3 million in 1997 as a result of Jones Lang LaSalle's
conversion from partnership to corporate form in July 1997 and the
resulting provision for income taxes at an effective tax rate of 39.3% in
1998 and 38.5% in 1997. This increase included the effects of the
recognition of a $6.8 million tax benefit in July 1997, in accordance with
SFAS No. 109, as a result of Jones Lang LaSalle recording a deferred tax
asset arising from temporary differences between the book and tax basis of
its consolidated assets and liabilities at the date of conversion to
corporate form. In 1998, the provision for income taxes includes a tax
benefit of approximately $3.9 million related to merger related charges.
<PAGE>
NET EARNINGS
Net earnings, including merger related charges of $6.1 million on an
after-tax basis, decreased $5.4 million, or 20.8%, to $20.5 million in 1998
from $25.8 million in 1997. Exclusive of merger related charges, net
earnings increased slightly to $26.6 million. Net earnings, excluding
merger related charges, represented 8.7% of total revenue compared to 11.5%
in 1997. This decrease primarily reflects the increased tax provision in
1998 as a result of being a taxable entity for the entire year, and to a
lesser extent, the impact of amortization of intangibles related to recent
acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Jones Lang LaSalle has financed its operations,
acquisitions and co-investment activities with internally generated funds,
the common stock of Jones Lang LaSalle and borrowings under its credit
facilities. On October 27, 1999, Jones Lang LaSalle closed a new $380.0
million unsecured credit agreement that replaced the existing five-year
unsecured $150.0 million revolving credit facility, the $175.0 million term
credit facility used to finance the COMPASS acquisition and the $30.0
million short-term facility (collectively the "Previous Facilities"). The
new agreement includes a $223.5 million three-year revolving facility and a
$156.5 million term facility due October 15, 2000 (collectively, the "New
Facilities"). The revolving facility is available for working capital, co-
investments and acquisitions. Jones Lang LaSalle is authorized under the
agreement to increase the revolving facility up to a total of $250 million
and the term facility up to a total of $175 million through the expansion
of its existing bank group. Jones Lang LaSalle is in discussions with
additional banks to increase the New Facilities, however, there can be no
guarantee as to the final outcome of these discussions. As of December 31,
1999 there was $316.2 million outstanding on the New Facilities, of which
$156.5 million was classified as current.
The New Facilities are guaranteed by certain of Jones Lang LaSalle's
subsidiaries. Jones Lang LaSalle must maintain a certain level of
consolidated net worth and a ratio of funded debt to earnings before
interest expense, taxes, depreciation and amortization ("EBITDA"). Jones
Lang LaSalle must also meet a minimum interest coverage ratio, minimum
liquidity ratio, and minimum EBITDA. Additionally, Jones Lang LaSalle is
restricted from, among other things, incurring certain levels of
indebtedness to lenders outside of the New Facilities, disposing of a
significant portion of its assets, and paying dividends until the term
facility is repaid. Lender approval is required for certain levels of co-
investment. The New Facilities bear variable rates of interest based on
market rates. Jones Lang LaSalle uses interest rate swaps to convert a
portion of the floating rate indebtedness to a fixed rate. The effective
interest rate on the Previous Facilities and the New Facilities was 6.48%
for 1999, including the effect of interest rate swap agreements. The
interest rate swap agreements had a notional amount as of December 31, 1999
of $55.0 million.
Jones Lang LaSalle has additional access to liquidity via various
interest bearing overdraft facilities and short-term credit facilities in
Europe and Asia Pacific. The aggregate amount available under these
facilities is approximately $32.8 million, of which $4.1 million was
outstanding as of December 31, 1999. Borrowings on these facilities are
currently limited to $50.0 million under the terms of the New Facilities.
Management believes that the New Facilities, along with existing local
borrowing facilities and cash flow generated from operations, will provide
adequate liquidity and financial flexibility to meet working capital
requirements, including merger and integration costs yet to be paid. Jones
Lang LaSalle is exploring financing alternatives for the refinancing of the
term facility due October 15, 2000, however, there can be no guarantee as
to the final outcome of these discussions.
<PAGE>
During 1999, cash flows used in operating activities totaled $32.8
million compared to cash flows provided by operations of $19.2 million in
1998. The increased use is primarily a result of increased operating
expenses resulting from the acquisition of COMPASS and the merger with JLW,
and the related payment of integration, transition and transaction costs
associated with the transactions. To a lesser extent, the increased use is
due to higher bonus accruals at December 31, 1998 as compared to December
31, 1997, which are paid in the first quarter of the following year and
higher trade receivables at December 31, 1999 as compared to December 31,
1998, primarily as a result of the COMPASS acquisition and the JLW merger.
Jones Lang LaSalle expects to continue to pursue co-investment
opportunities with investment management clients for which the holding
period typically ranges from three to seven years. While this program
remains very important to the continued growth of the Investment Management
segment, the future commitment to co-investment is completely discretionary
(other than with respect to the $28.7 million of commitments discussed
below) and can be increased or decreased based on the availability of
capital and other factors. The performance of the Investment Management
segment would likely be negatively impacted if a substantial decrease in
co-investment were to occur. Management anticipates that co-investment
activity within the Americas and Europe regions will continue with probable
expansion into Asia Pacific, as appropriate opportunities arise. This
strategy should serve to grow the assets under management, generate returns
on investment and create potential opportunities to provide other services.
Such co-investments are generally represented by non-controlling general
partner, limited partner and limited liability company interests. In
addition to a share of investment returns, Jones Lang LaSalle typically
earns investment management fees, and in some cases, property management
and leasing fees on these investments. The equity earnings from these co-
investments have had a relatively small impact on current earnings and cash
flow. However, increased investment participation could increase
fluctuations in net earnings and cash flow as a result of the timing and
magnitude of the gains or losses and potential performance fees, if any, to
be recognized upon the disposition of these assets. In most of these
investments, Jones Lang LaSalle will not have complete discretion to
control the timing of the disposition of such investments. Jones Lang
LaSalle anticipates that a significant gain will be recorded in 2000
relating to the disposition of a large portfolio, which was delayed from
closing in 1999. As of December 31, 1999, there were total investments of
$67.3 million in 34 separate property or fund co-investments with
additional capital commitments of $28.7 million for future fundings of co-
investments.
Capital expenditures are anticipated to be approximately $40.0 million
for 2000. These expenditures are associated primarily with the continual
improvements to Jones Lang LaSalle's information systems and computer
hardware, including the implementation of global reporting and
communication systems, office renewals and expansions and the scheduled
replacement of fleet cars primarily within the European countries.
Net cash used in investing activities was $67.1 million for 1999
compared with $235.4 million in 1998. The decreased use of cash of $168.3
million is primarily attributable to the cash paid in relation to the
acquisition of COMPASS in 1998 and significant co-investment activity in
1998, including the investment in LaSalle Hotel Properties. These factors
were partially offset by the cash paid in connection with the JLW merger
and the increased capital expenditures during 1999 as a result of the JLW
merger and acquisition of COMPASS and the resulting consolidation of
corporate offices. The continued customization and implementation of the JD
Edwards property accounting and information system also offset these
factors.
<PAGE>
Net cash provided by financing activities of $106.7 million in 1999
was comprised primarily of proceeds from borrowings under credit
facilities, net of repayments, of $102.5 million for increased working
capital requirements and to fund the payment of integration, transition and
transaction costs associated with the COMPASS acquisition and the JLW
merger. Cash flows provided by financing activities of $202.4 million in
1998 were composed of borrowings under credit facilities, net of
repayments, of $202.4 million to fund the acquisition of COMPASS and
infrastructure investments.
SEASONALITY
Historically, Jones Lang LaSalle's revenue, operating profits and net
earnings in the first three calendar quarters are substantially lower than
in the fourth quarter. Other than Investment Management, this seasonality
is due to a calendar-year-end focus, primarily in the United States, on the
completion of transactions, which is consistent with the real estate
industry generally. The Investment Management segment earns performance
fees on clients' returns on their real estate investments. Such performance
fees are generally earned when the asset is disposed of, the timing of
which Jones Lang LaSalle does not have complete discretion over. Non-
variable operating expenses, which are treated as expenses when incurred
during the year, are relatively constant on a quarterly basis. Therefore,
Jones Lang LaSalle typically sustains a loss in the first quarter of each
calendar year, reports a small profit or loss in the second and third
quarters and records a substantial majority of its earnings in the fourth
calendar quarter, barring the recognition of investment generated
performance fees in earlier quarters.
INFLATION
Jones Lang LaSalle's operations are directly affected by various
national and local economic conditions, including interest rates, the
availability of credit to finance real estate transactions and the impact
of tax laws. To date, management does not believe that general inflation
has had a material impact on operations, as revenue, bonuses and other
variable costs related to revenue are primarily impacted by real estate
supply and demand rather than general inflation.
OTHER MATTERS
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" becomes effective for all
fiscal quarters for fiscal years beginning after June 15, 2000 and is not
expected to have a material impact on the consolidated financial
statements.
During December, 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statement," which provides guidance on various revenue recognition matters.
Jones Lang LaSalle has not yet determined the impact of the Staff
Accounting Bulletin on the consolidated financial statements.
EURO CONVERSION ISSUES
On January 1, 1999, certain countries of the European Monetary Union
("EMU") adopted a common currency, the euro. For a three-and-one-half-year
transition period, non-cash transactions may be denominated in either the
euro or in the old national currencies. After July 1, 2002, the euro will
be the sole legal tender for the EMU countries. The adoption of the euro
will affect a multitude of financial systems and business applications as
the commerce of these nations will be transacted in the euro and the
existing national currency.
<PAGE>
Jones Lang LaSalle is currently evaluating the potential impact of
euro related issues on information systems, currency exchange rate risk and
other business activities. Management does not expect the impact of euro
conversion issues to be material to Jones Lang LaSalle, however there can
be no assurance that external factors will not have a material adverse
effect on operations.
YEAR 2000 ISSUES
The "Year 2000 Issue" was the result of computer programs and systems
having been designed and developed to use two digits, rather than four, to
define the applicable year. As a result, these computer programs and
systems had the potential to recognize a date using "00" as the year 1900
rather than the year 2000. This could have resulted in system failure or
miscalculations causing disruption of operations, including, among other
things, a temporary inability to process transactions, pay invoices or
engage in similar normal business activities.
Jones Lang LaSalle successfully modified its software and hardware to
meet Year 2000 requirements and experienced no significant disruption of
its operations. The total cost of such modifications was $4.8 million of
operating expenses associated with testing and other matters and $1.5
million of capital expenditures primarily representing system upgrades
which provide operational benefits above and beyond Year 2000 compliance.
Although Jones Lang LaSalle is not aware of any threatened claims
related to the Year 2000, it may become subject to litigation arising from
such claims, and, depending on the outcome, such litigation could have a
material adverse affect on Jones Lang LaSalle. It is not clear whether
insurance coverage would be adequate to offset these and other business
risks related to the Year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Jones Lang LaSalle is exposed to interest rate changes primarily as a
result of its lines of credit used to maintain liquidity and to fund
capital expenditures, acquisitions, co-investments and operations. Jones
Lang LaSalle's interest rate risk management objective is to limit the
impact of interest rate changes on earnings and cash flows and to lower
overall borrowing costs. To achieve this objective, Jones Lang LaSalle
borrows primarily at variable rates and enters into derivative financial
instruments such as interest rate swap agreements when appropriate. Jones
Lang LaSalle does not enter into derivative or interest rate transactions
for trading or speculative purposes.
As of December 31, 1999, Jones Lang LaSalle had entered into interest
rate swap agreements with a notional amount of $55.0 million providing for
an average fixed interest rate of approximately 5.21%. These agreements
have terms which expire through June 15, 2000. Such interest rate swap
agreements had an approximate market value of $.2 million at December 31,
1999. The carrying value of the debt approximates its fair value. As of
December 31, 1999, the outstanding borrowings on the New Facilities were
$316.2 million. The Previous Facilities bore and the New Facilities bear
variable rates of interest based on market rates. The effective interest
rate on the Previous Facilities and the New Facilities was 6.48% for 1999,
including the effect of interest rate swap agreements.
<PAGE>
FOREIGN CURRENCY RISK
Jones Lang LaSalle's reporting currency is the U.S. dollar. Business
is transacted in various foreign currencies throughout Europe and Asia
Pacific. The financial statements of subsidiaries outside the United
States, except those located in highly inflationary economies, are
generally measured using the local currency as the functional currency. As
a result, fluctuations in the U.S. dollar relative to the other currencies
in which earnings are generated can impact Jones Lang LaSalle's business,
operating results and financial condition as reported in U.S. dollars. For
1999, on a pro forma basis (excluding the effect of stock compensation
expense), 142% of Jones Lang LaSalle's net loss was attributable to
operations with U.S. dollars as their functional currency and (42%) was
attributable to operations having other functional currencies. Revenues and
expenses are primarily earned and incurred in the currency of the location
where the operations generating the revenues and expenses have occurred,
thereby limiting exposure to exchange rate fluctuations to some extent.
On a limited basis, Jones Lang LaSalle enters into forward foreign
currency exchange contracts to manage currency risks and reduce exposure
resulting from fluctuations in the designated foreign currency associated
with existing commitments, assets or liabilities. At December 31, 1999,
Jones Lang LaSalle had forward exchange contracts in effect with a notional
value of $5.7 million with no market value and no carrying value. Jones
Lang LaSalle does not enter into forward foreign currency exchange
contracts for trading or speculative purposes.
DISCLOSURE OF LIMITATIONS
As the information presented above includes only those exposures that
exist as of December 31, 1999, it does not consider those exposures or
positions which could arise after that date. Moreover, because firm
commitments are not presented, the information represented herein has
limited predictive value. As a result, the ultimate realized gain or loss
with respect to interest rate and foreign currency fluctuations will depend
on the exposures that arise during the period, the hedging strategies at
the time and interest and foreign currency rates.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
JONES LANG LASALLE INCORPORATED
CONSOLIDATED FINANCIAL STATEMENTS
Report of KPMG LLP, Independent Auditors . . . . . . . . . . . . . 46
Consolidated Balance Sheets as of
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . 47
Consolidated Statements of Earnings
For the Years Ended December 31, 1999, 1998 and 1997 . . . . . . 49
Consolidated Statements of Stockholders'
Equity For the Years Ended December 31,
1999, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . 51
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997 . . . . . . 54
Notes to Consolidated Financial Statements . . . . . . . . . . . . 57
Quarterly Results of Operations (Unaudited). . . . . . . . . . . . 80
SCHEDULES SUPPORTING THE CONSOLIDATED FINANCIAL STATEMENTS:
II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . 83
All other schedules have been omitted since the required information
is presented in the financial statements and related notes or is not
applicable.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and
Board of Directors of
Jones Lang LaSalle Incorporated:
We have audited the accompanying consolidated financial statements of
Jones Lang LaSalle Incorporated and subsidiaries and their predecessors as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we have also audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Jones Lang LaSalle Incorporated and subsidiaries and their predecessors as
of December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/S/ KPMG LLP
Chicago, Illinois
February 7, 2000
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
($ in thousands, except share data)
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 23,308 16,941
Trade receivables, net of allowances of $9,871 and $3,978 in
1999 and 1998, respectively. . . . . . . . . . . . . . . . . . . . . 270,593 116,965
Notes receivable and advances to real estate ventures. . . . . . . . . 4,519 17,042
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,045 3,385
Income tax refund receivable . . . . . . . . . . . . . . . . . . . . . 14,500 --
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,598 2,185
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . 13,673 9,926
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,446 --
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 348,682 166,444
Property and equipment, at cost, less accumulated
depreciation of $55,943 and $35,859
in 1999 and 1998, respectively . . . . . . . . . . . . . . . . . . . . 76,470 28,773
Intangibles resulting from business acquisitions and JLW merger,
net of accumulated amortization of $27,515 and
$11,961 in 1999 and 1998, respectively . . . . . . . . . . . . . . . . 367,215 229,437
Investments in real estate ventures. . . . . . . . . . . . . . . . . . . 67,305 52,976
Long-term receivables, net . . . . . . . . . . . . . . . . . . . . . . . 27,962 10,950
Prepaid pension asset. . . . . . . . . . . . . . . . . . . . . . . . . . 23,956 --
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,270 660
Other assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,940 1,681
-------- --------
$924,800 490,921
======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS - CONTINUED
1999 1998
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . $ 88,257 51,101
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . 142,960 58,398
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . 162,643 --
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,259 8,324
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 420,119 117,823
Long-term liabilities:
Credit facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 159,743 202,923
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . 7,535 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,878 603
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 600,275 321,349
Commitments and contingencies
Minority interest in consolidated subsidiaries . . . . . . . . . . . . . 589 --
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,285,472 and 16,264,176 shares issued and
outstanding as of December 31, 1999 and 1998, respectively . . . . . 303 163
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 442,699 123,543
Unallocated ESOT shares. . . . . . . . . . . . . . . . . . . . . . . . (7) --
Deferred stock compensation. . . . . . . . . . . . . . . . . . . . . . (70,106) --
Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . (50,050) 44,792
Accumulated other comprehensive income . . . . . . . . . . . . . . . . 1,097 1,074
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 323,936 169,572
-------- --------
$924,800 490,921
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands, except share data)
<CAPTION>
1999 1998 1997 (1)
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Fee based services . . . . . . . . . . . . . . . . . $736,042 298,296 219,911
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . . . . . . . . . . 6,218 3,911 3,238
Gain on sale of business . . . . . . . . . . . . . . 7,502 -- --
Other income . . . . . . . . . . . . . . . . . . . . 5,677 2,257 1,624
-------- -------- --------
Total revenue. . . . . . . . . . . . . . . . . 755,439 304,464 224,773
Operating expenses:
Compensation and benefits. . . . . . . . . . . . . . 477,658 172,982 123,281
Operating, administrative and other. . . . . . . . . 161,007 70,164 57,285
Depreciation and amortization. . . . . . . . . . . . 36,676 13,455 9,093
-------- -------- --------
Total operating expenses before merger
related non-recurring charges. . . . . . . . 675,341 256,601 189,659
Merger related non-recurring charges:
Stock compensation expense . . . . . . . . . . . . . 101,579 -- --
Integration and transition expenses. . . . . . . . . 49,822 10,021 --
-------- -------- --------
Total merger related non-recurring charges . . 151,401 10,021 --
-------- -------- --------
Total operating expenses . . . . . . . . . . . 826,742 266,622 189,659
Operating income (loss). . . . . . . . . . . . . . . (71,303) 37,842 35,114
Interest expense, net of interest income . . . . . . . 18,211 4,153 3,995
-------- -------- --------
Earnings (loss) before provision
for income taxes . . . . . . . . . . . . . . . . . (89,514) 33,689 31,119
Net provision for income taxes . . . . . . . . . . . . 5,328 13,224 5,279
-------- -------- --------
Net earnings (loss). . . . . . . . . . . . . . . . . . $(94,842) 20,465 25,840
======== ======== ========
Other comprehensive income, net of tax:
Foreign currency translation adjustments . . . . . . 23 444 (469)
-------- -------- --------
Comprehensive income (loss). . . . . . . . . $(94,819) 20,909 25,371
======== ======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
1999 1998 1997 (1)
------------ ------------ ------------
Basic earnings (loss) per common share . . . . . . . . $ (4.20) 1.26 1.50
========== ========== ==========
Basic weighted average shares outstanding. . . . . . . 22,607,350 16,215,478 16,200,000
========== ========== ==========
Diluted earnings (loss) per common share . . . . . . . $ (4.20) 1.25 1.49
========== ========== ==========
Diluted weighted average shares outstanding. . . . . . 22,607,350 16,387,721 16,329,613
========== ========== ==========
<FN>
(1) Earnings per share for 1997 is calculated based on earnings for the period from conversion to corporate
form, July 22, 1997, through December 31, 1997.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands, except share data)
<CAPTION>
Partners' Accumu-
Capital lated
(Deficit) Other
Additi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1996. . . . . . . -- -- -- -- -- -- 23,148 1,099 24,247
Net earnings
(through
July 21,
1997) . . . . . -- -- -- -- -- -- 1,513 -- 1,513
Distributions. . -- -- -- -- -- -- (14,835) -- (14,835)
Acquisition
of Galbreath
common
stock. . . . . -- -- -- -- -- -- 29,292 -- 29,292
Effect of
the reorgani-
zation . . . . 12,200,000 $ 122 38,996 -- -- -- (39,118) -- --
Net proceeds
from the
initial
Offering . . . 4,000,000 40 82,782 -- -- -- -- -- 82,822
Cumulative
effect of
foreign
currency
translation
adjustments. . -- -- -- -- -- -- -- (565) (565)
---------- ----- ------- -------- -------- -------- -------- -------- --------
Balances after
the reorgani-
zation and
initial
Offering. . . . . 16,200,000 162 121,778 -- -- -- -- 534 122,474
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Partners' Accumu-
Capital lated
(Deficit) Other
Additi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
Net earnings
(July 22,
1997 through
December 31,
1997) . . . . . -- -- -- -- -- 24,327 -- -- 24,327
Cumulative
effect of
foreign
currency
translation
adjustments . . -- -- -- -- -- -- -- 96 96
---------- ----- ------- -------- -------- -------- -------- ------- ------
Balances at
December 31,
1997. . . . . . . 16,200,000 162 121,778 -- -- 24,327 -- 630 146,897
Net earnings. . -- -- -- -- -- 20,465 -- -- 20,465
Shares issued
under stock
purchase plan. 64,176 1 1,765 -- -- -- -- -- 1,766
Cumulative
effect of
foreign
currency
translation
adjustments. . -- -- -- -- -- -- -- 444 444
---------- ----- ------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1998. . . . . . . 16,264,176 163 123,543 -- -- 44,792 -- 1,074 169,572
Net loss. . . . -- -- -- -- -- (94,842) -- -- (94,842)
Shares issued in
connection with:
Stock option
plan . . . . 21,292 -- 495 -- -- -- -- -- 495
Stock purchase
programs . . 199,587 2 3,695 -- -- -- -- -- 3,697
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Partners' Accumu-
Capital lated
(Deficit) Other
Additi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
Share activity
related to JLW
merger:
Shares issued
at closing . 14,254,116 143 355,233 (9) (160,253) -- -- -- 195,114
Adjustment
shares sub-
sequently
retained . . (453,699) (5) (8,462) -- -- -- -- -- (8,467)
ESOT shares
allocated. . -- -- 1,597 2 -- -- -- -- 1,599
Stock compensa-
tion adjust-
ments . . . . -- -- (33,402) -- 27,906 -- -- -- (5,496)
Amortization of
deferred stock
compensation. -- -- -- -- 62,241 -- -- -- 62,241
Cumulative
effect of
foreign
currency
translation
adjustments . -- -- -- -- -- -- -- 23 23
---------- ----- ------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1999. . . . . . . 30,285,472 $ 303 442,699 (7) (70,106) (50,050) -- 1,097 323,936
========== ===== ======= ======== ======== ======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . $(94,842) 20,465 25,840
Reconciliation of net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization. . . . . . . . . . . 36,676 13,455 9,093
Equity in earnings and gain on sale from
unconsolidated ventures. . . . . . . . . . . . . (6,218) (3,911) (3,238)
Provision for loss on receivables and
other assets . . . . . . . . . . . . . . . . . . 2,744 4,009 2,640
Stock compensation expense . . . . . . . . . . . . 101,143 -- --
Amortization of deferred compensation. . . . . . . 2,070 229 --
Tax benefit on conversion to corporate form. . . . -- -- (6,842)
Changes in:
Receivables. . . . . . . . . . . . . . . . . . . . (49,962) (28,504) 9,631
Prepaid expenses and other assets. . . . . . . . . (10,442) (3,760) 1,864
Deferred tax assets and income tax
refund receivable. . . . . . . . . . . . . . . . (19,479) -- --
Accounts payable, accrued liabilities
and accrued compensation . . . . . . . . . . . . 5,544 17,255 (2,429)
---------- ---------- ----------
Net cash (used in) provided by
operating activities . . . . . . . . . . . (32,766) 19,238 36,559
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998 1997
------------ ------------ ------------
Cash flows provided by (used in) investing
activities:
Net capital additions--property and equipment. . . (36,848) (15,592) (6,277)
Cash paid in connection with merger with
Jones Lang Wootton, net of cash balances
assumed (Note 3) . . . . . . . . . . . . . . . . (27,704) -- --
Other acquisitions, net of cash balances
assumed. . . . . . . . . . . . . . . . . . . . . (3,030) (178,919) 1,008
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures . . . . . . . . . . . . . (25,491) (51,347) (16,546)
Distributions, repayments of advances
and sale of investments. . . . . . . . . . . . 25,930 10,493 11,707
---------- ---------- ----------
Net cash used in investing activities . . . (67,143) (235,365) (10,108)
Cash flows provided by (used in) financing
activities:
Proceeds from borrowings under credit
facilities . . . . . . . . . . . . . . . . . . . 326,004 356,929 92,300
Repayments of borrowings under credit
facilities . . . . . . . . . . . . . . . . . . . (223,479) (154,552) (126,202)
Net repayments under long-term notes payable . . . -- -- (37,213)
Common stock issued under stock option plan
and stock purchase programs. . . . . . . . . . . 4,192 -- --
Distributions to partners. . . . . . . . . . . . . -- -- (14,835)
Net proceeds from the initial Offering . . . . . . -- -- 82,822
---------- ---------- ----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . 106,717 202,377 (3,128)
Effects of foreign currency translation
on cash balances. . . . . . . . . . . . . . . . . . (441) 31 130
---------- ---------- ----------
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998 1997
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . 6,367 (13,719) 23,453
Cash and cash equivalents, January 1 . . . . . . . . 16,941 30,660 7,207
---------- ---------- ----------
Cash and cash equivalents, December 31 . . . . . . . $ 23,308 16,941 30,660
========== ========== ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . $ 20,448 3,215 4,195
Taxes, net of refunds. . . . . . . . . . . . . . . 20,763 2,881 9,910
Non-cash investing and financing activities:
Acquisitions and merger:
Shares issued in connection with
merger and acquisition . . . . . . . . . . . . $ 141,918 -- 29,292
Fair value of assets acquired. . . . . . . . . . (218,514) (23,257) (12,448)
Fair value of liabilities assumed. . . . . . . . 197,556 22,652 14,740
Goodwill . . . . . . . . . . . . . . . . . . . . (151,694) (178,314) (30,576)
---------- ---------- ----------
Cash paid, net of cash balances
assumed. . . . . . . . . . . . . . . . . . $ (30,734) (178,919) 1,008
========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except where otherwise noted)
(1) ORGANIZATION
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle") is a leading
full-service real estate services firm that provides investment management,
hotel acquisition, disposition, strategic advisory and valuation, property
management, corporate property services, development services, project
management, tenant and agency leasing, investment disposition, acquisition,
financing and capital placement services on a local, regional and global
basis. With over 7,000 employees in more than 100 markets on five
continents, Jones Lang LaSalle is able to satisfy local, regional and
international service needs. The ability to provide this network of
services around the globe was solidified effective March 11, 1999 with the
merger of the business of the Jones Lang Wootton companies ("JLW") with
those of LaSalle Partners Incorporated ("LaSalle Partners"). In connection
with this merger, the name of the company was changed from LaSalle Partners
Incorporated to Jones Lang LaSalle Incorporated (see Note 3).
Jones Lang LaSalle, formerly LaSalle Partners Incorporated [successor
to LaSalle Partners Limited Partnership and LaSalle Partners Management
Limited Partnership (collectively, the "Predecessor Partnerships")], was
incorporated in Maryland on April 15, 1997. On July 22, 1997, LaSalle
Partners completed an initial public offering (the "Offering") of 4,000,000
shares of LaSalle Partners common stock, $.01 par value per share (the
"Common Stock"). In addition, all of the partnership interests held in the
Predecessor Partnerships were contributed to LaSalle Partners, pursuant to
agreements among the general and limited partners, in exchange for an
aggregate of 12,200,000 shares of common stock. The contribution occurred
immediately prior to the closing of the Offering. The 4,000,000 shares
were offered at $23 per share, aggregating $82.8 million, net of offering
costs, of which $63.5 million was used to retire long-term debt and related
interest.
The Predecessor Partnerships were subject to a reorganization as part
of Jones Lang LaSalle's incorporation. Due to the existence of a paired
share arrangement between the Predecessor Partnerships and between the
former general partners of the Predecessor Partnerships, as well as the
existence of identical ownership before and after the incorporation of the
Predecessor Partnerships, such transactions were accounted for in a manner
similar to the accounting used for a pooling of interests. Thus, the
financial statements include the financial positions and results of
operations of the Predecessor Partnerships at their historical basis.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Jones
Lang LaSalle and their majority-owned-and-controlled partnerships and
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
CASH HELD FOR OTHERS
Jones Lang LaSalle controls certain cash and cash equivalents as
agents for its investment and property management clients. Such amounts are
not included in the accompanying Consolidated Balance Sheets.
STATEMENT OF CASH FLOWS
Cash and cash equivalents include demand deposits and investments in
U.S. Treasury instruments (generally held available for sale) with
maturities of three months or less. The combined carrying value of such
investments of $5.6 million and $3.0 million at December 31, 1999 and 1998,
respectively, approximates their market value.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or a change in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying value of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
INVESTMENTS IN REAL ESTATE VENTURES
Jones Lang LaSalle has limited partner, general partner and limited
liability company interests in various real estate ventures with interests
generally ranging from less than 1% to 49.5% which are accounted for using
the equity method. In instances where Jones Lang LaSalle exercises
temporary control over co-investments, such investments are accounted for
under the equity method.
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS AND JLW MERGER
Intangibles resulting from business acquisitions and the JLW merger
are amortized on a straight-line basis over the estimated lives (generally
eight to 40 years) of the related assets. Jones Lang LaSalle periodically
evaluates the recoverability of the carrying amount of intangibles
resulting from business acquisitions and mergers by assessing whether any
impairment indications are present, including substantial recurring
operating deficits or significant adverse changes in legal or economic
factors that affect the businesses acquired. If such analysis indicates
impairment, the intangible asset would be adjusted in the period such
changes occurred based on its estimated fair value, which is derived from
expected cash flow of the businesses.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS
Jones Lang LaSalle's financial instruments include cash and cash
equivalents, receivables, accounts payable, notes payable, interest rate
swap agreements and foreign currency exchange contracts. The estimated
fair value of cash and cash equivalents, receivables and payables
approximates their carrying amounts due to the short maturity of these
instruments. The estimated fair value of Jones Lang LaSalle's credit
facilities approximates their carrying value due to their variable interest
rate terms. The fair value of interest rate swaps is estimated, using
third-party quotes, as the amount that Jones Lang LaSalle would receive or
pay to execute a new agreement with terms identical to those remaining on
the current agreement, considering current interest rates. The fair value
of forward foreign currency exchange contracts is estimated by valuing the
net position of the contracts using the applicable spot rates and forward
rates as of the reporting date.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries located outside the United
States, except those subsidiaries located in highly inflationary economies,
are generally measured using the local currency as the functional currency.
The assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date with the resulting translation
adjustments included as a separate component of stockholders' equity and
comprehensive income. Income and expense are translated at average monthly
rates of exchange. Gains and losses from foreign currency transactions are
included in net earnings. For subsidiaries operating in highly inflationary
economies, the associated gains and losses from balance sheet translation
adjustments are included in net earnings.
DERIVATIVE INSTRUMENTS
Jones Lang LaSalle has entered into interest rate swap agreements as a
hedge against a portion of its credit facilities in order to manage
interest rate risk. Fees, if any, related to these agreements are
amortized using the effective interest method over the life of the
agreements. As of December 31, 1999 and 1998, Jones Lang LaSalle had
interest rate swap agreements in effect with a notional amount of $55.0
million with an approximate market value of $.2 million.
Interest rate swap agreements are contracts that represent an exchange
of interest payments and the underlying principal balances of the assets or
liabilities are not affected. Net settlement amounts are reported as
adjustments to interest income or interest expense. Gains and losses from
the termination of interest rate swaps are deferred and amortized over the
remaining lives of the interest rate swap agreements. If the balance of
the liability falls below that of the notional amount of the derivative,
the excess portion of the derivative is marked-to-market with a
corresponding effect on current earnings.
Jones Lang LaSalle also enters into forward foreign currency exchange
contracts on a limited basis to manage currency risks and reduce its
exposure resulting from fluctuations in the designated foreign currency
associated with existing commitments, assets or liabilities. The
associated gains and losses are deferred and are recognized in income upon
settlement of the related transaction. At December 31, 1999, Jones Lang
LaSalle had forward foreign currency exchange contracts in effect with a
notional value of $5.7 million with no market value and no carrying value.
There were no forward exchange contracts in effect at December 31, 1998.
Jones Lang LaSalle does not enter into derivative financial
instruments for trading or speculative purposes.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
EARNINGS PER SHARE
The basic and diluted losses per common share for the year ended
December 31, 1999 were calculated based on basic weighted average shares
outstanding of 22,607,350. Consideration shares issued as a result of the
merger with JLW, to the extent included, have been weighted as of March 11,
1999. As a result of the operating loss incurred for the period, diluted
weighted average shares outstanding for the year ended December 31, 1999 do
not give effect to common stock equivalents as to do so would be anti-
dilutive. These common stock equivalents consist principally of
consideration shares issued in connection with the JLW merger that are
subject to vesting provisions or are contingently returnable. Basic
earnings per share for the year ended December 31, 1998 and for the period
from conversion to corporate form, July 22, 1997, through December 31, 1997
were based on weighted average shares outstanding of 16,215,478 and
16,200,000, respectively. Diluted earnings per share for the year ended
December 31, 1998 and for the period from conversion to corporate form,
July 22, 1997, through December 31, 1997 were based on weighted average
shares outstanding of 16,387,721 and 16,329,613, respectively. These
amounts reflect an increase of 172,243 shares and 129,613 shares,
respectively, primarily representing the dilutive effect of outstanding
stock options whose exercise price was less than the average market price
of Jones Lang LaSalle's stock for the period, and, to a lesser extent, the
dilutive effect of shares to be issued under employee stock compensation
programs.
REVENUE RECOGNITION
Advisory and management fees are recognized in the period in which the
services are performed. Transaction commissions are recorded as income at
the time the related services are provided unless significant future
contingencies exist. Development services fees are generally recognized as
billed, which approximates the percentage of completion method of
accounting. Incentive fees are recorded in accordance with specific terms
of each compensation agreement and are typically tied to performance that
is measured at contractual milestones, such as the disposition of an asset,
or at the conclusion of a given project. Fees recognized in the current
period that are expected to be received beyond one year have been
discounted to the present value of future expected payments. Pursuant to
contractual arrangements, accounts receivable includes unbilled amounts of
$70.9 million and $32.3 million at December 31, 1999 and 1998,
respectively.
For financial statement presentation purposes, certain one-time
leasing commission payments, aggregating $10.8 million in 1997, made to
former Galbreath employees related to contracts in progress at the
acquisition date have been presented as a reduction of related commission
revenue.
DEPRECIATION
Depreciation and amortization is calculated for financial reporting
purposes primarily using the straight-line method based on the estimated
useful lives of the assets. Furniture, fixtures and equipment totaling
$34.4 million and $18.0 million at December 31, 1999 and 1998,
respectively, are generally depreciated over seven years. Computer
equipment and software totaling $59.7 million and $33.3 million at
December 31, 1999 and 1998, respectively, are generally depreciated over
three to five years. Leasehold improvements totaling $26.2 million and
$13.3 million at December 31, 1999 and 1998, respectively, are amortized
over the lease periods which generally range from one to ten years.
Automobiles totaling $12.1 million at December 31, 1999 are generally
depreciated using a declining balance method over three to five years.
There were no automobiles at December 31, 1998.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
STOCK-BASED COMPENSATION
Jones Lang LaSalle grants stock options for a fixed number of shares
to employees with an exercise price equal to the fair value of the shares
at the date of grant. Jones Lang LaSalle follows the requirements of the
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees" in accounting for stock-based compensation, and
accordingly, recognizes no compensation expense for stock option grants,
but provides the pro forma disclosures required by the Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-
Based Compensation."
RECLASSIFICATIONS
Certain 1998 and 1997 amounts have been reclassified to conform with
the 1999 presentation.
(3) ACQUISITIONS AND MERGER
ACQUISITIONS
On October 1, 1998, Jones Lang LaSalle acquired all of the common
stock of the following real estate service companies formerly owned by Lend
Lease Corporation ("Lend Lease"): Compass Management and Leasing, Inc. and
its wholly owned subsidiaries; The Yarmouth Group Property Management,
Inc.; and ERE Yarmouth Retail, Inc. (formerly Compass Retail, Inc.). On
October 31, 1998, Jones Lang LaSalle also acquired Compass Management and
Leasing (Australia) Pty Limited, the Lend Lease property management and
corporate property services business in Australia. Atlanta-based Compass
Management and Leasing, Inc. was a global real estate management firm, with
operations across the United States, United Kingdom, South America and
Australia. Jones Lang LaSalle paid $180.0 million in cash for all of the
acquired companies ("COMPASS"). The purchase of the companies also
includes provisions for an earnout payment of up to $77.5 million over five
years. The acquisition was accounted for as a purchase and, accordingly,
operating results of this business subsequent to the date of acquisition
are included in the accompanying Consolidated Statements of Earnings. The
excess purchase price over the fair value of the identifiable assets and
liabilities acquired was $175.6 million, including transaction costs, of
which $35.1 million was allocated to management contracts and is being
amortized on a straight-line basis over eight years, and $140.5 million was
allocated to goodwill and is being amortized on a straight-line basis over
40 years based on Jones Lang LaSalle's estimate of useful lives.
On April 22, 1997, Jones Lang LaSalle acquired all of the common stock
of Galbreath, a property, facility and development management company. In
consideration for the stock, Jones Lang LaSalle issued a 17.5% limited
partnership interest in the Predecessor Partnerships to the former
stockholders of Galbreath. The acquisition was accounted for as a purchase
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and, accordingly, operating results of this business subsequent to the date
of acquisition are included in the accompanying Consolidated Statements of
Earnings. The excess purchase price over the fair value of the
identifiable assets and liabilities acquired was $30.6 million, including
transaction costs, of which $6.1 million was allocated to management
contracts that are being amortized on a straight-line basis over eight
years and $24.5 million was allocated to goodwill which is being amortized
on a straight-line basis over 40 years based on Jones Lang LaSalle's
estimate of useful lives.
JONES LANG WOOTTON MERGER
On March 11, 1999, LaSalle Partners merged its business with that of
JLW and changed its name to Jones Lang LaSalle Incorporated. In accordance
with the purchase and sale agreements, Jones Lang LaSalle issued 14.3
million shares of its common stock on March 11, 1999, plus $6.2 million in
cash (collectively, the "Consideration") in connection with the acquisition
of the property and asset management, advisory and other real estate
businesses operated by a series of JLW partnerships and corporations in
Europe, Asia, Australia, North America and New Zealand. Approximately 12.5
million of the shares were issued to former JLW equity owners (having both
direct and indirect ownership) and 1.8 million of the shares were placed in
an employee stock ownership trust ("ESOT") to be distributed by December
31, 2000 to selected employees of the former JLW entities. Included in the
total ESOT shares are .9 million shares that were allocated on March 11,
1999 and .2 million that were allocated on December 31, 1999, with the
remaining .7 million shares to be allocated on December 31, 2000. Issuance
of the shares was not registered under the U.S. securities laws, and the
shares are generally subject to a contractual one-year restriction on sale.
Included in the 14.3 million shares originally issued were 1.2 million
shares which were subject to a post-closing net worth adjustment. The
procedures related to the post-closing net worth calculation were completed
during the third quarter and resulted in .5 million shares being retained
by Jones Lang LaSalle and an additional $.5 million in cash consideration
being due to certain of the former JLW shareholders.
The transaction, which was principally structured as a share exchange,
has been treated as a purchase and is being accounted for using both APB
Opinion No. 16, "Business Combinations" and APB Opinion No. 25, "Accounting
for Stock Issued to Employees" as reflected in the following table.
Accordingly, JLW's operating results have been included in Jones Lang
LaSalle's results as of March 1, 1999, the effective date of the merger for
accounting purposes.
Accounting Method No. of % of Shares
(shares in millions) Shares Issued
-------------------- -------- -----------
APB Opinion No. 16 7.2 52%
APB Opinion No. 25 -
Fixed Award 5.3 38%
Variable Award 1.3 10%
---- ----
Net Shares Issued 13.8 100%
==== ====
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As noted in the previous table, 7.2 million shares, or 52% of the
shares issued, are subject to accounting under APB Opinion No. 16. The
value of those shares totaled $141.9 million for accounting purposes based
on the five-day average closing stock price surrounding the date the
financial terms of the merger with JLW were substantially complete,
discounted at a rate of 20% for transferability restrictions. The value of
the shares, in addition to a cash payment of approximately $6.2 million and
capitalizable transaction costs of approximately $15.8 million were
allocated to the identifiable assets acquired and liabilities assumed,
based on management's estimate of fair value, which totaled $252.6 million
and $240.7 million, respectively. Included in the assets acquired is $32.2
million in cash. Included in the liabilities assumed is $47.4 million of
obligations to former partners for undistributed earnings, of which $9.5
million remains unpaid at December 31, 1999. The resulting excess purchase
price of $152.0 million was allocated to goodwill which is being amortized
on a straight-line basis over 40 years based on management's estimate of
useful lives.
The remaining 6.6 million shares, or 48% of the shares issued, and $.4
million in cash paid are subject to accounting under APB Opinion No. 25.
Accordingly, shares issued are being accounted for as compensation expense
or deferred compensation expense to the extent they are subject to
forfeiture or vesting provisions. Included in the 6.6 million shares are
1.3 million shares that are subject to variable stock award plan
accounting. The remaining 5.3 million shares and the $.4 million in cash
paid are subject to fixed stock award plan accounting. Compensation expense
incurred for the year ended December 31, 1999 totaled $101.6 million,
inclusive of the compensation expense recognized at closing and the
amortization of deferred compensation for the periods.
UNAUDITED COMBINED PRO FORMA RESULTS
The following unaudited combined pro forma results give effect to the
merger with JLW as if it had occurred on January 1, 1998 and the
acquisitions of COMPASS and Galbreath and estimated incremental general and
administrative costs associated with operations as a public company and the
repayment of Jones Lang LaSalle's long-term debt out of the proceeds of the
Offering, as if these events occurred on January 1, 1997 ($ in thousands):
1999 1998 1997
-------- -------- --------
Total revenue $813,899 $848,325 $317,788
Net earnings (loss) (108,253) (108,365) 16,683
Basic earnings (loss)
per common share (4.50) (4.47) 1.03
Diluted earnings (loss)
per common share (4.50) (4.47) 1.02
The above combined pro forma results are based upon available
information and certain assumptions that management believes are
reasonable. These pro forma results are not necessarily indicative of what
the actual results of operations would have been for the three-year period
ended December 31, 1999 had Jones Lang LaSalle completed the merger with
JLW, the acquisitions of COMPASS and the Galbreath common stock and
consummated its conversion to corporate form and the Offering transactions
as of the dates indicated nor does it purport to represent the future
financial position or results of operations of Jones Lang LaSalle.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) DISPOSITION
Effective December 31, 1996, Jones Lang LaSalle sold its Construction
Management business and certain related assets to a former member of
management for a $9.1 million note. The note, which is secured by the
current and future assets of the business, is due December 31, 2006 and
bears interest at rates of 6.8% to 10.0%, with interest payments due
annually. Annual principal repayments began in January 1998.
Under the terms of the Asset Purchase Agreement, Jones Lang LaSalle
agreed to provide certain financial assistance and administrative and
financial services, at cost, beginning in January 1997. The nature of
these arrangements prohibited Jones Lang LaSalle from recognizing the sale
as a divestiture prior to December 31, 1999. As such, Jones Lang LaSalle
accounted for the results of operations, including principal and interest
received on the note, in a method similar to the equity method of
accounting. As such, principal and interest received under the note were
treated as a reduction of such net assets and as a reserve, if necessary,
for any anticipated financial exposure under the terms of the Asset
Purchase Agreement with the remainder recognized as income. Revenue
recognized for the years ended December 31, 1999, 1998 and 1997 was $1.8
million, $1.3 million and $1.1 million, respectively, and has been
reflected in Fee Based Services in the accompanying Consolidated Statements
of Earnings.
As of December 31, 1999, Jones Lang LaSalle had received substantial
principal payments on its note receivable and is no longer obligated to
provide financial assistance to the Construction Management business under
the Asset Purchase Agreement. Accordingly, Jones Lang LaSalle recognized
the disposition as a divestiture at December 31, 1999 and has recognized a
resulting gain of $7.5 million in the Consolidated Statement of Earnings.
(5) BUSINESS SEGMENTS
As a result of the merger with JLW, Jones Lang LaSalle is managing its
business along a combination of functional and geographic lines. In the
fourth quarter of 1999, Jones Lang LaSalle consolidated its operations in
Asia and Australasia into a unified region now known as Asia Pacific.
Accordingly, operations are now classified into five business segments:
two global businesses, (i) Investment Management and (ii) Hotel Services;
and three geographic regions, (iii) the Americas, (iv) Europe and (v) Asia
Pacific. The Investment Management segment provides real estate investment
management services to institutional investors, corporations, and high net
worth individuals. The Hotel Services segment provides strategic advisory,
sales, acquisition, valuation and asset management services related solely
to hotel, conference and resort properties. The geographic regions of the
Americas, Europe and Asia Pacific each provide Owner and Occupier Services
which consist primarily of tenant representation and agency leasing,
investment disposition and acquisition, and valuation services
(collectively, "implementation services") and property management,
corporate property services, development and project management services
(collectively, "management fees"). Results for 1998 and 1997 have been
realigned based upon the current business segments.
Total revenue by industry segment includes revenue derived from
services provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. Jones Lang LaSalle
allocates all expenses, other than interest and income taxes, as nearly all
expenses incurred benefit one or more of the segments. Merger related non-
recurring charges are not allocated to the segments.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Summarized financial information by business segment for 1999, 1998
and 1997 are as follows ($ in thousands):
1999 1998 1997
-------- -------- --------
OWNER AND OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services. . . . $151,769 119,928 90,817
Management fees. . . . . . . . 117,395 82,330 48,264
Equity earnings. . . . . . . . 873 369 816
Other services . . . . . . . . 11,883 10,168 6,270
Gain on sale of business . . . 7,502 -- --
Intersegment revenue . . . . . 3,661 2,353 1,659
-------- -------- --------
293,083 215,148 147,826
Operating expenses:
Compensation, operating and
administrative expenses. . . 243,883 176,184 118,683
Depreciation and
amortization . . . . . . . . 19,843 8,787 4,796
-------- -------- --------
Operating income . . . . $ 29,357 30,177 24,347
======== ======== ========
EUROPE
Revenue:
Implementation services. . . . $171,935 831 710
Management fees. . . . . . . . 79,454 755 --
Equity losses. . . . . . . . . (219) -- --
Other services . . . . . . . . 1,998 168 --
-------- -------- --------
253,168 1,754 710
Operating expenses:
Compensation, operating and
administrative expenses. . . 215,830 1,243 625
Depreciation and
amortization . . . . . . . . 8,047 47 --
-------- -------- --------
Operating income . . . . $ 29,291 464 85
======== ======== ========
ASIA PACIFIC
Revenue:
Implementation services. . . . $ 69,899 1,543 319
Management fees. . . . . . . . 36,651 81 --
Equity earnings. . . . . . . . 117 -- --
Other services . . . . . . . . 7,577 6 --
-------- -------- --------
114,244 1,630 319
Operating expenses:
Compensation, operating and
administrative expenses. . . 101,642 2,883 971
Depreciation and
amortization . . . . . . . . 4,976 107 6
-------- -------- --------
Operating income
(loss) . . . . . . . . $ 7,626 (1,360) (658)
======== ======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1999 1998 1997
-------- -------- --------
HOTEL SERVICES
Revenue:
Implementation services. . . . $ 10,089 -- --
Management fees. . . . . . . . 1,301 -- --
Other services . . . . . . . . 2,375 -- --
-------- -------- --------
13,765 -- --
Operating expenses:
Compensation, operating and
administrative expenses. . . 11,340 -- --
Depreciation and
amortization . . . . . . . . 149 -- --
-------- -------- --------
Operating income . . . . $ 2,276 -- --
======== ======== ========
INVESTMENT MANAGEMENT
Revenue:
Implementation services. . . . $ 11,488 6,402 3,600
Advisory fees. . . . . . . . . 67,560 77,140 70,817
Equity earnings. . . . . . . . 5,447 3,542 2,422
Other services . . . . . . . . 345 1,201 738
Intersegment revenue . . . . . 136 -- --
-------- -------- --------
84,976 88,285 77,577
Operating expenses:
Compensation, operating and
administrative expenses. . . 69,767 65,189 61,946
Depreciation and
amortization . . . . . . . . 3,661 4,514 4,291
-------- -------- --------
Operating income . . . . $ 11,548 18,582 11,340
======== ======== ========
Total segment revenue. . . . . . . $759,236 306,817 226,432
Intersegment revenue
eliminations . . . . . . . . . . (3,797) (2,353) (1,659)
-------- -------- --------
Total revenue. . . . . . 755,439 304,464 224,773
-------- -------- --------
Total segment operating
expenses . . . . . . . . . . . . 679,138 258,954 191,318
Intersegment operating
expense eliminations . . . . . . (3,797) (2,353) (1,659)
-------- -------- --------
Total operating
expenses before
merger related
non-recurring
charges (1) . . . . . . 675,341 256,601 189,659
-------- -------- --------
Merger related non-
recurring charges (1) . 151,401 10,021 --
-------- -------- --------
Operating income
(loss). . . . . . . . . $(71,303) 37,842 35,114
======== ======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
- ------------
(1) Merger related non-recurring charges consist of integration and
transition costs related to the merger with JLW and the COMPASS acquisition
and compensation expense incurred associated with the issuance of shares to
former employees of JLW.
Identifiable assets by segment are those assets that are used by or
are a result of each segment's business. Corporate assets are principally
cash and cash equivalents, office furniture and computer hardware and
software.
The following table reconciles segment identifiable assets to
consolidated assets, investments in real estate ventures to consolidated
investments in real estate ventures and fixed asset expenditures to
consolidated fixed asset expenditures.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
1999 1998 1997
----------------------------- ----------------------------- --------
Invest- Invest-
ments Fixed ments Fixed Fixed
Identi- in Real Asset Identi- in Real Asset Asset
fiable Estate Expen- fiable Estate Expen- Expen-
($ in thousands) Assets Ventures ditures Assets Ventures ditures ditures
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Owner and Occupier Services:
Americas . . . . . . . . . . . . . $428,226 $ 9,604 $ 19,294 $355,840 $ 7,059 $14,022 $ 5,536
Europe . . . . . . . . . . . . . . 226,535 -- 10,328 5,221 -- -- --
Asia Pacific . . . . . . . . . . . 149,365 -- 5,867 14,859 -- 30 117
Hotel Services . . . . . . . . . . . 5,193 -- 20 -- -- -- --
Investment Management. . . . . . . . 107,000 57,701 3,999 98,060 45,917 1,540 624
Corporate. . . . . . . . . . . . . . 8,481 -- 763 16,941 -- -- --
-------- -------- -------- -------- ------- ------- -------
Consolidated . . . . . . . . . . . . $924,800 $ 67,305 $ 40,271 $490,921 $52,976 $15,592 $ 6,277
======== ======== ======== ======== ======= ======= =======
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Jones Lang LaSalle conducts business in two countries which
individually comprise over 10% of total revenue and total assets in 1999.
Geographic segment information is as follows ($ in thousands):
Total Long-Lived
Revenue Assets
-------- ----------
United States. . . . . . . . . . $339,339 292,102
United Kingdom . . . . . . . . . 160,238 108,788
Other foreign countries. . . . . 255,862 156,695
-------- --------
$755,439 557,585
======== ========
Long-lived assets exclude intangibles resulting from business
acquisitions and the JLW merger.
(6) INVESTMENTS IN REAL ESTATE VENTURES
Jones Lang LaSalle has invested in certain real estate ventures that
own and operate commercial real estate. These investments include
noncontrolling general and limited partnership ownership interests
generally ranging from less than 1% to 49.5% of the respective ventures.
Jones Lang LaSalle has made initial capital contributions to the ventures
and had remaining commitments to certain ventures for additional capital
contributions of approximately $28.7 million as of December 31, 1999.
Substantially all venture interests are held by corporate subsidiaries of
Jones Lang LaSalle. Accordingly, Jones Lang LaSalle's exposure to
liabilities and losses of the ventures is limited to its initial and
remaining commitments. To the extent Jones Lang LaSalle's investment basis
differs from its share of the equity of an unconsolidated investment, such
difference is amortized over the depreciable lives of the investee's
investment assets.
Included in investment in real estate ventures is an investment in
LaSalle Hotel Properties ("LHO"), a real estate investment trust, which
completed its initial public offering in April 1998. LHO was formed to own
hotel properties and to continue and expand the hotel investment activities
of Jones Lang LaSalle by investing principally in upscale and luxury full-
service hotels located primarily in major business and urban, resort and
convention markets. Jones Lang LaSalle provides advisory, acquisition and
administrative services to LHO for which it receives a base advisory fee
calculated as a percentage of net operating income, as well as performance
fees based on growth in funds from operations on a per share basis. Such
performance fees, if any, are paid in the form of LHO common stock or
units, at Jones Lang LaSalle's option. LHO was formed with 10 hotels, nine
of which Jones Lang LaSalle had a nominal co-investment in and acted as the
investment advisor for. In accordance with the individual investment
advisory agreements, Jones Lang LaSalle earned and received performance
fees totaling $15.2 million on the disposition of certain of the assets.
Jones Lang LaSalle contributed its ownership interests in the hotels as
well as the related performance fees to LHO for an effective ownership
interest of approximately 6.4%.
Such investments have been accounted for under the equity method of
accounting in the accompanying Consolidated Financial Statements. As such,
Jones Lang LaSalle recognizes its share of the underlying profits and
losses of the ventures as revenue in the accompanying Consolidated
Statements of Earnings. Jones Lang LaSalle generally is entitled to
operating distributions in accordance with its respective ownership
interests.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Summarized combined financial information for the above unconsolidated
ventures is presented below ($ in thousands):
1999 1998 1997
---------- --------- ---------
Balance Sheet:
Investments in real estate . . .$2,081,747 2,021,372 1,236,217
Total assets . . . . . . . . . .$2,603,815 2,513,483 1,406,236
========== ========= =========
Mortgage indebtedness. . . . . .$ 695,442 614,349 579,310
Total liabilities. . . . . . . .$1,327,824 977,194 631,807
========== ========= =========
Total equity . . . . . . . . . .$1,275,991 1,536,289 774,429
========== ========= =========
Investments in real estate
ventures . . . . . . . . . . . . .$ 66,538 52,083 17,100
Statements of Operations:
Revenues . . . . . . . . . . . .$ 403,557 298,886 288,709
Net earnings . . . . . . . . . .$ 115,571 104,095 96,725
========== ========= =========
Equity in earnings from
real estate ventures . . . . . . .$ 6,218 3,911 3,238
========== ========= =========
During 1999, 1998 and 1997, Jones Lang LaSalle made loans to certain
of these real estate ventures, of which $6.7 million, $15.5 million and
$4.7 million was outstanding at December 31, 1999, 1998 and 1997,
respectively, and is included in notes and other receivables in the
accompanying Consolidated Balance Sheets. These notes, which bear interest
rates of 7.25% to 8.0%, are to be repaid by 2005.
Jones Lang LaSalle also has investments that are accounted for using
the cost method that totaled $.8 million, $.9 million and $1.0 million at
December 31, 1999, 1998 and 1997, respectively.
(7) DEBT
CREDIT FACILITIES
On October 27, 1999, Jones Lang LaSalle closed a new $380.0 million
unsecured credit agreement. The agreement includes a $223.5 million three-
year revolving facility and a $156.5 million term facility due October 15,
2000 (collectively, the "New Facilities"). Jones Lang LaSalle is
authorized under the agreement to increase the revolving facility up to a
total of $250.0 million and the term facility up to a total of $175.0
million through the expansion of its existing bank group. Jones Lang
LaSalle is currently in discussions with additional banks to increase the
New Facilities, however, there can be no guarantee as to the final outcome
of these discussions. The New Facilities replaced the five-year unsecured
$150.0 million revolving credit facility, $175.0 million term credit
facility and $30.0 million short-term facility (the "Previous Facilities").
The revolving facility is available for working capital, co-investments and
acquisitions. As of December 31, 1999, there was $316.2 million
outstanding on the New Facilities, of which $156.5 million is classified as
current.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The New Facilities are guaranteed by certain of Jones Lang LaSalle's
subsidiaries. Jones Lang LaSalle must maintain a certain level of
consolidated net worth and a ratio of funded debt to earnings before
interest expense, taxes, depreciation and amortization ("EBITDA"). Jones
Lang LaSalle must also meet a minimum interest coverage ratio, a minimum
liquidity ratio and minimum EBITDA. Additionally, Jones Lang LaSalle is
restricted from, among other things, incurring certain levels of
indebtedness to lenders outside of the New Facilities, disposing of a
significant portion of its assets, and paying dividends until the term
facility is repaid. Lender approval is required for certain levels of co-
investment. The New Facilities bear variable rates of interest based on
market rates. Jones Lang LaSalle uses interest rate swaps to convert a
portion of the floating rate indebtedness to a fixed rate. The effective
interest rate on the Previous Facilities and the New Facilities was 6.48%
for the year ended December 31, 1999, including the effect of interest rate
swap agreements. The effective interest rate on the Previous Facilities
for the year ended December 31, 1998 was 6.1%, including the effect of
interest rate swap agreements.
Jones Lang LaSalle also has various interest bearing overdraft
facilities and short-term credit facilities in Europe and Asia Pacific.
The aggregate amount available under these facilities approximates $32.8
million, of which $4.1 million was outstanding as of December 31, 1999.
Borrowings on these facilities are currently limited to $50.0 million under
the terms of the New Facilities.
(8) LEASES
Jones Lang LaSalle leases office space in various buildings for its
own use. The terms of these non-cancelable operating leases provide for
Jones Lang LaSalle to pay base rent and a share of increases in operating
expenses and real estate taxes in excess of defined amounts. Jones Lang
LaSalle also leases equipment under both operating and capital lease
arrangements.
Minimum future lease payments (i.e., base rent for leases of office
space) due in each of the next five years ending December 31 and thereafter
are as follows ($ in thousands):
Operating Capital
Leases Leases
--------- --------
2000 . . . . . . . . . . $ 36,270 $ 1,957
2001 . . . . . . . . . . 33,408 1,314
2002 . . . . . . . . . . 26,813 461
2003 . . . . . . . . . . 21,077 386
2004 . . . . . . . . . . 17,091 169
Thereafter . . . . . . . 37,410 92
-------- --------
$172,069 $ 4,379
======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Assets recorded under capital leases in the Consolidated Balance Sheet
at December 31, 1999 are as follows ($ in thousands):
1999
--------
Furniture, fixtures and equipment $ 2,244
Computer equipment and software 2,492
Automobiles 455
Leasehold improvements 1,775
--------
6,966
Less accumulated depreciation
and amortization (3,557)
--------
Net assets under capital leases $ 3,409
========
Rent expense was $45.0 million, $9.8 million and $7.1 million, during
1999, 1998 and 1997, respectively.
(9) INCOME TAXES
For the year ended December 31, 1999, 1998 and for the period
subsequent to conversion to corporate form in 1997, Jones Lang LaSalle's
provision for income taxes aggregated $5.3 million, $13.2 million and $11.0
million, respectively, and consisted of the following ($ in thousands):
Year Ended December 31,
---------------------------------------
1999 1998 1997
-------- -------- --------
U.S. Federal:
Current. . . . . . . . $(11,762) $ 11,843 $ 3,930
Deferred tax . . . . . 2,570 (1,970) 2,656
-------- -------- --------
(9,192) 9,873 6,586
-------- -------- --------
State and Local:
Current. . . . . . . . (2,979) 2,819 823
Deferred tax . . . . . 901 (144) 1,000
-------- -------- --------
(2,078) 2,675 1,823
-------- -------- --------
Foreign:
Current. . . . . . . . 17,959 1,506 2,600
Deferred tax . . . . . (1,361) (830) --
-------- -------- --------
16,598 676 2,600
-------- -------- --------
Total. . . . . . . . . . $ 5,328 $ 13,224 $ 11,009
======== ======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
For the period prior to the incorporation of the Predecessor
Partnerships, the accompanying Consolidated Statements of Earnings include
a federal and state income tax provision for wholly owned corporate
subsidiaries and a state tax provision for certain states that require
partnerships to pay income taxes. For the period January 1, 1997 through
July 21, 1997, such amounts aggregated $1.1 million. No other provision
for income taxes was made for those periods as the liability for such taxes
would have been that of the respective partners of the Predecessor
Partnerships. As a result of Jones Lang LaSalle's conversion from
partnership to corporate form in July 1997, a tax benefit of $6.8 million
was recognized related to deferred tax assets recorded in accordance with
the provisions of SFAS No. 109 arising from temporary differences between
the book and tax basis of Jones Lang LaSalle's assets and liabilities at
the date of conversion.
Income tax expense for 1999, 1998 and for the period subsequent to
conversion to corporate form for 1997 differed from the amounts computed by
applying the U.S. federal income tax rate of 35% to earnings before
provision for income taxes (a loss of $89.5 million for the year ended
December 31, 1999, income of $33.7 million for the year ended December 31,
1998 and income of $28.6 million for the period July 22, 1997 through
December 31, 1997) as a result of the following ($ in thousands):
1999 1998 1997
---------------- ----------------- --------------
Computed "expected"
tax expense
(benefit) . . . . . .$(31,330) 35.0% $11,791 35.0% $10,009 35.0%
Increase (reduction)
in income taxes
resulting from:
Nondeductible
stock compensa-
tion expense. . . . 34,078 (38.1%) -- -- -- --
State and local
income taxes,
net of federal
income tax benefit. (1,350) 1.5% 1,739 5.2% 1,185 4.1%
Amortization of
goodwill and
other intangibles . 76 (0.1%) (1,182) (3.5%) (573) (2.0%)
Nondeductible
expenses. . . . . . 2,402 (2.7%) 807 2.4% 205 0.7%
Foreign earnings
taxed at varying
rates . . . . . . . (1,022) 1.1% -- -- -- --
Valuation
allowances. . . . . 1,552 (1.7%) -- -- -- --
Other, net . . . . . . 922 (1.0%) 69 0.2% 183 0.7%
------- ------ ------- ------ ------- ------
$ 5,328 (6.0%) $13,224 39.3% $11,009 38.5%
======= ====== ======= ====== ======= ======
Domestic and foreign losses before provision for income taxes for the
year ended December 31, 1999 were $35.6 million and $53.9 million,
respectively. Domestic and foreign earnings before provision for income
taxes for the year ended December 31, 1998 were $29.9 million and $3.8
million, respectively.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below ($ in thousands):
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31,
---------------------------------------
1999 1998 1997
-------- -------- --------
Deferred tax assets:
Accrued expenses . . . $ 13,525 $ 3,957 $ 2,205
Allowances for
uncollectible
accounts. . . . . . . 3,983 3,238 2,208
Foreign tax credit
carryforwards . . . . 3,634 3,800 2,600
Foreign loss carry-
forwards. . . . . . . 3,326 830 --
Property and
equipment . . . . . . 2,233 1,644 1,397
Investments in real
estate ventures . . . 1,208 -- --
Alternative minimum
tax credit
carryover . . . . . . 750 -- --
Other. . . . . . . . . 639 355 554
-------- -------- --------
29,298 13,824 8,964
Less valuation
allowances . . . . . 2,020 -- --
-------- -------- --------
$ 27,278 $ 13,824 $ 8,964
======== ======== ========
Deferred tax liabilities:
Prepaid pension
asset . . . . . . . . $ 6,978 $ -- $ --
Intangible assets. . . 3,743 -- --
Income deferred for
tax purposes. . . . . 3,329 -- --
Investments in real
estate ventures . . . -- 2,483 2,820
Other. . . . . . . . . 1,820 716 1,065
-------- -------- --------
$ 15,870 $ 3,199 $ 3,885
======== ======== ========
In connection with the merger with JLW, Jones Lang LaSalle recorded
deferred tax assets of $13.3 million and deferred tax liabilities of $8.2
million as part of its purchase price allocation. In connection with the
COMPASS acquisition, Jones Lang LaSalle recorded deferred tax assets of
$2.6 million as part of its purchase price allocation.
A deferred U.S. tax liability has not been provided on the unremitted
earnings of foreign subsidiaries because it is the intent of Jones Lang
LaSalle to permanently reinvest such earnings.
As of December 31, 1999, Jones Lang LaSalle has available $3.6 million
of foreign tax credit carryforwards for U.S. federal income tax purposes,
which expire in 2002 through 2004. There were also foreign loss
carryforwards at December 31, 1999 approximating $10.8 million which expire
in 2003 and thereafter.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The net deferred tax asset of $11.4 million at December 31, 1999 is
considered realizable given past income and estimates of future income.
These considerations include, but are not limited to, net operating losses,
earnings trends and tax planning strategies. Valuation allowances have
been provided with regard to the tax benefit of certain foreign net
operating loss carryforwards for which utilization is not probable.
(10) RETIREMENT PLANS
DEFINED CONTRIBUTION PLANS
Jones Lang LaSalle has a qualified profit sharing plan that
incorporates IRC Section 401(k) for its eligible U.S. employees.
Contributions under the qualified profit sharing plan are made via a
combination of employer match and an annual contribution on behalf of
eligible employees. Included in the accompanying Consolidated Statements
of Earnings for the years ended December 31, 1999, 1998 and 1997 are
contributions of $4.2 million, $1.8 million and $1.7 million, respectively.
Related trust assets of the Plan are managed by trustees and are excluded
from the accompanying Consolidated Financial Statements.
Jones Lang LaSalle maintains several defined contribution retirement
plans for its eligible non-U.S. employees. Contributions to these plans
were approximately $2.0 million for the year ended December 31, 1999.
Amounts contributed to similar plans for the year ended December 31, 1998,
prior to the merger with JLW, were immaterial.
DEFINED BENEFIT PLANS
Jones Lang LaSalle maintains several contributory defined benefit
pension plans to provide retirement benefits to eligible employees in
certain countries. It is Jones Lang LaSalle's policy to fund the minimum
annual contributions required by applicable regulations.
Net periodic pension cost consisted of the following ($ in thousands):
1999
--------
Employer service cost - benefits earned
during the year . . . . . . . . . . . . . . . . . $ 5,902
Interest cost on projected benefit
obligation. . . . . . . . . . . . . . . . . . . . 3,680
Expected (return) loss on plan assets . . . . . . . (5,332)
Net amortization/deferrals. . . . . . . . . . . . . (1,224)
--------
Net periodic pension cost . . . . . . . . . . . . . $ 3,026
========
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The change in benefit obligation and plan assets and reconciliation of
funded status as of December 31, 1999 are as follows ($ in thousands):
1999
--------
Change in benefit obligation:
Projected benefit obligation at
beginning of year . . . . . . . . . . . . . . . $ --
Merger with JLW . . . . . . . . . . . . . . . . . 85,311
Service cost. . . . . . . . . . . . . . . . . . . 5,902
Interest cost . . . . . . . . . . . . . . . . . . 3,680
Benefits paid . . . . . . . . . . . . . . . . . . (1,631)
Actuarial loss. . . . . . . . . . . . . . . . . . (4,309)
Changes in foreign exchange rates . . . . . . . . 210
--------
Projected benefit obligation at
end of year . . . . . . . . . . . . . . . . . $ 89,163
========
Change in plan assets:
Fair value of plan assets at
beginning of year . . . . . . . . . . . . . . . $ --
Merger with JLW . . . . . . . . . . . . . . . . . 111,197
Actual return on plan assets. . . . . . . . . . . 5,729
Benefits paid . . . . . . . . . . . . . . . . . . (2,610)
Changes in foreign exchange rates . . . . . . . . 408
--------
Fair value of plan assets at end of year. . . . $114,724
========
Reconciliation of funded status:
Funded status . . . . . . . . . . . . . . . . . . $ 25,561
Unrecognized actuarial loss . . . . . . . . . . . (2,153)
--------
Net amount recognized . . . . . . . . . . . . . $ 23,408
========
The amounts recognized in the accompanying Consolidated Balance Sheet
as of December 31, 1999 are as follows ($ in thousands):
1999
--------
Prepaid pension asset . . . . . . . . . . . . . . . $ 23,956
Accrued pension liability . . . . . . . . . . . . . (548)
--------
Net amount recognized . . . . . . . . . . . . . . . $ 23,408
========
For one of the plans, the accumulated benefit obligation exceeded the
fair value of the plan assets at December 31, 1999. The related aggregate
benefit obligation was $2.4 million and the aggregate fair value of the
plan assets was $1.9 million.
Weighted average assumptions used in developing the projected benefit
obligation as of December 31 were generally as follows:
1999
--------
Discount rate used in determining
present values. . . . . . . . . . . . . . . . . . 6.25%
Annual increase in future compensation
levels. . . . . . . . . . . . . . . . . . . . . . 4.00%
Expected long-term rate of return
on assets . . . . . . . . . . . . . . . . . . . . 7.50%
Plan assets consist of a diversified portfolio of fixed-income
investments and equity securities.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) STOCK OPTION AND STOCK COMPENSATION PLANS
STOCK AWARD AND INCENTIVE PLAN
In 1997, Jones Lang LaSalle adopted a stock award and incentive plan
that provides for the granting of options to purchase a specified number of
shares of common stock and other stock awards to eligible participants of
Jones Lang LaSalle. Under the plan, the total number of shares of common
stock available to be issued is 4,160,000. The options are granted at the
market value of common stock at the date of grant. The options vest at
such times and conditions as the Compensation Committee of the Board of
Directors of Jones Lang LaSalle determines and sets forth in the award
agreement. Such options granted in 1999 and 1998 vest over a period of
zero to five years. Such options granted in 1997 vest over a period of one
to six years. Certain 1997 options having a six-year vesting period are
subject to an accelerated vesting schedule based on the future average
stock price. At December 31, 1999 and 1998, there were 2,127,662 and
973,100 additional shares, respectively, available for grant under the
stock award and incentive plan.
The per share weighted-average fair value of options granted during
1999, 1998 and 1997 was $17.63, $16.44 and $11.63 on the date of grant
using the Black Scholes option-pricing model with the following weighted-
average assumptions:
1999 1998 1997
-------------- ------------- -------------
Expected dividend yield. . 0.00% 0.00% 0.00%
Risk-free interest rate. . 6.90% 4.95% 6.95%
Expected life. . . . . . . 6 to 9 years 6 to 9 years 6 to 9 years
Expected volatility. . . . 47.34% 41.50% 16.50%
Contractual terms. . . . . 7 to 10 years 7 to 10 years 7 to 10 years
Jones Lang LaSalle accounts for its stock option and compensation
plans under the provisions of SFAS No. 123, which allows entities to
continue to apply the provisions of APB No. 25 and provide pro forma net
income and net income per share disclosures for employee option grants as
if the fair-value-based method defined in SFAS No. 123 had been applied.
Jones Lang LaSalle has elected to apply the provisions of APB No. 25 in
accounting for its stock award and incentive plan, and, accordingly, no
compensation cost has been recognized for its stock award and incentive
plan in the Consolidated Financial Statements. Had Jones Lang LaSalle
determined compensation cost based upon the fair value at the date of grant
for its options as set forth under SFAS No. 123, Jones Lang LaSalle's net
earnings (loss), basic earnings (loss) per common share and diluted
earnings (loss) per common share would have been as follows ($ in
thousands, except share data):
1999 1998 1997 (1)
-------- -------- --------
Net earnings (loss). . . . . . . . $(98,767) $ 15,689 $ 23,924
Basic earnings (loss) per
common share . . . . . . . . . . (4.37) 0.97 1.48
Diluted earnings (loss) per
common share . . . . . . . . . . (4.37) 0.96 1.47
- -----------
(1) Earnings per share for 1997 is calculated based on earnings for the
period from conversion to corporate form, July 22, 1997, through December
31, 1997.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Stock option activity is as follows (shares in thousands):
1999 1998 1997
----------------- ----------------- -----------------
Weighted- Weighted- Weighted-
Shares Average Shares Average Shares Average
------ --------- ------ --------- ------ ---------
Outstanding
at beginning
of year . . . 1,241.9 $26.75 738.0 $23.29 -- $ --
Granted. . . . 997.6 31.45 524.9 31.71 740.5 23.29
Exercised. . . (21.3) 23.25 -- -- -- --
Forfeited. . . (207.2) 31.39 (21.0) 29.56 (2.5) 23.00
------- ------- -----
Outstanding
at end of
year. . . . . 2,011.0 $28.67 1,241.9 $26.75 738.0 $23.29
======= ======= =====
At December 31, 1999, 1998 and 1997, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was
$9.31-$43.88 and 6.5 years, $23.00-$43.88 and 7.6 years, and $23.00-$35.06
and 9.5 years, respectively. At December 31, 1999 and 1998, approximately
645,333 and 534,000 options were exercisable, respectively. None of the
options were exercisable at December 31, 1997.
OTHER STOCK COMPENSATION PROGRAMS
In 1999, Jones Lang LaSalle established a stock compensation program
for certain of its employees pursuant to which they are awarded a portion
of their annual bonus in the form of restricted shares of Jones Lang
LaSalle common stock. The number of shares awarded was enhanced by Jones
Lang LaSalle by 20% in 1999 and will be enhanced by 15% in future years.
The shares vest 50% at eighteen months from the date of grant and the
remaining 50% at thirty months from the date of grant. The related
compensation cost is amortized to expense over the vesting period.
In 1997 and 1998, Jones Lang LaSalle maintained a Stock Compensation
Program ("SCP") for eligible employees. Under this plan, employee
contributions for stock purchases were enhanced by Jones Lang LaSalle
through an additional contribution of 15%. Employee contributions vested
immediately while Jones Lang LaSalle contributions were subject to various
vesting periods. The related compensation cost is amortized to expense
over the vesting period. As of December 31, 1999, 37,598 shares have been
issued under this plan. The plan was suspended in 1999.
In 1998, Jones Lang LaSalle adopted an Employee Stock Purchase Plan
("ESPP") for eligible employees. Under this plan, employee contributions
for stock purchases will be enhanced by Jones Lang LaSalle through an
additional contribution of 15%. Employee contributions and Jones Lang
LaSalle contributions vest immediately. As of December 31, 1999, 226,165
shares have been issued under this plan.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(12) TRANSACTIONS WITH AFFILIATES
Certain officers of Jones Lang LaSalle are trustees for real estate
funds that were organized by a subsidiary. Jones Lang LaSalle earns
advisory and management fees for services rendered to the funds. Included
in the accompanying Consolidated Financial Statements are revenues of $.2
million, $2.3 million and $4.2 million for 1999, 1998 and 1997,
respectively, as well as receivables of $.03 million and $.1 million at
December 31, 1999 and 1998, respectively, related to such services.
Jones Lang LaSalle also earns fees and commissions for services
rendered to affiliates of Dai-ichi Life Property Holdings, Inc. and
Galbreath Holdings, LLC, two significant stockholders and real estate
ventures in which Jones Lang LaSalle has an equity interest. Included in
the accompanying Consolidated Financial Statements are revenues from such
affiliates of $39.0 million, $45.9 million and $33.0 million for 1999, 1998
and 1997, respectively, as well as receivables for reimbursable expenses
and revenues as of December 31, 1999 and 1998 of $8.7 million and $9.3
million, respectively.
(13) COMMITMENTS AND CONTINGENCIES
At December 31, 1999, Jones Lang LaSalle has several completion and
budget guarantees relating to development projects. Management does not
expect to incur any material losses under these guarantees.
Jones Lang LaSalle is a defendant in various litigation matters
arising in the ordinary course of business, some of which involve claims
for damages that are substantial in amount. Many of these litigation
matters are covered by insurance. In the opinion of Management, the
ultimate resolution of such litigation matters is not expected to have a
material adverse effect on the financial position, results of operations or
liquidity of Jones Lang LaSalle.
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth certain unaudited consolidated
statements of earnings data for each of Jones Lang LaSalle's last eight
quarters. In the opinion of Management, this information has been presented
on the same basis as the audited consolidated financial statements
appearing elsewhere in this report, and includes all adjustments,
consisting only of normal recurring adjustments and accruals, that Jones
Lang LaSalle considers necessary for a fair presentation. The unaudited
consolidated quarterly information should be read in conjunction with Jones
Lang LaSalle's Consolidated Financial Statements and the notes thereto.
The operating results for any quarter are not necessarily indicative of the
results for any future period.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
QUARTERLY INFORMATION
(UNAUDITED)
<CAPTION>
1999
-------------------------------------------------------
($ in thousands, except share data) March 31 June 30 Sept. 30 Dec. 31 Year
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue (1):
Owner & Occupier Services:
Americas . . . . . . . . . . . . . . . . . . . . . $ 44,111 54,439 72,346 118,526 289,422
Europe . . . . . . . . . . . . . . . . . . . . . . 27,783 68,011 67,795 89,579 253,168
Asia Pacific . . . . . . . . . . . . . . . . . . . 9,727 33,434 31,677 39,406 114,244
Hotel Services . . . . . . . . . . . . . . . . . . . 854 3,181 3,715 6,015 13,765
Investment Management. . . . . . . . . . . . . . . . 18,946 20,079 18,639 27,176 84,840
-------- -------- -------- -------- --------
Total revenue. . . . . . . . . . . . . . . . . $101,421 179,144 194,172 280,702 755,439
Merger related non-recurring charges (2) . . . . . . . 54,043 35,587 25,742 36,029 151,401
Operating income (loss) (1). . . . . . . . . . . . . . $(66,333) (38,462) (12,992) 46,484 (71,303)
Net earnings (loss). . . . . . . . . . . . . . . . . . $(55,415) (37,704) (16,937) 15,214 (94,842)
Basic earnings (loss) per common share . . . . . . . . $ (3.09) (1.62) (0.70) .63 (4.20)
Diluted earnings (loss) per common share . . . . . . . $ (3.09) (1.62) (0.70) .63 (4.20)
<PAGE>
JONES LANG LASALLE INCORPORATED
QUARTERLY INFORMATION - CONTINUED
1998
-------------------------------------------------------
($ in thousands, except share data) March 31 June 30 Sept. 30 Dec. 31 Year
-------- -------- -------- -------- --------
Revenue (1):
Owner & Occupier Services:
Americas . . . . . . . . . . . . . . . . . . . . . $ 27,752 44,649 48,339 92,055 212,795
Europe . . . . . . . . . . . . . . . . . . . . . . 3 270 437 1,044 1,754
Asia Pacific . . . . . . . . . . . . . . . . . . . 46 170 120 1,294 1,630
Hotel Services . . . . . . . . . . . . . . . . . . . -- -- -- -- --
Investment Management. . . . . . . . . . . . . . . . 23,264 29,123 15,936 19,962 88,285
-------- -------- -------- -------- --------
Total revenue. . . . . . . . . . . . . . . . . $ 51,065 74,212 64,832 114,355 304,464
Merger related non-recurring charges (2) . . . . . . . -- -- -- 10,021 10,021
Operating income (loss) (1). . . . . . . . . . . . . . $ (5,349) 12,220 8,229 22,742 37,842
Net earnings (loss). . . . . . . . . . . . . . . . . . $ (3,440) 7,310 4,806 11,789 20,465
Basic earnings (loss) per common share . . . . . . . . $ (0.21) 0.45 0.30 0.73 1.26
Diluted earnings (loss) per common share . . . . . . . $ (0.21) 0.45 0.29 0.72 1.25
<FN>
(1) Excludes intersegment revenue and intersegment expense.
(2) Merger related non-recurring charges include integration and transition costs related to the merger with JLW
and the COMPASS acquisition and compensation expense incurred associated with the issuance of shares to former
employees of JLW.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
<CAPTION>
Additions
Balance at -------------------------- Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1999
Accounts Receivable
Reserves . . . . . . . . . $ 3,978 2,744 8,722(A) 5,573(D) $9,871
1998
Accounts Receivable
Reserves . . . . . . . . . $ 2,679 4,009 107(B) 2,817(D) $3,978
1997
Accounts Receivable
Reserves . . . . . . . . . $ 1,900 2,640 1,530(C) 3,391(D) $2,679
<FN>
(A) Represents reserve acquired as a result of the merger with JLW.
(B) Represents reserve acquired as a result of the COMPASS acquisition.
(C) Represents reserve acquired as a result of the Galbreath acquisition.
(D) Includes primarily write-offs of uncollectible accounts.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to
the material in the Company's Proxy Statement for the 2000 Annual Meeting
of Stockholders (the "Proxy Statement") under the captions "Election of
Directors," "Management" and "Section 16(a) Beneficial Ownership Reporting
Compliance."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Executive
Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Security Ownership."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the material appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions."
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements
See Index to Consolidated Financial Statements in Item 8
of this report.
2. Financial Statement Schedule:
See Index to Consolidated Financial Statements in Item 8
of this report.
3. Exhibits
A list of exhibits is set forth in the Exhibit Index
which immediately precedes the exhibits and is incorporated by reference
herein.
(b) Reports on Form 8-K:
None
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this filing and elsewhere (such as in reports,
other filings with the Securities and Exchange Commission, press releases,
presentations and communications by Jones Lang LaSalle or its management
and written and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause Jones Lang LaSalle's
actual results, performance, achievements, plans and objectives to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed in (i) this Report in Item 1.
"Business," Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Item 7A. "Quantitative and
Qualitative Disclosures About Market Risk," and elsewhere, (ii) our Proxy
Statement dated February 4, 1999 under the captions "Risk Factors," "The
Transactions," "The Purchase Agreements," "JLW Management's Discussion and
Analysis of Financial Condition and Results of Operations of the JLW
Companies," and elsewhere, and (iii) in other reports filed with the
Securities and Exchange Commission. Jones Lang LaSalle expressly disclaims
any obligation or undertaking to update or revise any forward-looking
statements to reflect any changes in events or circumstances or in its
expectations or results.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Jones Lang LaSalle
Incorporated, a Maryland corporation, and the undersigned Directors and
officers of Jones Lang LaSalle Incorporated, hereby constitutes and
appoints Stuart L. Scott, Christopher A. Peacock, William E. Sullivan and
Nicholas J. Willmott its, his or her true and lawful attorneys-in-fact and
agents, for it, him or her and in its, his or her name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this report, and to file each such amendment to this report,
with all exhibits thereto, and any and all documents in connection
therewith, with the Securities and Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as it, he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chicago, State of Illinois, on the 24th day of March, 2000.
JONES LANG LASALLE INCORPORATED
/S/ STUART L. SCOTT
__________________________
By: Stuart L. Scott
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 24th day of March, 2000.
SIGNATURE TITLE
- --------- -----
/S/ STUART L. SCOTT
_____________________________
Stuart L. Scott Chairman of the Board of Directors, and
Chief Executive Officer and Director
(Principal Executive Officer)
/S/ CHRISTOPHER A. PEACOCK
____________________________
Christopher A. Peacock President, Deputy Chief Executive
Officer, Chief Operating Officer
and Director
/S/ WILLIAM E. SULLIVAN
____________________________
William E. Sullivan Executive Vice President,
Chief Financial Officer and
Secretary
(Principal Financial Officer)
/S/ MICHAEL J. SMITH
____________________________
Michael J. Smith Deputy Chairman and Director
/S/ PETER H. T. LEE
____________________________
Peter H. T. Lee Chairman of Hong Kong and Director
/S/ CLIVE J. PICKFORD
____________________________
Clive J. Pickford Chairman of Europe and Director
<PAGE>
SIGNATURE TITLE
- --------- -----
/S/ M.G. ROSE
____________________________
M.G. Rose Chief Executive Officer of
Global Services
Management and Director
/S/ EARL E. WEBB
____________________________
Earl E. Webb Chief Executive Officer
of the Americas and Director
/S/ HENRI-CLAUDE DE BETTIGNIES
______________________________
Henri-Claude de Bettignies Director
/S/ DARRYL HARTLEY-LEONARD
____________________________
Darryl Hartley-Leonard Director
/S/ DEREK A. HIGGS
____________________________
Derek A. Higgs Director
/S/ DAVID K.P. LI
____________________________
David K.P. Li Director
/S/ THOMAS C. THEOBALD
____________________________
Thomas C. Theobald Director
/S/ JOHN R. WALTER
____________________________
John R. Walter Director
/S/ NICHOLAS J. WILLMOTT
____________________________
Nicholas J. Willmott Senior Vice President and
Global Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Subscription Agreement (Incorporated by reference to
Exhibit 2.01 to the Registrant's Registration Statement No. 333-25741).
2.2 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Europe and the U.S.A. (the "Europe/USA
Agreement") (Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.3 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Australia and New Zealand (the "Australasia
Agreement") (Incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.4 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Asia (the "Asia Agreement") (Incorporated by
reference to Exhibit 10.3 to the Current Report on Form 8-K dated October
22, 1998 (filed December 9, 1998)).
2.5 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Europe/USA
Agreement (Incorporated by reference to Exhibit 10.4 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.6 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Australasia
Agreement (Incorporated by reference to Exhibit 10.5 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.7 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Asia
Agreement (Incorporated by reference to Exhibit 10.6 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.8 Form of Indemnity and Escrow Agreement, dated as of October 21,
1998, by and among the Registrant, certain subsidiaries of the Registrant
and each of the shareholders selling equity interests in the JLW Parent
Companies under the Europe/USA Agreement, the Australasia Agreement and the
Asia Agreement (Incorporated by reference to Exhibit 10.7 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.9 Form of Stockholder Agreement, dated as of October 21, 1998, by
and among the Registrant and each of the persons receiving shares of common
stock under the Europe/USA Agreement, the Australasia Agreement and the
Asia Agreement (Incorporated by reference to Exhibit 10.8 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.10 Form of Stockholder Agreement, dated as of October 21, 1998, by
and among the Registrant and each of the partners of DEL-LPL Limited
Partnership and DEL-LPAML Limited Partnership who was an employee of the
Registrant in October 1998 and who received shares of Common Stock in
connection with the dissolution of DEL-LPL Limited Partnership and DEL-
LPAML Limited Partnership (Incorporated by reference to Exhibit 10.9 to the
Current Report on From 8-K dated October 22, 1998 (filed December 9,
1998)).
3.1 Articles of Amendment and Restatement of the Registrant
(Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
dated March 11, 1999 (filed March 24, 1999)).
3.2 Second Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K
dated March 11, 1999 (filed March 24, 1999)).
4.1 Form of certificate representing shares of Jones Lang LaSalle
Incorporated common stock (Incorporated by reference to Exhibit 4.3 to the
Current Report on Form 8-K dated March 11, 1999 (filed March 24, 1999)).
10.1 Amended and Restated Multicurrency Credit Agreement, dated as
of October 27, 1999 (Incorporated by reference to Exhibit 10.3 to the
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).
10.2 Contribution and Exchange Agreement, dated as of April 21,
1997, by and among DEL-LPL Limited Partnership, DEL-LPAML Limited
Partnership, LaSalle Partners Limited Partnership, LaSalle Partners
Management Limited Partnership, The Galbreath Company, The Galbreath
Company of California, Inc., Galbreath Holdings, LLC and the Stockholders
of The Galbreath Company (Incorporated by reference to Exhibit 10.08 to the
Registrant's Registration Statement No. 333-25741).
10.3 Asset Purchase Agreement, dated as of December 31, 1996, by and
among LaSalle Construction Limited Partnership, LaSalle Partners Limited
Partnership, Clune Construction Company, L.P. and Michael T. Clune
(Incorporated by reference to Exhibit 10.10 to the Registrant's
Registration Statement No. 333-25741).
10.4 1997 Stock Award and Incentive Plan (Incorporated by reference
to Exhibit 99.2 to the Registrant's Registration Statement No. 333-42193).
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.5 Amendment to the Registrant's 1997 Stock Award and Incentive
Plan (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998).
10.6 Second Amendment to the 1997 Stock Award and Incentive Plan
(Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
10.7 Third Amendment to the 1997 Stock Award and Incentive Plan
(Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
10.8 Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 99.1 to the Registrant's Registration Statement No. 333-42193).
10.9 First Amendment to the Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 1998).
10.10 Second Amendment to the Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
10.11 Amended and Restated Stock Compensation Program
10.12 Description of Management Incentive Plan (Incorporated by
reference to Exhibit 10.8 to the Annual Report on Form 10-K for the year
ended December 31, 1997).
10.13 Registration Rights Agreement, dated as of April 22, 1997, by
and among the Registrant, DEL-LPL Limited Partnership, DEL-LPAML Limited
Partnership, DSA-LSPL, Inc., DSA-LSAM, Inc. and Galbreath Holdings, LLC
(Incorporated by reference to Exhibit 10.14 to the Registrant's
Registration Statement No. 333-25741.)
10.14 Form of Indemnification Agreement with Executive Officers and
Directors (Incorporated by Reference to Exhibit 10.14 to the Annual Report
on Form 10-K for the year ended December 31, 1998).
10.15 Severance Pay Plan.
10.16 Senior Executive Service Agreement with Christopher A. Peacock.
10.17 Senior Executive Service Agreement with Robert Orr.
10.18 Consent Agreement, dated as of April 15, 1997, by and among
DSA-LSPL, Inc., DSA-LSAM, Inc., DEL-LPL Limited Partnership, DEL-LPAML
Limited Partnership, DEL/LaSalle Finance Company, L.L.C., LaSalle Partners
Limited Partnership and LaSalle Partners Management Limited Partnership
(Incorporated by reference to Exhibit 10.16 to the Registrant's
Registration Statement No. 333-25741.)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.19 Consent Agreement, dated as of April 22, 1997, by and among the
Stockholders of The Galbreath Company and The Galbreath Company of
California, Inc., Galbreath Holdings, LLC, DEL-LPL Limited Partnership,
DEL-LPAML Limited Partnership, DEL/LaSalle Finance Company, L.L.C., LaSalle
Partners Limited Partnership and LaSalle Partners Management Limited
Partnership (Incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement No. 333-25741.)
10.20 Purchase Agreement by and among the Registrant and Lend Lease
Corporation Limited, and the subsidiaries of Lend Lease Corporation Limited
named herein dated August 31, 1998 (Incorporated by reference to Exhibit
2(a) to the Current Report on Form 8-K dated October 1, 1998).
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP, independent auditors
24.1 Power of Attorney (Set forth on page preceding signature page
of this report.)
27.1 Financial Data Schedule
99.1 Jones Lang LaSalle press release announcing 1999 earnings
EXHIBIT 10.11
- -------------
JONES LANG LASALLE INCORPORATED
AMENDED AND RESTATED STOCK COMPENSATION PROGRAM
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1
Purpose 1
1.1. Purpose 1
1.2. Employers 1
1.3. Effective Date 1
1.4. Administrator 1
1.5. Notices 1
SECTION 2
Participation 1
2.1. Participation 1
2.2. Continuity of Participation 1
SECTION 3
Stock Compensation Allocations 2
3.1. Amount of SCA Credits 2
3.2. SCA Account and Vesting 2
3.3. Distribution Election 3
SECTION 4
Bonus Deferral Elections 3
4.1. Bonus Deferral Elections 3
4.2. Period for Which Deferral Election Effective 3
4.3. Distribution Elections 4
4.4. SCA Participant's Accounts 4
4.5. Adjustment of SCA Participant's Accounts 4
4.6. Company Stock and Investment Funds 5
4.7. Individual Investment Option 5
4.8. No Responsibility for Company Stock
or Investment Decisions 6
4.9. Statement of Account 6
SECTION 5
Salary Deferral Elections 6
SECTION 6
Distribution of Accounts 6
6.1. Distributions 6
6.2. Pre- and Post-Retirement Age Distributions 6
6.3. Designation of Beneficiary 7
SECTION 7
Partial Bonus in Stock Awards 7
7.1. Allocation of Bonus Award 7
7.2. Vesting and Issuance of Deferred Shares 7
7.3. Company Match 7
7.4. Dividends on Deferred Shares 7
7.5. Transferability 8
7.6. Termination of Employment 8
7.7. Pensionable Remuneration 8
SECTION 8
Administration and Interpretation 8
<PAGE>
PAGE
SECTION 9
Miscellaneous 9
9.1. No Right to Company Assets;
Limitations Related to Company Stock 9
9.2. No Employment Rights 9
9.3. Facility of Payment 9
9.4. Nonassignability 9
9.5. Effect on Other Benefits 9
9.6. Independence of Program 9
9.7. Responsibility for Legal Effect 10
9.8. Action by the Company 10
9.9. Successors, Acquisitions, Mergers,
Consolidations 10
9.10. Gender and Number 10
9.11. Governing Laws 10
9.12. Claims Procedure 10
9.13. Withholding; Employment Taxes 10
SECTION 10
Amendment and Termination 10
<PAGE>
JONES LANG LASALLE INCORPORATED
AMENDED AND RESTATED STOCK COMPENSATION PROGRAM
SECTION 1 Purpose
1.1 PURPOSE. JONES LANG LASALLE INCORPORATED STOCK COMPENSATION
PROGRAM (the "program") has been established by JONES LANG LASALLE
INCORPORATED (the "company") to credit participants with amounts which may
be applied toward deemed shares of company stock, and to enable designated
employees to elect to defer a portion of their bonuses and other cash
compensation, subject to the terms of the program and to provide bonuses
consisting of deferred stock to designated employees.
1.2. EMPLOYERS. The program as set forth below shall apply to
eligible employees of the company and each subsidiary of the company unless
otherwise determined by the administrator. The company and each subsidiary
of the company will be referred to as an "employer" and may be referred to
collectively as the "employers."
1.3. EFFECTIVE DATE. The "effective date" of the program as set
forth below is the closing date of the initial public offering of the
company, expected to occur on or about July 21, 1997. The program was
amended and restated effective January 1, 2000.
2.4. ADMINISTRATOR. The program will be administered by the
Compensation Committee of the Board of Directors of the company, which may
delegate such authority to the president of the company to the extent such
delegation is appropriate.
2.5. NOTICES. Any notice or document relating to the program which
is to be filed with the company may be delivered, or mailed by registered
or certified mail, postage prepaid, to the Corporate Secretary, Jones Lang
LaSalle Incorporated, 200 E. Randolph Drive, Chicago, Illinois 60601.
SECTION 2 PARTICIPATION
2.1. PARTICIPATION. For the period beginning on the effective date
and for each subsequent calendar year, the administrator will designate
before the effective date and before the beginning of the calendar year
those employees, if any, who are to participate (the "SCA Participant(s)")
in the program. In addition, the administrator may designate during a
calendar year additional employees who are to participate in the program.
In general, employees covered by the program will be limited to a select
group of management and highly-compensated employees with expected annual
compensation of at least $100,000. A SCA Participant will receive SCA
credits and may make deferral elections as described in Sections 2 through
6 below.
2.2. CONTINUITY OF PARTICIPATION. A SCA Participant who separates
from service with the company and all its subsidiaries and affiliates will
cease participation and will become entitled to distributions as described
in Section 6. However, the separation from service of an employee with one
employer which has adopted the program (as described in subsection 1.2)
will not interrupt the continuity of his participation if, concurrently
with or immediately after such separation, he is employed by one or more of
the other employers which has adopted the program. A SCA Participant who
separates from service with all employers but remains in the employ of a
subsidiary or affiliate of the company which has not adopted the program
will become entitled to distributions in accordance with Section 6. A SCA
Participant will separate from service upon the first to occur of the
following:
<PAGE>
(a) Retirement as defined by the administrator;
(b) Retirement on account of disability at any age, as
determined by a qualified physician selected by the administrator (a SCA
Participant will be considered disabled for purposes of the program if, on
account of a disability, he is no longer capable of performing the duties
assigned to him by his employer); or
(c) The SCA Participant's death; or
(d) Resignation or dismissal from the employ of all the
employers before retirement and for a reason other than disability.
SECTION 3 STOCK COMPENSATION ALLOCATIONS
3.1. AMOUNT OF SCA CREDITS. Each year, beginning with the year of
the effective date, each SCA Participant will be credited under the program
with a stock compensation allocation ("SCA"). The amount of SCA credited to
each SCA Participant will be determined in accordance with the following
table:
STOCK COMPENSATION ALLOCATION SCHEDULE
ACTUAL COMPENSATION STOCK COMPENSATION ALLOCATION
- ------------------------------- --------------------------------------
Equal to or
greater than but less than Minimum + x% of excess over
- ------------ ------------- ------- ------- --------------
$ 0 100,000 0 0% $ 0
100,000 150,000 2,000 10% 100,000
150,000 200,000 7,000 12% 150,000
200,000 250,000 13,000 15% 200,000
250,000 300,000 20,500 17% 250,000
300,000 400,000 29,000 19% 300,000
400,000 500,000 48,000 19% 400,000
500,000 67,000 13.4% 500,000
At any time, the administrator may adjust the amounts and percentages set
forth above. As of each December 31 after the effective date, the amount of
each SCA Participant's SCA credit will be determined and the amount will be
credited to the SCA Participant's SCA account under the program. The amount
so credited will, according to the SCA Participant's written election, be
applied among options made available by the administrator or, at the
election of the SCA Participant, will be converted to a deemed investment
consisting of shares of company stock (as defined in subsection 4.6).
Shares of company stock will be credited to a SCA Participant's SCA account
on the terms set forth in subsection 4.6, including a deemed purchase
discount of 15%. Each SCA Participant's election in accordance with the
preceding must be made in writing and filed with the company at the time
prescribed by the administrator. A SCA Participant's "compensation" for
purposes of this subsection shall include such items of remuneration as are
determined by the administrator and, for the calendar year which includes
the effective date, a SCA Participant's compensation will include amounts
received from the company and from its predecessor.
3.2. SCA ACCOUNT AND VESTING. A "SCA account" will be maintained in
the name of each SCA Participant under the program, and each SCA account
will be credited as provided in subsection 3.1. SCA accounts will be
reduced by amounts applied toward options made available by the
administrator, and SCA accounts will be adjusted from time to time as
provided in subsection 4.5. If for any year a SCA Participant's SCA account
is credited with shares of company stock in accordance with subsection 3.1,
shares of company stock will be credited by taking into account a deemed
purchase discount of 15 percent, as specified in subsection 4.6. For each
year that a SCA account is credited with shares of company stock, a
"discount subaccount" will also be established which reflects the number of
<PAGE>
shares represented by the 15 percent deemed purchase discount. The number
of shares of company stock credited to the discount subaccount maintained
for each year is subject to the vesting schedule in the next sentence. If
the SCA Participant separates from service with the company within three
years from the date as of which company stock is credited to the SCA
Participant's discount subaccount, the amount then credited (as adjusted
under subsection 4.5) to the discount subaccount will be forfeited, unless
the SCA Participant's separation is due to one of the following:
(a) death;
(b) total and permanent disability;
(c) retirement (as defined by the administrator), provided
the SCA Participant announces his retirement on or before the date company
stock is credited.
3.3. DISTRIBUTION ELECTION. In accordance with subsection 3.1,
company stock will be credited as a deemed investment to the SCA accounts
of certain SCA Participants. Each such SCA Participant may, but need not,
make an election of the date on which the amount so credited (together with
any investment gains or losses thereon) will be distributed, subject to the
vesting requirements of subsection 3.2. Such date shall be referred to as
the "distribution date" and shall occur no later than March 15 (based on
the prior December 31 valuation) following one of the following dates:
December 31 of the second, third, fourth, fifth, sixth, seventh, eighth,
ninth or tenth calendar year after the calendar year for which a SCA
account credit was made. The distribution date, once elected by the SCA
Participant, shall be irrevocable, subject only to subsection 6.2. If for
any calendar year a SCA Participant does not make a distribution election
in accordance with this subsection, the amount of company stock credited to
his SCA account for that year (to the extent vested under subsection 3.2)
will be distributed as soon as practicable after such amount becomes vested
in accordance with subsection 3.2.
SECTION 4 BONUS DEFERRAL ELECTIONS
4.1. BONUS DEFERRAL ELECTIONS. In order to defer a portion of his
bonus for any calendar year, a SCA Participant with annual compensation not
greater than $225,000 may irrevocably elect to defer from his bonus an
amount not to exceed 10 percent of his total compensation for that year.
The amount which can be deferred by a SCA Participant under the preceding
sentence shall be reduced by the amount of the SCA Participant's SCA credit
for that year. A SCA Participant must make his bonus deferral election in
advance by signing a deferral agreement and filing it with the
administrator no later than the date specified by the administrator. A SCA
Participant's bonus deferral election filed with the administrator is
irrevocable on and after the administrator's deadline for the election. The
amount of each SCA Participant's bonus deferral election will be credited
to a deferral account established in his name, as provided in subsection
4.4, but amounts credited to deferral accounts (which are applied toward
company stock) will not be eligible for the deemed purchase discount
described in subsection 4.6. The administrator is authorized to modify this
subsection to:
(a) allow other SCA Participants to make bonus deferral
elections;
(b) change the rate of bonus deferral permitted; or
(c) delete the reduction for SCA credit.
4.2. PERIOD FOR WHICH DEFERRAL ELECTION EFFECTIVE. A SCA
Participant's deferral election under subsection 4.1 and under Section 5
shall remain in effect only for the calendar year specified in the deferral
agreement. No deferral election shall be effective for more than one
calendar year. A SCA Participant must file a separate deferral election at
the time prescribed by the administrator in order to make deferrals for
that year.
<PAGE>
4.3. DISTRIBUTION ELECTIONS. Each deferral election made by a SCA
Participant under subsection 4.1 and Section 5 may, but need not, include
an election of the date on which the amount of such deferral (together with
any investment gains or losses thereon) will be distributed. As provided in
subsection 3.3, SCA Participant may also elect a distribution date for the
amount of company stock credited each year to the SCA Participant's SCA
account. Such date shall be referred to as the "distribution date" and
shall occur no later than March 15 (based on the prior December 31
valuation) following one of the following dates: the second, third, fourth,
fifth, sixth, seventh, eighth, ninth or tenth calendar year after the
calendar year to which the deferral election relates. The distribution
date, once elected by the SCA Participant, shall be irrevocable, subject
only to subsection 6.2. If a SCA Participant does not make a distribution
election in accordance with this subsection, the amount of such deferral
(together with any investment gains and losses thereon) will be distributed
in accordance with Section 6.
4.4. SCA PARTICIPANT'S ACCOUNTS. The administrator shall maintain
in the name of each SCA Participant bookkeeping accounts to be known as the
SCA Participant's "SCA account" and his "deferral account." A SCA
Participant's accounts shall include a subaccount for each calendar year
that amounts are credited on behalf of the SCA Participant. Each such
subaccount shall reflect (i) the amount credited during that year and (ii)
investment gains or losses on the investments deemed credited to those
accounts. SCA credits and deferred amounts shall be credited to subaccounts
as of the date bonuses or cash compensation would otherwise have been paid
to the SCA Participant. Subaccounts will be adjusted from time to time to
reflect investment gains and losses, as provided in subsection 4.5.
4.5. ADJUSTMENT OF SCA PARTICIPANT'S ACCOUNTS. As of each
December 31 (that date is referred to below as an "accounting date"), the
administrator shall:
(a) First, charge to the proper accounts all payments or
distributions made since the last preceding accounting date that have not
been charged previously;
(b) Next, credit SCA Participants' accounts with SCA credits
and other amounts deferred which were applied to company stock;
(c) Next, as to any deferrals other than those in (b) above,
credit SCA Participants' accounts with a portion of the amounts deferred on
behalf of the SCA Participant since the last preceding accounting date, to
equitably reflect that deferrals were made from time to time during the
accounting period;
(d) Next, credit SCA Participants' accounts with their pro
rata share of any increase or charge such accounts with their pro rata
share of any decrease in the adjusted net worth (as defined below) of each
deemed investment relating to such accounts;
(e) Next, allocate and credit deferred amounts, not already
credited under subparagraph (c) above, that are to be credited as of that
date.
The "adjusted net worth" of a deemed investment or other investment fund as
at any date means the then net worth of such investment fund as determined
by the administrator. The administrator may specify additional "accounting
dates" from time to time on a uniform basis.
<PAGE>
4.6. COMPANY STOCK AND INVESTMENT FUNDS. SCA credits and other
deferred amounts under the program will, as elected by the SCA Participant,
be credited as a deemed investment consisting of shares of common stock of
Jones Lang LaSalle Incorporated (the "company stock"). With respect to any
such deemed investment credited to a SCA Participant's SCA account (but not
as to any such deemed investment credited to a SCA Participant's deferral
account because of a bonus deferral election under subsection 4.1), company
stock will be credited to a SCA Participant's account taking into account a
deemed purchase discount of 15 percent. The price of company stock credited
to a SCA Participant's account in accordance with the preceding sentence
will be determined by the administrator, taking into account the average of
the closing prices of the company stock on the New York Stock Exchange for
a period of 20 consecutive trading days, with the last of those trading
days to occur not later than March 31 following the December 31 as of which
SCA account credits are made. The administrator may also allow SCA
Participants to elect one or more investment funds for the investment of
all or a portion of the amounts deferred by the SCA Participant under
Section 4 or 5 of the program (but such investment fund elections will not
apply to SCA accounts). Each such election shall be made at such time, in
such manner and with respect to such investment funds as the administrator
shall determine, and shall be effective only in accordance with such rules
as the administrator shall establish. Prior to an accounting date, a SCA
Participant may elect in writing that all or part of his interest in an
investment fund be liquidated and the proceeds thereof transferred to one
or more of the other investment funds, in accordance with rules established
from time to time by the administrator. The deemed investments in company
stock, the investment funds described in this subsection and the individual
investment option in subsection 4.7 are for recordkeeping purposes only and
do not allow SCA Participants to direct any company or trust assets, and
this subsection does not create in any SCA Participant any rights greater
than those described in subsection 8.1. If there is a deemed purchase or
sale of the common stock of the company, then it (i) shall be subject to
the company's policies which restrict trading in company securities, and
(ii) the election shall not be given effect until such policies would allow
the individual to purchase and sell company securities. Amounts deemed
invested in the common stock of the company shall be credited with an
amount equal to the dividends earned on such deemed investment.
4.7. INDIVIDUAL INVESTMENT OPTION. In addition to the investment
funds described in subsection 4.6, if the administrator decides to make
this option available, amounts credited to a SCA Participant's deferral
account may be deemed credited to an individual investment option (as
hereinafter defined) chosen by such SCA Participant. The investment
experience of each individual investment option will be calculated by
reference to the closing price (as hereinafter defined) or net asset value
of amounts deemed credited to such individual investment option. In
addition, the amount credited to each individual investment option will be
reduced by an amount equal to the brokerage or other transaction costs that
would have been incurred in connection with the deemed purchase or sale of
an investment. The individual investment option will consist of a deemed
investment in any mutual fund, money market fund, common stock, preferred
stock or other security so long as such security is listed for trading on a
national securities exchange or the National Association of Securities
Dealers Automated Quotation System. All money market funds which are
elected as investment options must be money market funds which invest
solely in tax-exempt securities. A SCA Participant may change his
investment option by election made in accordance with subsection 4.6. The
term "closing price" with respect to a security shall mean (i) the closing
sale price of such security if such security is traded on a national
securities exchange, or (ii) if such security is not traded on a national
securities exchange, the average of the highest bid and the lowest asked
prices for such security.
<PAGE>
4.8. NO RESPONSIBILITY FOR COMPANY STOCK OR INVESTMENT DECISIONS.
Responsibility for the consequences of the company stock investment, as
well as for all decisions on investment funds and options, belongs solely
to the SCA Participant, and the company (including its employees, officers
and agents) provides no advice with respect to, and assumes no
responsibility for, any consequences of the company stock investment or of
a SCA Participant's investment elections.
4.9. STATEMENT OF ACCOUNT. As soon as practicable after the end of
each calendar year, the administrator shall furnish each SCA Participant
with a statement of the balance credited to the SCA Participant's accounts
as at the end of that year.
SECTION 5 SALARY DEFERRAL ELECTIONS
This Section 5 does not take effect until the administrator selects
an effective date. At the time authorized by the administrator, an employee
designated as a SCA Participant for a calendar year may irrevocably elect
to defer a portion of his salary for that year. All salary deferral
elections are subject to minimum amounts established by the administrator.
A SCA Participant's "salary" means the SCA Participant's total base pay as
paid by an employer hereunder, and for purposes of a deferral election a
SCA Participant's rate of base pay on January 1 of any year shall be
considered to remain at the same rate during that calendar year. A SCA
Participant must make his salary deferral election in advance by signing a
salary deferral agreement and filing it with the administrator no later
than the December 31 which precedes the calendar year to which the election
relates. A SCA Participant's salary deferral election filed with the
administrator is irrevocable on and after the deadline for the election.
Salary deferrals will be credited to SCA Participant's deferral accounts as
described in subsection 4.4 and will be subject to the same distribution
elections available under subsection 4.3.
SECTION 6 DISTRIBUTION OF ACCOUNTS
6.1. DISTRIBUTIONS. Subject to subsection 6.2, amounts credited and
deferred under Section 3 through Section 5 for each calendar year (and
investment gains and losses thereon) shall be distributed in a lump sum to
the SCA Participant on the applicable distribution date elected by the SCA
Participant, if any; provided, however, that if on any distribution date,
any investment gains or losses cannot then be determined, such distribution
will be delayed until the accounting steps described in subsection 4.5 have
been completed. Distributions may be made in cash, company stock or other
property, as determined by the administrator.
6.2. PRE- AND POST-RETIREMENT AGE DISTRIBUTIONS. If a SCA
Participant separates from service with the employers prior to attainment
of retirement age (as defined by the administrator), the entire balance in
the SCA Participant's deferral account shall be distributed to him in a
lump sum in cash on or about March 15 (the "early distribution dates")
following the calendar year in which the SCA Participant separates from
service, unless the administrator in its sole discretion determines that
distributions shall occur on the distribution dates elected by the SCA
Participant, if any. If a SCA Participant separates from service with the
employers on or after attainment of retirement age (as defined by the
administrator), the balances in the SCA Participant's deferral account
shall be distributed to the SCA Participant on the applicable distribution
dates elected by the SCA Participant if any, unless the administrator in
its sole discretion determines that distribution shall be made in a single
sum payment. Distribution shall be made to the SCA Participant or, in the
event of his death, to his beneficiary.
<PAGE>
6.3. DESIGNATION OF BENEFICIARY. A SCA Participant may designate a
beneficiary under this program by filing a written notice with the
administrator in such form as it requires. A SCA Participant may from time
to time change his designated beneficiary without the consent of such
beneficiary by filing a new designation in writing with the administrator.
If no designation under this program is in effect at the death of the SCA
Participant, the beneficiary shall be the spouse of the SCA Participant at
the time of his death or, if no spouse is living at the death of the SCA
Participant, the representative of the SCA Participant's estate. A SCA
Participant's beneficiary designation form may specify whether payment is
to be made to the beneficiary in a single sum payment or in installments
over a period not to exceed ten years.
SECTION 7 PARTIAL BONUS IN STOCK AWARDS
7.1. ALLOCATION OF BONUS AWARD. A specified portion of the
discretionary bonus award will be granted to a participant pursuant to this
section ("PBS Participant") of the program for the year 1999 or thereafter,
in the form of deferred shares of company stock (the "deferred shares"), as
approved by the administrator. The specified percentage shall be 25% of
any bonus, unless otherwise determined by the administrator. Each deferred
share will be subject to a vesting schedule in accordance with Section 7.2.
The administrator shall have the authority to modify the terms of any
restricted bonus award as reasonably necessary to comply with the relevant
laws of any foreign jurisdiction in which a PBS Participant is employed.
7.2. VESTING AND ISSUANCE OF DEFERRED SHARES.
(a) Unless otherwise determined by the administrator, 50% of
the deferred shares will vest and be issued to the PBS Participant on the
first day of the 19th month following the last day of the year (or other
period) with respect to which the relevant bonus is attributable and the
remaining 50% will vest on the first day of the 31st month following the
end of such year (or other period).
(b) In lieu of issuing deferred shares to a PBS Participant,
the company, at the direction of the administrator, may pay to such PBS
Participant an amount in cash equal to the fair market value of the
deferred shares based upon the closing price of company stock on the New
York Stock Exchange on the trading day immediately preceding the day on
which the shares vest.
7.3. COMPANY MATCH. That portion of the bonus award that is in the
form of deferred shares pursuant to the program will be matched by the
company by 20% for bonus awards granted with respect to the year 1999 and
by 15% for bonus awards granted with respect to the years (or other
periods) thereafter.
7.4. DIVIDENDS ON DEFERRED SHARES
(a) Dividends paid on deferred shares shall be paid in the
form of additional deferred shares (having the same vesting terms as the
deferred shares with respect to which the dividend is paid) having a fair
market value equal to the amount of such dividends as determined on the
dividend payment date by the administrator based upon the closing price of
company stock on the New York Stock Exchange on the trading day immediately
preceding the dividend payment date (with any fractional shares rounded
down to the nearest whole share).
<PAGE>
(b) Deferred shares distributed in connection with a stock
split or stock dividend shall be subject to restrictions and a risk of
forfeiture to the same extent as the deferred shares with respect to which
such additional shares have been distributed. In the event of such a stock
split or stock dividend, a proportionate adjustment shall be made in the
aggregate number of deferred shares available and reserved for issuance
under the program, as may be determined by the administrator, in its sole
discretion.
7.5. TRANSFERABILITY. Deferred shares may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of and shall be
subject to a risk of forfeiture until such deferred shares vest pursuant to
Section 7.2.
7.6. TERMINATION OF EMPLOYMENT. In the event that the PBS
Participant ceases to be employed by the company by reason of (a) death,
(b) disability (as defined in Section 2.2(b)), or (c) termination of
participant's employment by the Company under special circumstances (as
determined by the administrator), the deferred shares will continue to vest
in accordance with Section 7.2; provided, however, such vesting schedule
may be accelerated at the discretion of the administrator. In the event
that (x) the PBS Participant's employment is terminated by the company for
"cause" or (y) the PBS Participant voluntarily resigns, then the deferred
shares (and any related accrued but unpaid dividends) that at that time
have not vested, shall be forfeited to the company without payment of any
consideration therefor, and neither the PBS Participant nor any of his
successors, heirs or assigns, shall thereafter have any further rights or
interests in such deferred shares or certificates. Notwithstanding the
foregoing, if the Participant voluntarily resigns due to normal or approved
early retirement (as defined by the administrator) any unvested deferred
shares held by such participant shall become immediately vested.
The term "Cause" shall mean failure to perform the PBS Participant's
job responsibilities in good faith, falsification of company records,
theft, failure to cooperate with an investigation, use or distribution on
the premises of the company or any of the company's subsidiaries of illegal
drugs, or conviction of any crime against the company, any of the company's
subsidiaries or any of their employees.
7.7. PENSIONABLE REMUNERATION. Benefits received under this
Section 7 will not form part of a participant's pensionable remuneration.
SECTION 8 ADMINISTRATION AND INTERPRETATION
The administrator shall administer and interpret the program, and any
interpretation by the administrator shall be final and binding upon
participants and beneficiaries. The administrator may adopt such rules and
regulations relating to the program as it deems necessary or advisable. The
administrator may delegate administrative responsibilities to advisors or
other persons who may or may not be employees of the company and may rely
upon information or opinions of legal counsel or experts selected to render
advice with respect to the program. If the administrator is a participant,
he may not decide or determine any matter or question concerning his
benefits under the program that he would not have the right to decide or
determine if he were not the administrator.
<PAGE>
SECTION 9 MISCELLANEOUS
9.1. NO RIGHT TO COMPANY ASSETS; LIMITATIONS RELATED TO COMPANY
STOCK. No participant under this program or other person shall acquire by
reason of the program any right in or title to any assets, funds or
property of the employers whatsoever including, without limiting the
generality of the foregoing, any specific funds, assets, or other property
which the employers, in their sole discretion, may set aside in
anticipation of a liability hereunder. Any benefits which become payable
hereunder shall be paid from the general assets of the employers. A
participant shall have only a contractual right to the amounts, if any,
payable hereunder to that participant. The employers' obligations under
this program are not secured or funded in any manner.
9.2. NO EMPLOYMENT RIGHTS. Nothing herein shall constitute a
contract of continuing service or in any manner obligate the company or any
of its subsidiaries to continue the employment of any participant, or
obligate any participant to continue in the employment of the company or
any of its subsidiaries, and nothing herein shall be construed as fixing or
regulating the compensation payable to a participant.
9.3. FACILITY OF PAYMENT. When a person entitled to benefits under
the program is under legal disability, or, in the administrator's opinion,
is in any way incapacitated so as to be unable to manage his financial
affairs, the administrator may direct payment of benefits to such person's
legal representative, or to a relative or friend of such person for such
person's benefit, or the administrator may direct the application of such
benefits for the benefit of such person. Any payment made in accordance
with the preceding sentence shall be a full and complete discharge of any
liability for such payment under the plan.
9.4. NONASSIGNABILITY. No participant or other person shall have
any right to commute, sell, assign, pledge, anticipate, mortgage or
otherwise encumber, transfer or convey in advance of actual receipt the
amounts, if any, payable hereunder. No amounts payable hereunder shall,
prior to actual payment, be subject to claims of creditors, seizure or
sequestration for the payment of any debts, judgments, alimony, domestic
relations order or separate maintenance owed by the participant or any
other person, or be transferable by operation of law in the event of the
participant's or any other person's bankruptcy or insolvency.
Notwithstanding the foregoing, if an estate or trust is a beneficiary
entitled to distributions from the program upon the death of the
participant, the representatives of the estate or the trustees of the trust
may assign the right to receive such payments to the persons, estates or
trusts beneficially entitled thereto, and the administrator may rely
conclusively and without any liability on the certification of the
representative or trustee.
9.5. EFFECT ON OTHER BENEFITS. Except as provided below in this
subsection, the participant's compensation for purposes of calculating his
awards and benefits under any employee benefit plan or program maintained
by the company shall not be reduced on account of deferrals under this
program. However, amounts deferred for more than one year under this
program shall not be included when calculating a participant's benefits or
contributions under any 401(k) plan, 423(b) plan or other plan sponsored by
the company which is qualified under Section 401(a) of the Internal Revenue
Code. Except for amounts deferred one year or less, distributions made from
this program shall be excluded from a participant's compensation in years
distributed for purposes of calculating contributions, awards and benefits
under any employee benefit plan or program maintained by the company.
9.6. INDEPENDENCE OF PROGRAM. Except as otherwise expressly
provided herein, the program shall be independent of, and in addition to,
any employment agreement or other plan or rights that may exist from time
to time between an employer and a participant in the program.
<PAGE>
9.7. RESPONSIBILITY FOR LEGAL EFFECT. No representations or
warranties, express or implied, are made by the employers or the
administrator and neither the employers nor the administrator assumes any
responsibility concerning the legal, tax, or other implications or effects
of the program.
9.8. ACTION BY THE COMPANY. Any action required or permitted to be
taken under the program by the company shall be by one or more officers
designated by the Board of Directors of the company.
9.9. SUCCESSORS, ACQUISITIONS, MERGERS, CONSOLIDATIONS. The terms
and conditions of the program shall inure to the benefit of and bind the
employers, the participants, their successors, assigns, and personal
representatives.
9.10. GENDER AND NUMBER. Wherever appropriate herein, the masculine
may mean the feminine and the singular may mean the plural or vice versa.
9.11. GOVERNING LAWS. This program shall be construed and
administered according to the laws of the State of Illinois.
9.12. CLAIMS PROCEDURE. The company will provide notice in writing
to any participant or beneficiary whose claim for benefits under the plan
is denied, and the company shall afford such participant or beneficiary a
full and fair review of its decision if so requested. The company has
discretionary authority and responsibility to construe and interpret the
provisions of the plan and make factual determinations thereunder,
including the power to determine the rights or eligibility of employees or
participants and any other persons, and the amounts of their benefits under
the plan, and to remedy ambiguities, inconsistencies or omissions, and each
such determination by the company shall be binding on all parties. Any
interpretation of the provisions of the plan and any decisions on any
matter within the discretion of the company made by the company in good
faith shall be binding on all persons. Any misstatement or other mistake of
fact shall be corrected when it becomes known and the company shall make
such adjustment on account thereof as it considers equitable and
practicable.
9.13. WITHHOLDING; EMPLOYMENT TAXES. To the extent required by law
in effect at the time distribution is made from the program, the employers
may withhold any taxes required to be withheld by federal, state or local
governments.
SECTION 10 AMENDMENT AND TERMINATION
The company reserves the right, in its sole discretion, to
discontinue or completely terminate the program at any time. If the program
is discontinued with respect to future deferrals, participants' account
balances shall be distributed on the distribution dates elected by them,
unless the administrator designates an earlier distribution date. As of the
date designated by the administrator following the date of complete
termination, each participant shall receive distribution of his entire
deferral account balance as if his elected distribution dates had occurred.
The program may be amended by a written instrument executed by the company,
provided that an amendment of the program may not reduce the balance in a
SCA Participant's deferral account as of the date the amendment is adopted.
EXHIBIT 10.15
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JONES LANG LASALLE INCORPORATED
SEVERANCE PAY PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
SECTION 1 1
Introduction 1
Purpose 1
Effective Date, Plan Year 1
Employers 1
Administration 1
Plan Supplements 1
SECTION 2 2
Eligibility for Participation 2
Eligible participants 2
Conditions of Ineligibility 2
SECTION 3 3
Plan Benefits 3
Pay 3
Full Years of Continuous Service 4
Base Severance 4
Enhanced Severance 4
Conditions to Enhanced Severance Benefits 5
Repayment and Forfeitures 5
Offset for Other Benefits or Amounts Due 5
Employment With a Competitor 6
Continuation Coverage Benefits 6
SECTION 4 6
Payment of Benefits 6
Release 6
Form of Payment 6
Death Benefits 6
SECTION 5 7
Financing Plan Benefits 7
SECTION 6 7
Reemployment 7
SECTION 7 7
Miscellaneous 7
Information to be Furnished by Participants 7
Employment Rights 7
Employer's and Administrator's Decision Final 7
Evidence 7
Uniform Rules 7
Gender and Number 8
Action by Employer 8
Controlling Laws 8
Interests Not Transferable 8
Mistake of Fact 8
Severability 8
Withholding 8
Effect on Other Plans or Agreements 8
Non-Duplication 8
No Vested Rights 8
SECTION 8 9
Amendment and Termination 9
Amendment and Termination 9
Notice of Amendment or Termination 9
Supplement A - Severance Benefits for Employees With Target Compensation
Over $400,000
<PAGE>
JONES LANG LASALLE INCORPORATED
SEVERANCE PAY PLAN
------------------------------
SECTION 1
---------
INTRODUCTION
1.1 PURPOSE. Jones Lang LaSalle Incorporated (the "Company") has
established the Jones Lang LaSalle Incorporated Severance Pay Plan (the
"Plan") to enable the Company and its subsidiaries and certain affiliates
that adopt the Plan with the Company's consent to provide severance
benefits to eligible employees who involuntarily terminate employment with
the Company or its subsidiaries or certain affiliates. Severance benefits
for eligible employees shall be determined exclusively under the Plan. The
Plan, as set forth herein, shall constitute an "employee welfare benefit
plan" within the meaning of Section 3(1) of the Employee Retirement Income
Act of 1974 ("ERISA").
1.2 EFFECTIVE DATE, PLAN YEAR. The "effective date" of the Plan is
June 1, 1998. A "Plan Year" is the 12-month period beginning on January 1
and ending on the following December 31.
1.3 EMPLOYERS. Any subsidiary or affiliate of the Company may adopt
the Plan with the Company's consent. A "subsidiary" of the Company is any
corporation more than 50 percent of the voting stock of which is owned,
directly or indirectly by the Company. An "affiliate" of the Company is
any business entity in which the Company does not own more than 50 percent
of the voting stock, but which exists to spend all or a substantial part of
its time to service the Company or its subsidiaries. The Company and any
subsidiaries or affiliates of the Company that adopt the Plan are referred
to below collectively as the "Employers" and sometimes individually as an
"Employer."
1.4 ADMINISTRATION. The Plan is administered by the Company's Chief
Human Resources Officer of the Americas (the 'Administrator'). The
Administrator, from time to time, may adopt such rules and regulations as
may be necessary or desirable for the proper and efficient administration
of the Plan and as are consistent with the terms of the Plan. The
Administrator, from time to time, may also appoint such individuals to act
as the Company's representatives as the Administrator considers necessary
or desirable for the effective administration of the Plan. In
administering the plan, the Administrator shall have the discretionary
authority to construe and interpret the provisions of the Plan and make
factual determinations thereunder, including the authority to determine the
eligibility of employees and the amount of benefits payable under the Plan.
Any notice or document required to be given or filed with the Company will
be properly given or filed if delivered or mailed, by registered mail,
postage prepaid, to the company, attention Severance Pay Plan
Administrator, at Jones Lang LaSalle Incorporated, 200 East Randolph Drive,
Chicago, Illinois 60601.
1.5 PLAN SUPPLEMENTS. The provisions of the Plan may be modified by
supplements to the Plan. The terms and provisions of each supplement are a
part of the Plan and supersede the provisions of the Plan to the extent
necessary to eliminate inconsistencies between the Plan and the
supplement(s).
<PAGE>
SECTION 2
---------
ELIGIBILITY FOR PARTICIPATION
2.1 ELIGIBLE PARTICIPANTS. Subject to the conditions and
limitations of the Plan, the Plan is applicable to each regular employee.
A "regular employee" means an employee of an Employer who is eligible for
coverage under the Company's medical benefit plan, who spends all or
substantially all of his/her time on Company matters, and who is not
covered by an authorized written employment agreement or severance
agreement. The Plan does not apply to the following employees of an
Employer:
(a) those who are covered by a collective bargaining
agreement;
(b) those who are performing services for an Employer
pursuant to the terms of an individual agreement (i.e., as an independent
contractor) or a leasing arrangement with another entity (i.e., as a leased
employee); and
(c) those who perform all or most of their services outside
the United States.
A regular employee described above who satisfies each of the conditions and
limitations of the Plan (including subsection 2.2) will become a
participant in the Plan if the participant's employment with an Employer
ends due to involuntary termination on account of: job elimination,
permanent reduction in work force, or permanent shut down of a facility,
department or subdivision.
2.2 CONDITIONS OF INELIGIBILITY. An otherwise eligible employee
SHALL NOT BE ELIGIBLE for severance pay under the Plan if:
(a) employment with the Employer terminates by reason of
discharge for cause (including, but not limited to, willful or grossly
negligent breach of the participant's duties as an employee of Employer,
fraud, embezzlement, theft, falsification of documents, use or distribution
on premises of illegal drugs, refusal to co-operate with an investigation)
or any other similar dishonest conduct;
(b) employment with the Employer terminates involuntarily as
a result of poor performance, as determined by the Plan Administrator;
(c) employment with the Employer terminates by reason of
death of employee;
(d) employment with Employer terminates voluntarily for any
reason, including retirement, resignation, or job abandonment;
(e) at the time of his termination, the employee is eligible
to receive any form of disability or worker's compensation insurance or
salary continuation because of disability;
(f) the employee is on temporary layoff or an authorized
leave of absence, provided however, that an employee who returns from
temporary layoff or an authorized leave of absence and who cannot be placed
in employment with an Employer shall be eligible for severance pay, subject
to the limitations of the Plan;
<PAGE>
(g) employment with Employer is involuntarily terminated
after employee refuses a position at the same or other location of
Employer, provided that such position is reasonably comparable in
responsibility and salary (the Administrator shall have sole discretion to
determine whether the position offered constitutes a "reasonably
comparable" position for purposes of this subparagraph);
(h) the employee is not employed with an Employer on the date
of any of the following: (1) a loss of work or (2) job discontinuance,
regardless of whether an advance announcement was made prior to such event.
If an employee does not remain employed with an Employer until the last
work day of an event described in this subparagraph, no benefits under the
Plan are payable to the employee;
(i) the Plan is terminated, whether or not the Company
provided prior notice concerning the termination of the Plan;
(j) an employee's employment is terminated in conjunction
with the sale or transfer (whether of stock or assets) of all or any part
of the business of an Employer;
(k) an employee is transferred to a different position with
the same or another Employer;
(l) employment with an Employer terminates involuntarily as a
result of the loss of a property or facility management assignment, as
determined in the sole discretion of the Administrator. For purposes of
this subparagraph, loss includes the resignation or relinquishment by an
Employer of a property or facility management assignment;
(m) an employee is terminated after a client of
the Employer requests that the employee cease providing services at the
client's premises.
In no event shall any participant's severance pay benefit exceed an amount
equal to 24 months of the participant's base pay.
SECTION 3
---------
PLAN BENEFITS
3.1 PAY. "Pay" for purposes of the Plan shall mean :
(a) for salaried employees, the participant's regular base monthly
salary (excluding bonus, COLA, or any other type or form of compensation);
or
(b) for hourly employees, monthly pay determined by multiplying the
participant's base hourly compensation rate by the monthly average of the
number of regularly scheduled work days in the three calendar months
preceding the participant's termination of employment;
Pay rates will be the rates in effect on a participant's last date of
employment with an Employer. Any performance or merit reviews that are
pending or in process shall not affect the amount of any severance pay
benefit.
<PAGE>
3.2 FULL YEARS OF CONTINUOUS SERVICE. A participant's "full years
of continuous service" for purposes of the Plan shall mean the number of
completed twelve-consecutive month periods, prior to his/her employment
termination date, measured from the eligible employee's last date of hire
by an Employer, determined in accordance with Employer's personnel records.
No fractional years of service are counted under the Plan.
3.3 BASE SEVERANCE. A participant who is eligible for severance pay
under the Plan shall be entitled to receive as base severance pay an amount
equal to one-half month of Pay as of the date of his/her termination from
Employer.
3.4 ENHANCED SEVERANCE. In addition to the base severance pay which
an eligible employee is entitled to receive under the subsection 3.3 of the
Plan, an eligible employee who satisfies all of the conditions of the Plan
will be entitled to enhanced severance pay in an amount determined by first
multiplying the individual's rate of monthly Pay (as defined in subsection
3.1) by the applicable Multiplier from column (b) of the following table.
That amount shall then be multiplied by the participant's number of full
years of continuous service, and the result so determined shall be subject
to the minimum number of months of pay as set forth in column (c) of the
following table, but shall not exceed the maximum number of months of pay
as set forth in column (d) of the following table:
(a) (b) (c) (d)
Minimum Maximum
Target Compensation Number of Number of
Base + Months of Months of
Target Bonus Multiplier Base Pay Base Pay
- -------------------- ---------- ---------- ----------
$200,000 to $399,999 1 6 18
$125,000 to $199,999 1/2 (.5) 4 12
$75,000 to $124,999 1/2 (.5) 3 8
$40,000 to $74,999 1/2 (.5) 2 4
Under $40,000 1/4 (.25) 1 3
In addition to the amount of severance set forth in subsections 3.3 and
3.4, the following additional benefits are provided:
(a) BENEFIT CONTINUATION. If the participant elects COBRA
continuation coverage, for each month that such coverage continues the
Employer will reimburse participant for a portion of the cost of medical
and dental insurance coverage, subject to subsection 3.9, and further
subject to the following limits:
(i) the Employer will cease reimbursing such costs beginning
with the same month the participant ceases to be covered by COBRA; and
(ii) in no event will the Employer reimburse such costs for
more than the number of months for which enhanced severance pay is payable,
as determined above, regardless of the form in which payment is actually
made.
(b) PRORATED TARGET BONUS. An eligible employee's prorated target
bonus (i.e., the fractional portion of the year in which the employee is
terminated times the target bonus for that year) will be paid.
(c) OUTPLACEMENT COUNSELING SERVICES FOR PROFESSIONAL EMPLOYEES.
The Employer will provide each participant who was a professional eligible
(as determined by Employer) with outplacement counseling services to be
provided by a firm of Employer's choice. The nature of such services, its
duration and all other terms and conditions shall be determined by
Employer. Support personnel will not be eligible for outplacement
counseling services.
<PAGE>
(d) TIMING AND CONSIDERATION. Each of these enhanced severance
arrangements will become available to an eligible employee beginning after
the seven day revocation period following the execution of the Severance
Agreement and General Release as described below. The consideration for
this voluntary Severance Agreement and General Release shall be the
enhanced severance, Employer-provided benefits, prorated target bonus pay
and outplacement counseling services, if applicable, to which the eligible
employee would otherwise not be entitled. Benefits are payable at the time
and in the manner described in subsection 4.2.
Notwithstanding the foregoing, the Plan Administrator may make such other
awards of severance benefits to any employee or group of employees as
he/she deems desirable, pursuant to conditions and procedures to be estab-
lished from time to time in accordance with the terms of the Plan.
3.5 CONDITIONS TO ENHANCED SEVERANCE BENEFITS. As a condition to
receiving enhanced severance benefits, each participant is required to:
(a) Execute and submit within the allotted time, a Severance
Agreement and General Release in the form prescribed. A participant may be
required to re-execute the release on his/her date of separation, if
necessary. If a participant's signed release is not returned by the
deadline, no enhanced severance benefits are provided. If a participant
revokes the Severance Agreement and General Release within the seven day
revocation period, no enhanced severance benefits will be provided.
(b) Return all Employer property (including, but not limited to
computers, keys, credit cards, documents, records, identification cards and
equipment) on or before his/her termination of employment.
(c) Repay all loans or other amounts due to the Employer.
3.6 REPAYMENTS AND FORFEITURES. Notwithstanding any other provision
of the Plan, any participant who accepts benefits under the Plan shall
reimburse the Employer for the full amount of any benefits he/she received
under the Plan if the participant subsequently discloses any of the
Employer's or the Company's trade secrets, violates any written covenants
between such participant and the Employer or the Company or otherwise
engages in conduct that may adversely affect the Employer's or the
Company's reputation or business relations. In addition, any participant
described in the preceding sentence shall forfeit any right to benefits
under the Plan which have not yet been paid. If, and to the extent
required by the terms of any agreement between the Employer or the Company
and a third party concerning the sale or transfer of all or any portion of
the Employer, any participant whose employment is involuntarily terminated
in conjunction with such sale and who becomes a direct competitor of such
third party or is employed by a direct competitor of such third party shall
forfeit any right to any additional benefits under the Plan which have not
yet been paid.
3.7 OFFSET FOR OTHER BENEFITS OR AMOUNTS DUE. The amount of any
benefits payable to a participant under the Plan shall be reduced on a
dollar-for-dollar basis by any separation, termination or similar benefits
that an Employer pays or is required to pay to such participant through
insurance or otherwise under any plan, program or contract of the Employer
or under any federal or state law.
<PAGE>
3.8 NON-SOLICITATION OF EMPLOYEES AND CLIENTS. As a condition to
receiving enhanced severance benefits, each participant shall execute a
release in a form specified by the Employer, containing the participant's
agreement to the following restrictions: during the period severance is
payable, the participant shall not (i) solicit or induce any other
employees of an Employer to leave the employ of the Employer; (ii) solicit
or induce any of an Employer's clients to discontinue or reduce the extent
of such relationship with the Employer; or (iii) assist, perform services
for, or have any equity interest in any of an Employer's clients. If a
participant fails to comply with such restrictions, any remaining unpaid
benefits under the plan shall not be paid and the Employer may pursue all
legal remedies available to it, including recovery of severance already
paid. The Employer has the sole discretion to determine whether an entity
is a "client" of Employer.
3.9 CONTINUATION COVERAGE BENEFITS. If a participant elects to
continue health insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), the Employer will subsidize the
premium for such continuation coverage until the occurrence of the earlier:
(1) the date that Employee becomes covered under another group plan or (2)
the last day of Employee's severance pay period. The Employer will
subsidize the premium to the extent that the participant would otherwise be
required to pay more for such coverage during such period than a similarly
situated active employee would be required to pay for comparable coverage.
After the end of the severance pay period, the participant will be required
to pay the full premium for any remaining COBRA continuation coverage. The
payment of benefits under the Plan shall in no way affect a participant's
COBRA coverage, which coverage shall terminate in accordance with the COBRA
coverage provisions of the Employer's medical and dental plans covering the
participant.
SECTION 4
---------
PAYMENT OF BENEFITS
4.1 RELEASE. No enhanced severance pay benefits under the Plan
shall be payable to any participant until such participant has executed a
release (provided by and satisfactory to the Employer) of all of such
participant's then existing rights and legal claims against the Employers
and their subsidiaries and affiliates.
4.2 FORM OF PAYMENT. Subject to the conditions and limitations of
any applicable supplement to the Plan, benefits shall be paid in equal
installments according to the Employer's normal payroll schedule; provided,
that all benefit payments to a participant must be completed within 24
months following the date on which the participant's employment terminates.
The Employer may, in its sole discretion, elect to pay benefits in a lump
sum. All payments made under the Plan are subject to reduction for
withholding. Severance payments made under this Plan are not considered
eligible wages for any other Employer-provided benefits, including the
401(k) plan.
4.3 DEATH BENEFITS. In the event of a participant's death before
he/she receives all benefits to which he/she otherwise would be entitled
under the Plan, payment of his/her benefits shall be made to his/her
beneficiary in installments or a lump sum, as determined by the Company.
By signing a form furnished by the Company, each participant may designate
any person or persons to whom his/her benefits are to be paid if he/she
dies before he/she receives all of his/her benefits. A beneficiary
designation form will be effective only when the form is filed with the
Company while the participant is still alive and will cancel all
beneficiary designation forms previously filed by the participant with the
Company with respect to this Plan. If a deceased participant has failed to
designate a beneficiary as provided above, or if the designated beneficiary
<PAGE>
predeceases the participant, payment of the participant's benefits shall be
made to his/her estate. If a designated beneficiary dies before complete
payment of any benefits attributable to a participant, remaining benefits
shall be paid to the beneficiary's estate.
SECTION 5
---------
FINANCING PLAN BENEFITS
All benefits payable under this Plan shall be paid directly by the
Employers out of their general assets. The Employers shall not be required
to segregate on their books or otherwise any amount to be used for the
payment of benefits under this Plan.
SECTION 6
---------
REEMPLOYMENT
If a participant who is entitled to receive benefits under the Plan
is reemployed by an Employer, by any enterprise in which the Employer owns
an interest, or by any acquiror of all or a portion of an Employer (whether
by stock or assets) before all his/her benefits have been paid, any
benefits remaining to be paid will be forfeited.
SECTION 7
---------
MISCELLANEOUS
7.1 INFORMATION TO BE FURNISHED BY PARTICIPANTS. Each participant
must furnish to his/her Employer such documents, evidence, data or other
information as the Employer considers necessary or desirable for the
purpose of administering the Plan. Benefits under the Plan for each par-
ticipant are provided on the condition that he/she furnish full, true and
complete data, evidence or other information, and that he/she will promptly
sign any document related to the Plan, requested by his/her Employer.
7.2 EMPLOYMENT RIGHTS. The Plan does not constitute a contract of
employment and participation in the Plan will not give a participant the
right to be rehired or retained in the employ of an Employer on a full-
time, part-time or any other basis or to be retrained by the Employer, nor
will participation in the Plan give any participant any right or claim to
any benefit under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Participants remain employees "at-
will." Nothing in the Plan guarantees that a participant will receive
his/her target bonus during his/her employment with Employer.
7.3 EMPLOYER'S AND ADMINISTRATOR'S DECISION FINAL. Any
interpretation of the Plan and any decision on any matter within the
discretion of an Employer or Administrator made by the Employer or
Administrator in good faith is binding on all persons. The Administrator
will establish and maintain a written procedure under which participants
may submit claims for benefits, and may request reviews of denied claims.
7.4 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person
relying thereon considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
7.5 UNIFORM RULES. In managing the Plan, the Employers will apply
uniform rules to all participants similarly situated.
<PAGE>
7.6 GENDER AND NUMBER. Where the context admits, words in the
masculine gender shall include the feminine and neuter genders, the plural
shall include the singular and the singular shall include the plural.
7.7. ACTION BY EMPLOYER. Any action required of or permitted by the
Company or an Employer under the Plan shall be by resolution of its Board
of Directors, by resolution of a duly authorized committee of its Board of
Directors, by a person or persons authorized by resolutions of its Board of
Directors or such committee, or by the Administrator. An amendment to the
Plan that is approved subsequently by resolution of the Board of Directors
or a duly authorized committee of the Board of Directors may have
retroactive effect.
7.8 CONTROLLING LAWS. Except to the extent superseded by ERISA, the
laws of the State of Illinois shall be controlling in all matters relating
to the Plan.
7.9 INTERESTS NOT TRANSFERABLE. Subject to subsection 3.7, the
interests of persons entitled to benefits under the Plan are not subject to
their debts or other obligations and, except as may be required by the tax
withholding provisions of the Internal Revenue Code or any state's income
tax act, or pursuant to an agreement between a participant and the Company,
may not be voluntarily sold, transferred, alienated, assigned or
encumbered.
7.10 MISTAKE OF FACT. Any mistake of fact or misstatement of fact
shall be corrected when it becomes known and proper adjustment made by
reason thereof.
7.11 SEVERABILITY. In the event any provision of the Plan shall be
held to be illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if such illegal or invalid provisions had never
been contained in the Plan.
7.12 WITHHOLDING. The Employers reserve the right to withhold from
any amounts payable under this Plan all federal, state, city, and local
taxes as shall be legally required and any applicable insurance or health
coverage premiums, as well as any other amounts authorized or required by
Employer policy including, but not limited to, withholding for garnishments
and judgments or other court orders.
7.13 EFFECT ON OTHER PLANS OR AGREEMENTS. Payments or benefits
provided to a participant under any Employer stock, deferred compensation,
savings, retirement or other employee benefit plan are governed solely by
the terms of such plan. Any obligations or duties of a participant
pursuant to any non-competition or other agreement with an Employer shall
be governed solely by the terms of such agreement and shall not be affected
by the terms of this Plan.
7.14 NON-DUPLICATION. No person will be entitled to benefits under
this Plan who is entitled to severance or similar benefits under any other
plan or arrangement of an Employer.
7.15 NO VESTED RIGHTS. No person shall acquire any vested rights to
any benefits described in the Plan, and the Company reserves the right to
discontinue such benefits at any time, as further provided in subsection
8.1.
<PAGE>
SECTION 8
---------
AMENDMENT AND TERMINATION
8.1 AMENDMENT AND TERMINATION. The Company reserves the right to
amend the Plan at any time and to alter, reduce or eliminate any benefit
under the Plan (in whole or in part) at any time or to terminate the Plan
at any time, as to any class or classes of covered employees (including
former or retired employees), with or without notice. Any amendment or
termination of the Plan by the Company shall be made in accordance with the
procedures set forth in subsection 7.7.
8.2 NOTICE OF AMENDMENT OR TERMINATION. Participants will be
notified of any material amendment or termination of the Plan within a
reasonable time.
<PAGE>
SUPPLEMENT A
TO
JONES LANG LASALLE INCORPORATED SEVERANCE PAY PLAN
Severance Benefits for Employees
With Target Compensation Over $400,000
A-1. PURPOSE. Set forth below is a Supplement to the Jones Lang
LaSalle Incorporated Severance Pay Plan (the "Plan") to set forth specific
provisions relating to participants ("Supplement A participants") employed
by the Company or any Employer who has target compensation over $400,000
for the year in which employment terminates. Notwithstanding anything in
the Plan to the contrary, a Supplement A participant shall not become
covered under the plan and this Supplement A until the first anniversary of
such employee's initial date of hire with an Employer. For purposes of the
Plan and this Supplement A, an "acquired employee" shall mean an employee
who becomes employed by an Employer pursuant to the terms of an agreement
providing for the acquisition of a business formerly employing such
employee.
A-2. AMOUNT OF SEVERANCE PAY BENEFIT. In lieu of the severance
amounts set forth in subsection 3.3 and 3.4, the severance pay benefit for
each Supplement A participant who satisfies the plan's requirements for
benefits shall be equal to the total of the amounts determined in
subparagraphs (a), (b) and (c) below:
(a) an amount equal to one-half month of base pay, PLUS
(b) an amount equal to twelve months of base pay, PLUS
(c) one month of base pay for each full year of continuous
service (as defined in subsection 3.2) in excess of twelve years of
continuous service, but not to exceed 12 months of base pay.
Notwithstanding the foregoing provisions of this paragraph A-2, no
Supplement A participant shall be entitled to a severance pay benefit in
excess of an amount equal to one year of base pay without the express
written approval of the Employer of the participant. No Supplement A
participant shall be entitled to a severance pay benefit in excess of an
amount equal to 24 months of the participant's base pay.
A-3. BASE PAY. A Supplement A participant's monthly rate of base
pay on the date of termination of employment will be used to determine the
participant's benefits under the Plan.
A-4. OTHER CONDITIONS. Except as specifically provided in this
Supplement A, each of the terms, conditions and limitations of the plan
shall be applicable to each Supplement A participant.
EXHIBIT 10.16
- -------------
JONES LANG WOOTTON
SENIOR EXECUTIVE SERVICE AGREEMENT (ENGLAND)
THIS AGREEMENT is made on 9, March 1999.
BETWEEN
(1) JONES LANG WOOTTON (a company incorporated with unlimited liability)
of 22 Hanover Square, London W1A 2BN (the "Company")
(2) Christopher Arden Peacock (the "Executive") of Logmore Place, Logmore
Lane, Westcott, Dorking, Surrey, RH4 3JN
WHEREBY IT IS AGREED as follows:
1. Definitions
In this Agreement
"associated company" means a company which is from time to time a
subsidiary or a holding company of the Company or subsidiary (other than
the Company) of a holding company of the Company. A Company is a
"subsidiary" of another company, its "holding" company, if that other
company.
(a) holds a majority of the voting rights
in it, or
(b) is a member of it and has the right to
appoint or remove a majority of its board of directors, or
(c) is a member of it and controls alone,
pursuant to an agreement with other shareholders or members, a majority of
the voting rights in it.
or if it is a subsidiary of a company which
is itself a subsidiary of that other company. A company includes any body
corporate.
the "Business" means the international business of
international real estate consultants known as "Jones Lang Wootton" and
including the Company, any associated company or related business.
the "Committee" means the international Board or such other
body which may from time to time be appointed.
"related business" means any affiliate of any associated company
or any joint venture partner of any associated company or any incorporated
or unincorporated association carrying on a trade or business in
association with any associated company.
<PAGE>
2. Term of Employment
(A) The Executive shall be employed by the Company on the terms set
out in this Agreement and in the Schedules. This Agreement shall take
effect from the date hereof and shall continue unless and until determined
by either party giving to the other notice in accordance with the terms set
out in Schedule (A).
(B) During employment this Agreement the executive shall perform
the duties and provide the services outlined herein for the Company and for
the Business.
3. Remuneration
(A) The Executive shall be paid by the Company by way of
remuneration for services during employment a basic salary at the rate of
(pound/sterling)200,000 per annum.
(B) The basic salary referred to in (A) above shall be paid monthly
in arrears on the last working day of each month during employment and in
accordance with the payment arrangement terms (if any) specified in
Schedule (A).
(C) The Company will review the remuneration payable under this
Agreement at least once in every twelve months, but (subject to the terms
(if any) specified in Schedule (A)) shall not be obliged to increase such
remuneration. Any such increase will be notified to the Executive in
writing.
(D) The Executive may participate in a bonus scheme in accordance
with the terms set out in Schedule (A).
(E) In addition, the Executive shall be entitled to the other
benefits listed in Schedule (B) and in accordance with the terms of that
Schedule.
4. Powers and Duties
(A) During employment the Executive shall exercise the powers and
perform the duties (not being duties inappropriate to his status) assigned
to him by the Committee in relation to the Business and shall comply with
all reasonable directions from time to time given to him by the Committee
and with all rules and regulations from time to time laid down by the
Business or the Company concerning its employees or employees of any
associated company.
(B) The Executive will during the course of his employment under
this Agreement and thereafter as applicable, comply with the Jones Lang
Wootton Code of Conduct and such other Rules, Policies and Guidelines as
may from time to time be issued by the Company for the lawful, professional
and ethical conduct of all or part of its business.
5. Travel, other employment, etc.
During employment the Executive shall:
(A) during the normal working hours specified in Schedule (A)
hereto (unless prevented by ill health or accident and except during
holidays permitted by this Agreement) devote the whole of his time,
attention and abilities to carrying out his duties;
<PAGE>
(B) travel to such places (whether in or outside the country of his
normal place of work as specified in Schedule (A) and in such manner and on
such occasions as the Committee may from time to time reasonably require;
(C) not (unless otherwise agreed in writing by the Committee)
directly or indirectly undertake any other business or profession or be or
become an employee or agent of any other firm, company, or person or assist
or have any financial interest in any other business or profession;
(D) not pledge the credit of the Business or enter into any
contracts, engagements, or commitments on behalf of the Business without
the prior express consent of the Committee;
(E) carry out his duties in a proper, loyal and efficient manner
and shall use his best endeavors to promote the interests and reputation of
the Business and not do anything which is harmful to it.
6. Mobility
The Executive's normal place of work shall be as specified in
Schedule (A). However, the Executive recognizes that the best interests of
the Business may require that he work in any place within Europe at any
time on reasonable notice. In considering any such relocation, the Company
will take into account all relevant circumstances including, without
limitation the Executive's personal circumstances. If the Company requires
the Executive to work permanently at a place which necessitates a move from
his present address, the Executive will be reimbursed by the Company in
accordance with the terms of the Jones Lang Wootton relocation policy.
7. Confidential Information
The Executive shall not, either during employment or thereafter, use
to the detriment or prejudice of the Business, except in the proper course
of his duties, divulge to any person any trade secret or any other
confidential information concerning the business or affairs of the
Business, which may have come to his knowledge during his employment.
8. Return of Papers etc.
(A) The Executive shall promptly whenever requested by the
Committee and in any event upon the termination of his employment by the
Company deliver up to the Company all lists of clients or customers,
correspondence and all other books, documents, papers, plans, statistics
and records which may have been prepared by him or have come into his
possession in the course of his employment with the Company or at any time
previous to that employment (including, without limitation, manuals,
handbooks, diaries, personal organizers and computer disks) whether
relating to the Company or the Business or any associated company and shall
not be entitled to and shall not retain any copies thereof. Title and
copyright therein shall vest in the Company.
(B) The Company may, at its discretion, release or provide access
to any of the lists, correspondence, books, documents, paper, plans,
statistics referred to above to after the determination of his employment
with the Company at the request of the Executive to enable him to answer or
rebut any question or criticism in connection with matters undertaken by
the Executive on behalf of the Company in the course of his employment.
<PAGE>
9. Expenses
The Company shall reimburse to the Executive all reasonable
travelling, hotel, entertainment and other out-of-pocket expenses which he
may from time to time be authorized to incur in the Executive of his duties
hereunder, upon production of an expense claim and vouchers in respect
thereof.
10. The Schedules
The provisions set out in the Schedules hereto as from time to time
altered are part of this Agreement. The Company may from time to time
notify the Executive in writing that it proposes to alter any provision of
the Schedule giving details. Unless the Executive shall within twenty-
eight days of such notice object in writing, such alteration shall be taken
to be agreed and shall be taken effect accordingly.
11. Notices
Any notices may be given personally to the Executive or to the
Company Secretary or faxed (with a copy sent by registered post) to the
Company at its registered office for the time being or to the Executive
either at his address given above or at his last known address. Any such
notice sent by post shall be deemed served seventy-two hours after it is
posted, and proof of posting shall be proof of service.
12. Other Agreements
The Executive acknowledges and warrants that there are no agreements
or arrangements whether written, oral or implied between the Company and/or
any associated company and the Executive relating to his employment other
than those expressly set out in this Agreement and that he is not entering
into this Agreement in reliance on any representation not expressly set out
herein. This Agreement supersedes and replaces all previous contracts of
employment made between the Executive and the Company or any associated
company.
IN WITNESS whereof this Agreement has been signed by or on behalf of
the parties hereto the day and year first before written.
SIGNED by /S/ PETER MANTLE
for and on behalf of the )
Company in the presence )
of Elizabeth Jones )
SIGNED by /S/ CHRISTOPHER ARDEN PEACOCK )
in the presence of )
Robert S. Orr )
<PAGE>
SCHEDULE (A)
(1) Place of Work
The normal place of work shall be one of the United Kingdom offices
of the Business.
(2) Hours of Work
The normal office hours of the Business, but also as may be necessary
for the proper performance of the Executive's duties although no extra
payment will be made for such extra work.
(3) Holidays
In addition to English public holidays, the Executive shall be
entitled to 30 days' holiday per annum, with pay, to be taken at periods as
may be agreed with the Company. Holidays not taken before the termination
of the Executive's employment hereunder will be lost, and the Executive
will not be entitled to any accrued holiday pay or to any pay in lieu of
holiday.
(4) Sickness
Subject to production, if requested, of medical certificates
satisfactory to the Company, if the Executive is absent from work due to
sickness or accident, remuneration will not cease to be payable by reason
only of such incapacity for work over a period of four consecutive months
or ninety working days in any calendar year. Thereafter any remuneration
shall be paid at the Company's sole discretion. Such remuneration shall
include any sums the Company is obliged to pay to the Executive pursuant to
the Social Security Contributions and Benefits Act 1992 (Statutory Sick
Pay). The Company may reduce remuneration during incapacity by an amount
equal to the benefit (excluding any lump sum benefit) which the Executive
would be entitled to claim during such incapacity under the then current
Social Security Acts (whether or not such benefit is claimed by him). In
the event that the Executive becomes permanently incapacitated,the
Company's Permanent Health Insurance provisions will apply as set out in
Schedule (B), paragraph (B) of this Agreement.
(5) Notice
The Company may terminate this Agreement by giving the Executive not
less than twelve months' notice in writing. The Executive may terminate
this Agreement by giving this Company not less than six months' notice in
writing. In either case, the Company may, at its discretion,continue to
provide the Executive with work or suspend the Executive under the terms
set out in paragraph 6 below. The Company reserves the right to terminate
the employment of the Executive at any time by paying him a sum equal to
his salary and the value of his other benefits for the period this
Agreement would otherwise continue.
(6) Garden Leave
The Company shall be under no obligation to vest in or assign any
powers or duties to or provide any work for the Executive, and the Company
may at any time or from time to time during any period of notice as
specified in Schedule (A) clause 5 of this Agreement or in circumstances in
which it reasonably believes that the Executive is guilty of misconduct or
in breach of this Agreement in order that the circumstances giving rise to
that belief may be investigated suspend the Executive from the performance
of his duties or exclude him from any premises of the Company and need not
give any reason for so doing. Remuneration will not cease to be payable by
reason only of such suspension or exclusion.
<PAGE>
(7) Termination
(A) If the Executive:
(i) shall be or become incapacitated from any cause
whatsoever from efficiently performing his duties hereunder for four
consecutive months or for ninety working days in aggregate in any period of
twelve consecutive months. In these circumstances, and at the discretion
of the Committee, the provisions of the Company's Permanent Health
Insurance cover would operate (subject to the rules and terms thereof); or
(ii) shall be or become of unsound mind or be or become a
patient for any purpose or any statute (or any part thereof) relating to
mental health; or
(iii) shall be or become bankrupt or compounds with his
creditors; or
(iv) shall be convicted of an indictable criminal offence
(other than minor traffic offenses or any minor issue of Health and
Safety); or
(v) shall be guilty of serious misconduct or commit any
serious or persistent breach of any of his obligations to the Company or
the Business (whether under this Agreement or otherwise); or
(vi) shall refuse or willfully neglect to comply with any
lawful instructions given to him by the Company or Business; or
(vii) have an order made against him under Section 3 or
Section 4 of the Estate Agents' Act 1979 or any comparable legislation in
the country within which he performs his employment, or if he shall fail to
inform the Company Secretary immediately of any matter which could cause
any such order to be made against him, then the Company shall be entitled
by notice in writing to the Executive to determine forthworth his
employment under this Agreement. The Executive shall have no claim against
the Company by reason of such determination.
(B) Any delay of forbearance by the Company in exercising any such
right of determination, provided that that delay does not exceed three
months from the date upon which they became aware of their right to
exercise the same, shall not constitute a waiver of it.
(8) Restrictions on termination
(A) In this clause 8:
(i) "Restricted Business" means the business of the
Company and its associated companies at the time of the termination of the
Executive's employment with which the Executive was involved to a material
extent during the period of 12 months ending on the date of the termination
of his employment;
(ii) "Restricted Customer" means any firm, company or
other persons who, during the period of 12 months ending on the date of the
termination of the Executive's employment, was a customer of or in the
habit of dealing with the Business and with whom the Executive had contact
or about whom he became aware or informed in the course of his employment;
and
<PAGE>
(iii) "Restricted Employee" means any person who, at the
date of the termination of the Executive's employment, was employed by the
Company or any associated company at the level of or more senior to the
Executive or was an employee of the Company or any associated company and
who could materially damage the interests of the Business if he became
employed in any business concern in competition with the Restricted
Business.
(B) The Executive will not, for a period of 12 months after the
termination of his employment, solicit or endeavor to entice away from the
Business, the Company or any associated company the business or custom of a
Restricted Customer with a view to providing goods or services to that
Restricted Customer in competition with any Restricted Business.
(C) The Executive will not, for a period of 12 months after the
termination of his employment, provide goods or services to or otherwise
have any business dealings with any Restricted Customer in the course of
any business concern which is in competition with any Restricted Business.
(D) The Executive will not, for a period of 12 months after the
termination of his employment, offer employment to or otherwise endeavor to
entice away from the Company or any associated company any Restricted
Employees.
(E) The Executive will not, for a period of 12 months after the
termination of his employment, (except when the termination is a dismissal)
be engaged in or concerned in any capacity in any business concern which is
in competition with any Restricted Business. This clause shall not
restrain the Executive from being engaged or concerned in any business
concern in so far as the Executive's duties or work shall relate solely:
(a) to geographical areas where the business concern is not
in competition with the Restricted Business; or
(b) to services or activities of a kind with which the
Executive was not concerned to a material extent during the period of the
12 months ending on the date of the termination of his employment.
(F) The period of restriction of 12 months referred to in each of
clauses (B) to (E) shall be reduced by the amount of any period of
suspension from the performance of his duties which the Company has imposed
on the Executive under Schedule (A) clause 6 of this Agreement.
(G) The obligations imposed on the Executive by this clause 8
extend to him acting not only on his own account but also on behalf of any
other firm, company or other person and shall apply whether be acts
directly or indirectly.
Unless the Company shall within ten working days of the service of notice
of termination by either party, waive its entitlement to the provisions of
this clause 8, compensation for the obligations contained in this clause
8(B) to (E) shall be payable as follows:
(i) the Executive shall receive an amount equivalent to his basic
salary (as current at the date of termination less any deductions required
by law)
(ii) this compensation will be paid in monthly installments
throughout the duration of the obligation in 8(B) to (E)
(iii) in the event that the Company agrees to reduce the duration of
the obligations, these monthly installments shall cease.
<PAGE>
(9) Retirement
The normal retirement date will be at the end of the month in which
the Executive reaches the age of 55 provided that if the Executive is aged
35 years or older on 1 January 1998 he will retire at the age of 60.
(10) Medical Fitness
The Executive will be required to undergo a medical examination at
the Company's expense. He will be responsible for arranging every two
years (or, if aged 50 or over, every year) a renewal medical examination
with the Company's medical providers or other appropriately qualified
person as approved by the Human Resources Department. The interval between
these must not exceed 24 (or 12, as the case may be) calendar months. The
Company reserve the right to ask for a medical report in certain
circumstances but this will not be progressed without the prior knowledge
of the Executive.
(11) Professional Conduct and Handbook
The Executive will comply with the Rules of Conduct of the Royal
Institution of Chartered Surveyors and rules of conduct of every other
relevant professional and regulatory body and will observe the terms of the
Jones Lang Wootton Staff Handbook (including the Compliance rules, the
Jones Lang Wootton Employment Handbook and Rules and the Health and Safety
Policy), the Jones Lang Wootton Quality Policy Manual and the QMS
Management Manual as amended from time to time.
(12) Redress of Grievance
In the event of the Executive wishing to seek redress of any
grievance relating to his employment or if he is dissatisfied with any
disciplinary decision relating to him he should write to the Committee
setting out full details of the matter. The Executive must then promptly
answer (in writing if required) such questions (if any) as the Company
wishes to put to him on the matter before the Company comes to a decision.
The decision of the Company on such matter shall be final.
(13) Disciplinary Procedure
Any disciplinary rules applicable to employees of the Company and
from time to time in force are specified in the Jones Lang Wootton
Employment Handbook and Rules a copy of which is available for inspection
in the Human Resources Department at any time upon reasonable notice.
(14) Continuous Employment
The Executive's continuous period of employment with the Company is
deemed to have begun on 1st January 1998.
(15) Taxation
The executive acknowledges that it shall be his responsibility to
make all appropriate declarations of salary and benefits under his
employment to the relevant tax or other regulatory authorities of the
United Kingdom and any other country as appropriate. The Company will
provide an allowance towards Accountancy fees for this purpose as set out
to Schedule B section I of this Agreement.
<PAGE>
(16) Bonus arrangement
(A) The Executive will participate in the Company bonus scheme, the
specific terms of which will be communicated individually. Achievement
under this scheme will depend upon and be related to (i) the Executive's
performance against pre-determined and agreed objectives, and (ii) the
financial performance of the Business. The Executive acknowledges that he
has no right to receive a bonus and will not acquire such a right merely by
virtue of having received one or more discretionary bonus payments during
the course of his employment.
(17) Financial Regulation
The Executive will at all times be governed (as applicable) by the
provisions of the Financial Services Act 1986 and comply with the Conduct
of Business Rules laid down by FIMBRA, TSA and IMRO and any other self
regulating organization.
(18) Professional Indemnity Insurance
The Company will take out and maintain professional indemnity
insurance on behalf of the Executive in accordance with the terms of Bye-
Law 19(8) of the Compulsory Professional Indemnity Insurance Bye-Law and
Regulations 1997 (as amended from time to time or replaced by equivalent
professional indemnity insurance provisions). Any material or substantial
change in the terms of that insurance will be notified to the Executive in
writing. The Executive will comply with the terms of that insurance
policy, a summary of which is available for inspection from the Secretariat
at any time upon reasonable notice.
(19) Choice of Law
This Agreement shall be governed by and construed in accordance with
English law and each party to this Agreement agrees to submit to the
exclusive jurisdiction of the English Courts.
<PAGE>
SCHEDULE (B)
(A) Private Medical Healthcare
The Company will provide private medical healthcare through a
designated healthcare provider on behalf of the Executive for the
Executive, his spouse and any minor children subject to the rules of any
such scheme in force from time to time. The Company reserves the right to
change this provision on written notice to the Executive.
(B) Permanent Health Insurance
In the event of the Executive becoming incapacitated, the Permanent
Health Insurance provisions of this Agreement will apply subject to the
rules of the scheme which are available for inspection at the Human
Resources Department. This envisages that all renumeration from the
Company will cease. Any payment to the Executive will be as outlined in
the scheme. The Company reserves the right to change this provision on
written notice to the Executive.
(C) Pension
Subject to any limits imposed by the appropriate regulating
authorities from time to time, the Company shall pay contributions to an
approved pension provider selected by the Executive as set out below in the
table below.
AGE % OF BASE SALARY
Under 40 7.5%
40-49 10%
50+ 15%
Pension is calculated on a base salary of (pound/sterling)100,000.
(D) Life Cover
Subject to the terms of any relevant policy of insurance and any
limit imposed by the Inland Revenue in force from time to time, the Company
shall provide life insurance cover for the Executive in the sum of four
times the basic salary of the Executive.
(E) Home Telephone
The Company will provide the Executive with an allowance of
(pound/sterling)400 per annum for home telephone expenses.
(F) Assisted Travel
Subject to the Executive's completion of the appropriate form of
request, the Company will provide the Executive with an interest free loan
to cover the cost of any season ticket required for the purposes of travel
home to his nominated place of work.
(G) Car
The Company will provide the Executive with a motor car in accordance
with the Company's car policy. The company shall pay all road fund
taxation, insurance premiums, maintenance, repair, fuel, oil and all other
running expenses relating to the car. It shall be the responsibility of
the Executive to take due care of the vehicle and return it in good
condition to the Company in the event of the Executive leaving the Company,
or at any other time as required by the Company in accordance with the
Company's car policy.
(H) Accountancy Fees
The Company will pay the Executive an allowance of (pound/sterling)
2,000 per annum towards the cost of accountancy fees for the purpose of
providing proper personal tax advice to the Executive.
EXHIBIT 10.17
- -------------
JONES LANG WOOTTON
SENIOR EXECUTIVE SERVICE AGREEMENT (ENGLAND)
THIS AGREEMENT is made on 9, March 1999.
BETWEEN
(1) JONES LANG WOOTTON (a company incorporated with unlimited liability)
of 22 Hanover Square, London W1A 2BN (the "Company")
(2) Robert Orr (the "Executive") of 6 Malbrook Road, London SW15 6UF
WHEREBY IT IS AGREED as follows:
1. Definitions
In this Agreement
"associated company" means a company which is from time to time a
subsidiary or a holding company of the Company or subsidiary (other than
the Company) of a holding company of the Company. A Company is a
"subsidiary" of another company, its "holding" company, if that other
company.
(a) holds a majority of the voting rights
in it, or
(b) is a member of it and has the right to
appoint or remove a majority of its board of directors, or
(c) is a member of it and controls alone,
pursuant to an agreement with other shareholders or members, a majority of
the voting rights in it.
or if it is a subsidiary of a company which
is itself a subsidiary of that other company. A company includes any body
corporate.
the "Business" means the international business of
international real estate consultants known as "Jones Lang Wootton" and
including the Company, any associated company or related business.
the "Committee" means the international Board or such other
body which may from time to time be appointed.
"related business" means any affiliate of any associated company
or any joint venture partner of any associated company or any incorporated
or unincorporated association carrying on a trade or business in
association with any associated company.
<PAGE>
2. Term of Employment
(A) The Executive shall be employed by the Company on the terms set
out in this Agreement and in the Schedules. This Agreement shall take
effect from the date hereof and shall continue unless and until determined
by either party giving to the other notice in accordance with the terms set
out in Schedule (A).
(B) During employment this Agreement the executive shall perform
the duties and provide the services outlined herein for the Company and for
the Business.
3. Remuneration
(A) The Executive shall be paid by the Company by way of
remuneration for services during employment a basic salary at the rate of
(pound/sterling)150,000 per annum.
(B) The basic salary referred to in (A) above shall be paid monthly
in arrears on the last working day of each month during employment and in
accordance with the payment arrangement terms (if any) specified in
Schedule (A).
(C) The Company will review the remuneration payable under this
Agreement at least once in every twelve months, but (subject to the terms
(if any) specified in Schedule (A)) shall not be obliged to increase such
remuneration. Any such increase will be notified to the Executive in
writing.
(D) The Executive may participate in a bonus scheme in accordance
with the terms set out in Schedule (A).
(E) In addition, the Executive shall be entitled to the other
benefits listed in Schedule (B) and in accordance with the terms of that
Schedule.
4. Powers and Duties
(A) During employment the Executive shall exercise the powers and
perform the duties (not being duties inappropriate to his status) assigned
to him by the International Board in relation to the Business and shall
comply with all reasonable directions from time to time given to him by the
International Board and with all rules and regulations from time to time
laid down by the Business or the Company concerning its employees or
employees of any associated company.
(B) The Executive will during the course of his employment under
this Agreement and thereafter as applicable, comply with the Jones Lang
Wootton Code of Conduct and such other Rules, Policies and Guidelines as
may from time to time be issued by the Company for the lawful, professional
and ethical conduct of all or part of its business.
5. Travel, other employment, etc.
During employment the Executive shall:
(A) during the normal working hours specified in Schedule (A)
hereto (unless prevented by ill health or accident and except during
holidays permitted by this Agreement) devote the whole of his time,
attention and abilities to carrying out his duties;
<PAGE>
(B) travel to such places (whether in or outside the country of his
normal place of work as specified in Schedule (A) and in such manner and on
such occasions as the Committee may from time to time reasonably require;
(C) not (unless otherwise agreed in writing by the Committee)
directly or indirectly undertake any other business or profession or be or
become an employee or agent of any other firm, company, or person or assist
or have any financial interest in any other business or profession;
(D) not pledge the credit of the Business or enter into any
contracts, engagements, or commitments on behalf or the Business without
the prior express consent of the Committee (financial limits to be
defined);
(E) carry out his duties in a proper, loyal and efficient manner
and shall use his best endeavors to promote the interests and reputation of
the Business and not do anything which is harmful to it.
6. Mobility
The executive's normal place of work shall be as specified in
Schedule (A). However, the Executive recognizes that the best interests of
the Business may require that he work in any place within Europe at any
time on reasonable notice. In considering any such relocation, the Company
will take into account all relevant circumstances including, without
limitation the Executive's personal circumstances. If the Company requires
the Executive to work permanently at a place which necessitates a move from
his present address, the Executive will be reimbursed by the Company in
accordance with the terms of the Jones Lang Wootton relocation policy.
7. Confidential Information
The Executive shall not, either during employment or thereafter, use
to the detriment or prejudice of the Business, except in the proper course
of his duties, divulge to any person any trade secret or any other
confidential information concerning the business or affairs of the
Business, which may have come to his knowledge during his employment.
8. Return of Papers etc.
(A) The Executive shall promptly whenever requested by the
Committee and in any event upon the termination of his employment by the
Company deliver up to the Company all lists of clients or customers,
correspondence and all other books, documents, papers, plans, statistics
and records which may have been prepared by him or have come into his
possession in the course of his employment with the Company or at any time
previous to that employment (including, without limitation, manuals,
handbooks, diaries, personal organizers and computer disks) whether
relating to the Company or the Business or any associated company and shall
not be entitled to and shall not retain any copies thereof. Title and
copyright therein shall vest in the Company.
(B) The Company may, at its discretion, release or provide access
to any of the list, correspondence, books, documents, paper, plans,
statistics referred to above to after the determination of his employment
with the Company at the request of the Executive to enable him to answer or
rebut any question or criticism in connections with matters undertaken by
the Executive on behalf of the Company in the course of his employment.
<PAGE>
9. Expenses
The Company shall reimburse to the Executive all reasonable
travelling, hotel, entertainment and other out-of-pocket expenses which he
may from time to time be authorized to incur in the execution of his duties
hereunder, upon production of an expense claim and vouchers in respect
thereof.
10. The Schedules
The provisions set out in the Schedules hereto as from time to time
altered are part of this Agreement. The Company may from time to time
notify the Executive in writing that it proposes to alter any provision of
the Schedule giving details. Unless the Executive shall within twenty-
eight days of such notice object in writing, such alteration shall be taken
to be agreed and shall take effect accordingly.
11. Notices
Any notices may be given personally to the Executive or to the
Company Secretary or faxed (with a copy sent by registered post) to the
Company at its registered office for the time being or to the Executive
either at his address given above or at his last known address. Any such
notice sent by post shall be deemed served seventy-two hours after it is
posted, and proof of posting shall be proof of service.
12. Other Agreements
The Executive acknowledges and warrants that there are no agreements
or arrangements whether written, oral or implied between the Company and/or
any associated company and the Executive relating to his employment other
than those expressly set out in this Agreement and that he is not entering
into this Agreement in reliance on any representation not expressly set out
herein. This Agreement supersedes and replaces all previous contracts of
employment made between the Executive and the Company or any associated
company.
IN WITNESS whereof this Agreement has been signed by or on behalf of
the parties hereto the day and year first before written.
SIGNED by /S/ PETER MANTLE
for and on behalf of the )
Company in the presence )
of Elizabeth Jones )
SIGNED by /S/ ROBERT S. ORR )
in the presence of )
/S/ )
<PAGE>
SCHEDULE (A)
(1) Place of Work
The normal place of work shall be London.
(2) Hours of Work
The normal office hours of the Business, but also as may be necessary
for the proper performance of the Executive's duties although no extra
payment will be made for such extra work.
(3) Holidays
In addition to English public holidays, the Executive shall be
entitled to 30 days' holiday per annum, with pay, to be taken at periods as
may be agreed with the Company. Holidays not taken before the termination
of the Executive's employment hereunder will be lost, and the Executive
will not be entitled to any accrued holiday pay or to any pay in lieu of
holiday.
(4) Sickness
Subject to production, if requested, of medical certificates
satisfactory to the Company, if the Executive is absent from work due to
sickness or accident, remuneration will not cease to be payable by reason
only of such incapacity for work for a period of four consecutive months or
ninety working days in any calendar year. Thereafter any remuneration
shall be paid at the Company's sole discretion. Such remuneration shall
include any sums the Company is obligated to pay to the Executive pursuant
to the Social Security Contributions and Benefits Act 1992 (Statutory Sick
Pay). The Company may reduce remuneration during incapacity by an amount
equal to the benefit (excluding any lump sum benefit) which the Executive
would be entitled to claim during such incapacity under the then current
Social Security Acts (whether or not such benefit is claimed by him). In
the event that the Executive becomes permanently incapacitated,the
Company's Permanent Health Insurance provisions will apply as set out in
Schedule (B), paragraph (B) of this Agreement.
(5) Notice
The Company may terminate this Agreement by giving the Executive not
less than twelve months' notice in writing. The Executive may terminate
this Agreement by giving this Company not less than six months' notice in
writing. In either case, the Company may, at its discretion,continue to
provide the Executive with work or suspend the Executive under the terms
set out in paragraph 6 below. The Company reserves the right to terminate
the employment of the Executive at any time by paying him a sum equal to
his salary and the value of his other benefits for the period this
Agreement would otherwise continue.
(6) Garden Leave
The Company shall be under no obligation to vest in or assign any
powers or duties to or provide any work for the Executive, and the Company
may at any time or from time to time during any period of notice as
specified in Schedule (A) clause 5 of this Agreement or in circumstances in
which it reasonably believes that the Executive is guilty of misconduct or
in breach of this Agreement in order that the circumstances giving rise to
that belief may be investigated suspend the Executive from the performance
of his duties or exclude him from any premises of the Company and need not
give any reason for so doing. Remuneration will not cease to be payable by
reason only of such suspension or exclusion.
<PAGE>
(7) Termination
(A) If the Executive:
(i) shall be or become incapacitated from any cause
whatsoever from efficiently performing his duties hereunder for four
consecutive months or for ninety working days in aggregate in any period of
twelve months. In these circumstances, and at the discretion of the
Committee, the provisions of the Company's Permanent Health Insurance cover
would operate (subject to the rules and terms thereof); or
(ii) shall be or becomes of unsound mind or be or become a
patient for any purpose or any statute (or any part thereof) relating to
mental health; or
(iii) shall be or become bankrupt or compounds with his
creditors; or
(iv) shall be convicted of an indictable criminal offence
(other than minor traffic offenses or any minor issue of Health and
Safety); or
(v) shall be guilty of serious misconduct or commit any
serious or persistent breach of any of his obligations to the Company or
the Business (whether under this Agreement or otherwise); or
(vi) shall refuse or willfully neglect to comply with any
lawful instructions given to him by the Company or the Business; or
(vii) have an order made against him under Section 3 or
Section 4 of the Estate Agents' Act 1979 or any comparable legislation in
the country within which he performs his employment, or if he shall fail to
inform the Company Secretary immediately of any matter which could cause
any such order to be made against him, then the Company shall be entitled
by notice in writing to the Executive to determine forthworth his
employment under this Agreement. The Executive shall have no claim against
the Company by reason of such determination.
(B) Any delay of forbearance by the Company in exercising any such
right of determination, provided that that delay does not exceed three
months from the date upon which they became aware of their right to
exercise the same, shall not constitute a waiver of it.
(8) Restrictions on termination
(A) In this clause 8:
(i) "Restricted Business" means the business of the
Company and its associated companies at the time of the termination of the
Executive's employment with which the Executive was involved to a material
extent during the period of 12 months ending on the date of the termination
of his employment;
(ii) "Restricted Customer" means any firm, company or
other persons who, during the period of 12 months ending on the date of the
termination of the Executive's employment, was a customer of or in the
habit of dealing with the Business and with whom the Executive had contact
or about whom he became aware or informed in the course of his employment;
and
<PAGE>
(iii) "Restricted Employee" means any person who, at the
date of the termination of the Executive's employment, was employed by the
Company or any associated company at the level of or more senior to the
Executive or was an employee of the Company or any associated company and
who could materially damage the interests of the Business if he became
employed in any business concern in competition with the Restricted
Business.
(B) The Executive will not, for a period of 12 months after the
termination of his employment, solicit or endeavor to entice away from the
Business, the Company or any associated company the business or custom of a
Restricted Customer with a view to providing goods or services to that
Restricted Customer in competition with any Restricted Business.
(C) The Executive will not, for a period of 12 months after the
termination of his employment, provide goods or services to or otherwise
have any business dealings with any Restricted Customer in the course of
any business concern which is in competition with any Restricted Business.
(D) The Executive will not, for a period of 12 months after the
termination of his employment, offer employment to or otherwise endeavor to
entice away from the Company or any associated company any Restricted
Employee.
(E) The Executive will not, for a period of 12 months after the
termination of his employment, (except when the termination is a dismissal)
be engaged in or concerned in any capacity in any business concern which is
in competition with any Restricted Business. This clause shall not
restrain the Executive from being engaged or concerned in any business
concern in so far as the Executive's duties or work shall relate solely:
(a) to geographical areas where the business concern is not
in competition with the Restricted Business; or
(b) to services or activities of a kind with which the
Executive was not concerned to a material extent during the period of the
12 months ending on the date of the termination of his employment.
(F) The period of restriction of 12 months referred to in each of
clauses (B) to (E) shall be reduced by the amount of any period of
suspension from the performance of his duties which the Company has imposed
on the Executive under Schedule (A) clause 6 of this Agreement.
(G) The obligations imposed on the Executive by this clause 8
extend to him acting not only on his own account but also on behalf of any
other firm, company or other person and shall apply whether be acts
directly or indirectly.
Unless the Company shall within ten working days of the service of notice
of termination by either party, waive its entitlement to the provisions of
this clause 8, compensation for the obligations contained in this clause
8(B) to (E) shall be payable as follows:
(i) the Executive shall receive an amount equivalent to his basic
salary (as current at the date of termination less any deductions required
by law)
(ii) this compensation will be paid in monthly instalment throughout
the duration of the obligation in 8(B) to (E)
(iii) in the event that the company agrees to reduce the duration of
the obligations, these monthly installments shall cease.
<PAGE>
(9) Retirement
The normal retirement date will be at the end of the month in which
the Executive reaches the age of 55 provided that if the Executive is aged
35 years or older on 1 January 1998 he will retire at the age of 60.
(10) Medical Fitness
The Executive will be required to undergo a medical examination at
the Company's expense. He will be responsible for arranging every two
years (or, if aged 50 or over, every year) a renewal medical examination
with the Company's medical providers or other appropriately qualified
person as approved by the Human Resources Department. The interval between
these must not exceed 24 (or 12, as the case may be) calendar months. The
Company reserve the right to ask for a medical report in certain
circumstances but this will not be progressed without the prior knowledge
of the Executive.
(11) Professional Conduct and Handbook
The Executive will comply with the Rules of Conduct of the Royal
Institution of Chartered Surveyors and rules of conduct of every other
relevant professional and regulatory body and will observe the terms of the
Jones Lang Wootton Staff Handbook (including the Compliance rules, the
Jones Lang Wootton Employment Handbook and Rules and the Health and Safety
Policy), the Jones Lang Wootton Quality Policy Manual and the QMS
Management Manual as amended from time to time.
(12) Redress of Grievance
In the event of the Executive wishing to seek redress of any
grievance relating to his employment or if he is dissatisfied with any
disciplinary decision relating to him he should write to the Committee
setting out full details of the matter. The Executive must then promptly
answer (in writing if required) such questions (if any) as the Company
wishes to put to him on the matter before the Company comes to a decision.
The decision of the Company on such matter shall be final.
(13) Disciplinary Procedure
Any disciplinary rules applicable to employees of the Company and
from time to time in force are specified in the Jones Lang Wootton
Employment Handbook and Rules a copy of which is available for inspection
in the Human Resources Department at any time upon reasonable notice.
(14) Continuous Employment
The Executive's continuous period of employment with the Company is
deemed to have begun on 1st January 1998.
(15) Taxation
The executive acknowledges that it shall be his responsibility to
make all appropriate declarations of salary and benefits under his
employment to the relevant tax or other regulatory authorities of the
United Kingdom and any other country as appropriate. The Company will
provide an allowance towards Accountancy fees for this purpose as set out
in Schedule B section I of this Agreement.
<PAGE>
(16) Bonus arrangement
(A) The Executive will participate in the Company bonus scheme, the
specific terms of which will be communicated individually. Achievement
under this scheme will depend upon and be related to (i) the Executive's
performance against pre-determined and agreed objectives, and (ii) the
financial performance of the Business. The Executive acknowledges that he
has no right to receive a bonus and will not acquire such a right merely by
virtue of having received one or more discretionary bonus payments during
the course of his employment.
(17) Financial Regulation
The Executive will at all times be governed (as applicable) by the
provisions of the Financial Services Act 1986 and comply with the Conduct
of Business Rules laid down by FIMBRA, TSA and IMRO and any other self
regulating organization.
(18) Professional Indemnity Insurance
The Company will take out and maintain professional indemnity
insurance on behalf of the Executive in accordance with the terms of Bye-
Law 19(B) of the Compulsory Professional Indemnity Insurance Bye-Law and
Regulations 1997 (as amended from time to time or replaced by equivalent
professional indemnity insurance provisions). Any material or substantial
change in the terms of that insurance will be notified to the Executive in
writing. The Executive will comply with the terms of that insurance
policy, a summary of which is available for inspection from the Secretariat
at any time upon reasonable notice.
(19) Choice of Law
This Agreement shall be governed by and construed in accordance with
English law and each party to this Agreement agrees to submit to the
exclusive jurisdiction of the English Courts.
<PAGE>
SCHEDULE (B)
(A) Private Medical Healthcare
The Company will provide private medical healthcare through a
designated healthcare provider on behalf of the Executive for the
Executive, his spouse and any minor children subject to the rules of any
such scheme in force from time to time. The Company reserves the right to
change this provision on written notice to the Executive.
(B) Permanent Health Insurance
In the event of the Executive becoming incapacitated, the Permanent
Health Insurance provisions of this Agreement will apply subject to the
rules of the scheme which are available for inspection at the Human
Resources Department. This envisages that all renumeration from the
Company will cease. Any payment to the Executive will be as outlined in
the scheme. The Company reserves the right to change this provision on
written notice to the Executive.
(C) Pension
Subject to any limits imposed by the appropriate regulating
authorities from time to time, the Company shall pay contributions to an
approved pension provider selected by the Executive as set out below in the
table below.
AGE % OF BASE SALARY
Under 40 7.5%
40-49 10%
50+ 15%
Pension is calculated on a base salary of (pound/sterling)100,000.
(D) Life Cover
Subject to the terms of any relevant policy of insurance and any
limit imposed by the Inland Revenue in force from time to time, the Company
shall provide life insurance cover for the Executive in the sum of four
times the basic salary of the Executive.
(E) Home Telephone
The Company will provide the Executive with an allowance of
(pound/sterling)400 per annum for home telephone expenses.
(F) Assisted Travel
Subject to the Executive's completion of the appropriate form of
request the Company will provide the Executive with an interest free loan
to cover the cost of any season ticket required for the purposes of travel
home to his nominated place of work.
(G) Car
The Company will provide the Executive with a motor car in accordance
with the Company's car policy. The company shall pay all road fund
taxation, insurance premiums, maintenance, repair, fuel, oil and all other
running expenses relating to the car. It shall be the responsibility of
the Executive to take due care of the vehicle and return it in good
condition to the Company in the event of the Executive leaving the Company,
or at any other time as required by the Company in accordance with the
Company's car policy.
(H) Accountancy Fees
The Company will pay the Executive an allowance of (pound/sterling)
2,000 per annum towards the cost of accountancy fees for the purpose of
providing proper personal tax advice to the Executive.
EXHIBIT 21.1
- ------------
JONES LANG LASALLE INCORPORATED
List of Subsidiaries
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
LaSalle Investment Management, Inc. Maryland
LaSalle Hotel Advisors, Inc. Maryland
Tamiami Title, Inc. Florida
LaSalle Investment Management
Securities, Inc. Maryland
LaSalle Investment Management
Securities, L. P. Maryland
Jones Lang LaSalle Americas, Inc. Maryland
Jones Lang LaSalle Development, Inc. Maryland
CJVS, Inc. California
Jones Lang LaSalle (New York), Inc. Delaware
JLW Real Estate Securities, Inc. Delaware
JLW Capital Management, Inc. Delaware
Jones Lang LaSalle Securities, Inc. Maryland
Jones Lang LaSalle Americas
Colorado, L.P. Colorado
Jones Lang LaSalle Americas
Illinois, L.P. Illinois
Compass Cayman Cayman Islands
Compass Asset Management
Services S/C Ltda. Brazil
LaSalle Do Brasil Ltda. Brazil
Jones Lang LaSalle Co-Investment, Inc. Maryland
Jones Lang LaSalle IP, Inc. Delaware
Jones Lang LaSalle International, Inc. Delaware
LaSalle Partners S. de R.L. de C.V. Mexico
LaSalle Partners Services S.
de R.L. de C.V Mexico
Jones Lang LaSalle Real
Estate Services, Inc. Canada
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
Jones Lang LaSalle S.R.L. Argentina
Inmobiliaria Jones Lang
LaSalle Limitada Chile
Jones Lang LaSalle (Europe) Ltd. England
Jones Lang LaSalle (Scotland) Ltd. Scotland
Jones Lang LaSalle (Scotland)
Service Company Scotland
Jones Lang LaSalle Ltd. Ireland
Utrillo Limited Ireland
Jones Lang LaSalle Mgmt. Services Ireland
Jones Lang Wootton Limited Ireland
JLW Financial Services Limited Ireland
JLW Limited Ireland
LaSalle Investment Management England
CIN LaSalle Property Services
London Ltd. England
CIN LaSalle Property Services
U.K. Ltd. England
LaSalle Partners Investment
Management, Ltd. England
LaSalle Partners International England
Compass Management & Leasing U.K. Ltd. England
Jones Lang LaSalle Continuation Ltd. England
Jones Lang LaSalle Ltd. England
JLL 99 Ltd. England
Salta Ltd. England
Jones Lang LaSalle Eastern
European Services Ltd. England
Jones Lang Wootton European
Resources Ltd. England
JLW Residential Ltd. England
Propertylink Limited England
Jones Lang Wootton Fund
Management Limited England
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
JLW Staff Resources England
Jones Lang Wootton
Insurance Services England
JLW Pension Trustees England
PMR Pension Trustees Ltd. England
Orchid Insurance Ltd. Guernsey
JLW Canadian Holdings Inc. Canada
JLW European Holdings Ltd. Jersey
Wonderment NV Curaco
RM Client Mgmt. Services, Ltd. England
Richard Main and Company England
JLW Jones Limited England
Jones Lang Wootton England
Jones Lang LaSalle Corporate
Finance Limited England
Property Mgmt. Resources Limited England
Real Ventures Property Partnership England
Real Ventures (Funding) Limited England
Jones Lang Wootton KK Japan
JLW Pacific Limited Cook Islands
Jones Lang Wootton Int'l Limited Bermuda
JLW Nominees Ltd. England
Jones Lang Wootton International England
JLW Second Nominees Ltd. England
JLW Building Surveying Services England
Jones Lang LaSalle Europe Limited England
Jones Lang LaSalle European
Services Ltd. England
JLW Estate Management Services England
Jones Lang LaSalle Resources England
AMAS Limited England
Jones Lang LaSalle European
Holdings Ltd. England
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
Jones Lang LaSalle (Israel) Ltd. Israel
Jones Lang LaSalle Secs Luxembourg
Jones Lang LaSalle BV Netherlands
Jones Lang LaSalle KFT Hungary
Jones Lang LaSalle LLC Russia
Jones Lang LaSalle Spzoo Poland
Jones Lang LaSalle Vastgoed
Management BV Netherlands
Jones Lang LaSalle Vastgoed
Taxaties BV Netherlands
Jones Lang LaSalle Vastgoed
Adviseurs BV Netherlands
BUIJS Business Promotions BV Netherlands
Jones Lang LaSalle Investment
Consultants BV Netherlands
Jones Lang LaSalle Research &
Consultancy BV Netherlands
Jones Lang LaSalle Woningbeheer BV Netherlands
Jones Lang LaSalle SA Belgium
Jones Lang LaSalle Srl Italy
Jones Lang LaSalle SA France
Jones Lang LaSalle Espana SA Spain
Jones Lang LaSalle GMBH Germany
Neoltia BV Netherlands
Ophuys BV Netherlands
Pleione BV Netherlands
Cattleya BV Netherlands
S.J.I. Management Ltd. Cyprus
JLW India Private Limited India
Jones Lang LaSalle Property
Management Services SARL France
Jones Lang LaSalle Balay Prenot SA France
Jones Lang LaSalle Laese SL Spain
Jones Lang LaSalle GMBH Austria
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
Laese de Centros Comerciales SA Portugal
Jones Lang LaSalle Asset
Management AB Sweden
Epifactie BV Netherlands
JLW Mgmt. Services LLC Russia
Jones Lang Wootton (India)
Pvt. Limited India
Jones Lang LaSalle Services SRL Bucharest
Jones Lang Wootton AB Sweden
Wonderment BV Netherlands
JLW Holdings (India) Ltd. England
JLW (Mauritius) Ltd. Mauritius
JLLINT, Inc. Delaware
Jones Lang LaSalle Asia
Holdings Ltd. Cook Islands
JLW Transact Thailand Co.-Limited Thailand
Jones Lang LaSalle Hotels Limited New Zealand
Jones Lang LaSalle Holdings Limited New Zealand
Jones Lang LaSalle Hotels Pte. Limited Singapore
Jones Lang LaSalle Advisory Limited New Zealand
Jones Lang LaSalle Limited New Zealand
JLW Transact Limited Hong Kong
Jones Lang Wootton (Myanmar) Ltd. Myanmar
Jones Lang LaSalle SEA Ltd. Hong Kong
Jones Lang LaSalle Limited Hong Kong
Jones Lang LaSalle Property
Consultants Pte. Ltd. Singapore
JLW Licensing Amsterdam BV Netherlands
Jones Lang LaSalle Thailand Ltd. Thailland
Jones Lang LaSalle Philippines Inc. Philippines
JLW Homes Pte. Ltd. Singapore
JLW Lanka Pvt. Ltd. Sri Lanka
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
Jones Lang LaSalle Management
Consultants Pvt. Ltd. Sri Lanka
Jones Lang LaSalle
Management Services Ltd. Thailand
Jones Lang LaSalle
Consultancy Services Ltd. Thailand
Jones Lang LaSalle Property
Management Pte. Ltd. Singapore
Jones Lang LaSalle Regional
Services Limited Hong Kong
Jones Lang LaSalle Plant &
Machinery Pte. Ltd. Singapore
Residential Realty Ltd. Hong Kong
Premier Cleaning Service Ltd. Hong Kong
Jones Lang LaSalle
Management Services Ltd. Hong Kong
Jones Lang LaSalle Asia Ltd. Hong Kong
Jones Lang LaSalle China Ltd. Hong Kong
Precision Engineering Ltd. Hong Kong
Residential Management Services Ltd. Hong Kong
Jones Lang LaSalle Surveyors
Shanghai Ltd. China
Beijing Jones Lang LaSalle
Property Mgt. Services Ltd. China
LPI Australia Holdings Pty.Ltd. Australia
Jones Lang LaSalle Real Estate
Services Pty. Ltd. Australia
Jones Lang LaSalle Australia
Pty. Limited Australia
Jones Lang LaSalle Hotels NSW
Pty. Limited Australia
Jones Lang LaSalle Hotels
Vic Pty. Limited Australia
Jones Lang LaSalle Hotels
Qld Pty. Limited Australia
Jones Lang LaSalle Advisory
Services Pty. Limited Australia
<PAGE>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ----------------
Jones Lang LaSalle Advisory
Corporate Property Pty. Limited Australia
Jones Lang LaSalle Advisory Corporate
Property (Vic Pty.) Limited Australia
Jones Lang LaSalle (NSW Pty.)
Limited Australia
Jones Lang LaSalle (VIC Pty.)
Limited Australia
Jones Lang LaSalle (QLD Pty.)
Limited Australia
Jones Lang LaSalle (SA Pty.)
Limited Australia
Jones Lang LaSalle (WA Pty.)
Limited Australia
Jones Lang LaSalle (ACT Pty.)
Limited Australia
Jones Lang LaSalle (TAS Pty.)
Limited Australia
Jones Lang LaSalle Superannuation
Pty. Limited Australia
Jones Lang LaSalle Property Fund
Advisors Limited Australia
Jones Lang LaSalle Mgmt. Services
Pty. Limited Australia
Jones Lang LaSalle Strata Mgmt.
Pty. Limited Australia
Jones Lang LaSalle Corporate
Property Services Pty. Limited Australia
LaSalle Investment Management S.N.C. France
Lafayette Partners France
Jones Lang LaSalle Property
Management Services SARL France
LaSalle Partners Mauritius
Private Limited Mauritius
LaSalle Partners (India)
Private Limited India
Jones Lang LaSalle (Europe) Ltd. England
LaSalle Investment Management
Securities B.V. Netherlands
LaSalle CIEC Consulting, Ltd. China
LaSalle Partners Luxembourg S.C.A. Luxembourg
EXHIBIT 23.1
- ------------
Board of Directors
Jones Lang LaSalle Incorporated:
We consent to incorporation by reference in the registration statement
(No. 333-42193) on Form S-8 and the registration statement (No. 333-70969)
on Form S-3 of Jones Lang LaSalle Incorporated of our report dated
February 7, 2000, relating to the consolidated balance sheets of Jones Lang
LaSalle Incorporated and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended
December 31, 1999, and related schedule, which report appears in the
December 31, 1999, annual report on Form 10-K of Jones Lang LaSalle
Incorporated and subsidiaries.
/s/ KPMG LLP
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 23,308
<SECURITIES> 0
<RECEIVABLES> 292,028
<ALLOWANCES> (9,871)
<INVENTORY> 0
<CURRENT-ASSETS> 348,682
<PP&E> 132,413
<DEPRECIATION> (55,943)
<TOTAL-ASSETS> 924,800
<CURRENT-LIABILITIES> 420,119
<BONDS> 0
<COMMON> 303
0
0
<OTHER-SE> 323,633
<TOTAL-LIABILITY-AND-EQUITY> 924,800
<SALES> 0
<TOTAL-REVENUES> 755,439
<CGS> 0
<TOTAL-COSTS> 823,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,744
<INTEREST-EXPENSE> 18,211
<INCOME-PRETAX> (89,514)
<INCOME-TAX> 5,328
<INCOME-CONTINUING> (94,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,842)
<EPS-BASIC> (4.20)
<EPS-DILUTED> (4.20)
</TABLE>
EXHIBIT 99.1
- ------------
PRESS RELEASE
- -------------
Contact: Bill Sullivan
Chief Financial Officer
+1 312 228 2685 or
+44 171 399 5252
JONES LANG LASALLE REPORTS 1999 RESULTS
---------------------------------------
1999 ADJUSTED NET EARNINGS EQUAL $1.07 PER SHARE
TO EXCEED CONSENSUS ESTIMATES BY $.07; COMPANY EXPECTS 30% GROWTH
IN ADJUSTED NET EARNINGS PER SHARE IN 2000
CHICAGO AND LONDON, FEBRUARY 9, 2000 - Jones Lang LaSalle Incorporated
(NYSE: JLL) today announced adjusted pro forma net earnings of $32.3
million, or $1.07 per diluted share, for the calendar year ended
December 31, 1999, on revenues of $813.9 million. Adjusted pro forma
EBITDA for the full year totaled $112.2 million. The full year adjusted
pro forma net earnings per share exceeded consensus analyst estimates by
$0.07.
For the fourth quarter 1999, the Company reported adjusted net earnings of
$45.9 million, or $1.51 per diluted share, on revenues of $280.7 million.
Adjusted EBITDA for the fourth quarter 1999 totaled $92.5 million.
The adjusted pro forma results include the operating results of the Jones
Lang Wootton companies for the two months ended February 28, 1999, and
exclude the non-recurring transition and integration costs and non-cash
compensation expenses associated with the Jones Lang Wootton merger and the
acquisition of COMPASS Management and Leasing and the U.S. retail
businesses of Lend Lease Corporation Limited.
The Company reported an actual net loss for the year of $94.8 million, or
$4.20 per diluted share, compared with earnings of $20.5 million, or $1.25
per diluted share from the comparable prior year period. For the fourth
quarter 1999, Jones Lang LaSalle generated net earnings of $15.2 million,
or $0.63 per diluted share, compared with net earnings of $11.8 million, or
$0.72 per diluted share for the 1998 fourth quarter. The 1999 full year
and fourth quarter actual results include $101.6 and $19.2 million,
respectively, of non-cash compensation expenses associated with the
issuance of shares pursuant to the merger between LaSalle Partners and the
Jones Lang Wootton companies. The results also include $49.8 million and
$16.8 million, respectively, of non-recurring transition and integration
costs associated with the Jones Lang Wootton merger and the acquisition of
COMPASS Management and Leasing and the U.S. retail businesses of Lend Lease
Corporation Limited.
-- more -
<PAGE>
JONES LANG LASALLE ANNOUNCES 1999 RESULTS - Add One
The fourth quarter and full year 1999 results include a pre-tax gain of
approximately $7.5 million associated with the disposition of the Company's
former construction subsidiary, which was sold in a leveraged buy-out in
December 1996. As previously announced, U.S. GAAP accounting requirements,
in relation to the terms of the sale, had not permitted the recognition of
this gain in prior years.
According to Stuart L. Scott, Chairman and Chief Executive Officer of Jones
Lang LaSalle, management is extremely pleased with the fourth quarter
results. "Our progress during the last six months of the year in
addressing the performance initiatives outlined in the beginning of the
third quarter of 1999, as well as our significant new business activity in
the fourth quarter, together have created solid footing for a successful
and improved 2000.
"In January this year, we announced cost savings expectations from several
initiatives we had implemented in the Americas' Owner & Occupier Services
segment to improve operating performance and help capture approximately
$20 million in cost efficiencies by the end of 2001. This program began to
show its substantial positive effect, primarily within the Americas'
operations and its leasing and management business, in the fourth quarter
of 1999. Through the implementation of these various initiatives, we
expect to achieve savings of $15 million in 2000 and total run-rate savings
of $20 million by 2001," said Mr. Scott.
He continued, "In addition to making progress on our cost-savings program
in the fourth quarter, we also validated our merger and growth platform by
gaining significant new business, expanding key client relationships, and
completing several investment initiatives."
Highlights of Jones Lang LaSalle's segment activities during the fourth
quarter 1999 include:
. Securing notable new business across the Americas, Europe and
Asia Pacific Owner and Occupier Services' regions, including: expanding
the McDonald's Corporation assignment to include project management
services in the United States as well as Citibank facility responsibilities
into Panama, Colombia and Venezuela; retaining advisory and disposition
services for a sizable Deutsche Telekom portfolio in Germany; and closing
the fourth and final sale of a $100 million luxury residential development
in Hong Kong.
. Executing the first and second closings of LaSalle Investment
Management's new Income and Growth II fund to raise commitments of $110
million toward approximately $220 million of new investments in a
diversified portfolio of value-added properties in the United States. A
target of $150-200 million in additional funding is expected in the first
half of 2000.
-- more --
<PAGE>
JONES LANG LASALLE ANNOUNCES 1999 RESULTS - Add Two
. Completing the euros 110 million first closing of the Euro 5
Fund, a newly launched LaSalle Investment Management vehicle that targets
property investments in France, Germany, Spain, Italy and Portugal. With a
goal of ultimately raising euros 200-250 million in equity, a second
closing of euros 100-150 million is anticipated in the first half of 2000.
HIGHLIGHTS OF BUSINESS SEGMENT PERFORMANCE
- ------------------------------------------
Chris Peacock, President and Chief Operating Officer stated that fourth
quarter performance was very positive, with strong revenue and operating
earnings momentum recorded in each of the five business segments.
"Our management teams, particularly in the Americas' Owner & Occupier
Services segment, demonstrated a commitment to improving results this
quarter and establishing strong backlogs in their businesses going into
2000. We also have made a concerted effort to leverage our merger platform
to add client value and expand business opportunities. Through these
combined efforts, we believe we are on track to meet our management plan of
approximately 30 percent growth in adjusted net earnings per share this
year," added Mr. Peacock.
OWNER & OCCUPIER SERVICES
- -------------------------
Jones Lang LaSalle's Owner & Occupier Services segments include the
Company's property management, corporate property services, leasing,
retail, tenant representation, investment banking and other transaction
services in three regions. Beginning with the fourth quarter reporting
period, Jones Lang LaSalle has consolidated the operations of its former
Australasia and Asian segments into a single Asia Pacific segment,
reflecting the unification of these regions as announced on December 21,
1999.
Consistent with historical seasonal trends of increasing revenues and
profitability in the fourth quarter of the year, the Americas region
reported operating income of $51.3 million on revenues of $120.4 million
for the quarter. For the full year 1999, the Americas region generated pro
forma operating income of $24.8 million on total pro forma revenues of
$296.8 million. The pro forma results are inclusive of the operating
results of the Jones Lang Wootton companies for the two months ended
February 28, 1999.
The European region generated fourth quarter operating income of $17.7
million on total revenues of $89.6 million. For the full year ended
December 31, 1999, the European region reported pro forma operating income
of $28.5 million on total pro forma revenues of $290.5 million.
-- more --
<PAGE>
JONES LANG LASALLE ANNOUNCES 1999 RESULTS - Add Three
The Asia Pacific region reported fourth quarter operating income of $4.4
million on total revenues of $39.4 million, bringing its year-to-date pro
forma operating income to $4.9 million on total pro forma revenue of $129.3
million.
HOTEL SERVICES
- --------------
Hotel Services reported operating income of $2.4 million in the fourth
quarter on revenue of $6.0 million. For the full year 1999, this segment
reported pro forma operating income of $2.2 million on total pro forma
revenue of $15.1 million.
INVESTMENT MANAGEMENT
- ---------------------
LaSalle Investment Management recorded revenues of $27.3 million in the
quarter, generating an operating profit of $6.8 million. Pro forma
operating income for the full year 1999 was $12.0 million on total pro
forma revenue of $86.1 million.
Jones Lang LaSalle (NYSE: JLL) is the world's leading real estate services
and investment management firm, operating across more than 100 key markets
on five continents. The company provides comprehensive and wide ranging
integrated expertise, including property and facility management,
transaction and investment management core services on a local, regional
and global level to owners, occupiers and investors. LaSalle Investment
Management, the company's investment management business, is the world's
second largest and most diverse real estate investment management firm,
with approximately $21.5 billion ((Pound/Sterling)13.3 billion) of assets
under management. Jones Lang LaSalle also is the industry leader in real
estate management services, with a portfolio of approximately 700 million
square feet (65 million square meters) of property under management
worldwide.
STATEMENTS IN THIS PRESS RELEASE REGARDING, AMONG OTHER THINGS, FUTURE
FINANCIAL RESULTS AND PERFORMANCE, ACHIEVEMENTS, PLANS AND OBJECTIVES MAY
BE CONSIDERED FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL
RESULTS, PERFORMANCE, ACHIEVEMENTS, PLANS AND OBJECTIVES OF JONES LANG
LASALLE TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY INCLUDE THOSE DISCUSSED UNDER "BUSINESS," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK," AND ELSEWHERE
IN LASALLE PARTNERS' ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998, UNDER "RISK FACTORS," "THE TRANSACTIONS," "THE PURCHASE
AGREEMENTS," "JLW MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE JLW COMPANIES," AND ELSEWHERE IN
LASALLE PARTNERS' PROXY STATEMENT DATED FEBRUARY 4, 1999, UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK,"
AND ELSEWHERE IN JONES LANG LASALLE'S QUARTERLY REPORTS ON FORM 10-Q FOR
THE QUARTERS ENDED MARCH 31, 1999, JUNE 30, 1999 AND SEPTEMBER 30, 1999,
AND IN OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS RELEASE. JONES LANG LASALLE
EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN JONES
LANG LASALLE'S EXPECTATIONS OR RESULTS, OR ANY CHANGE IN EVENTS.
# # #
<PAGE>
NOTE TO EDITORS:
- ---------------
. Media contacts may listen to the Jones Lang LaSalle fourth
quarter results discussion at 9 a.m. EST on February 9 with investors and
market analysts by dialing +1 719 457 2630.
. A replay of the call may be accessed by dialing +1 719 457 0820
outside the United States and +1 888 203 1112 in the United States from
noon EST on February 9, 2000 through 6:00 p.m. EST on February 15, 2000.
The replay passcode is 888850.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Earnings and Comprehensive Income
For the Three and Twelve Months Ended December 31, 1999 and 1998
(in thousands, except share data)
(Unaudited)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Fee based services . . . . . . . . . $ 268,593 112,229 736,042 298,296
Equity in earnings from
unconsolidated ventures. . . . . . 1,796 1,571 6,218 3,911
Gain on sale of business . . . . . . 7,502 -- 7,502 --
Other income . . . . . . . . . . . . 2,811 555 5,677 2,257
---------- ---------- ---------- ----------
Total revenue. . . . . . . . . 280,702 114,355 755,439 304,464
Operating expenses:
Compensation and benefits. . . . . . 142,409 56,207 477,658 172,982
Operating, administrative
and other. . . . . . . . . . . . . 45,830 20,107 161,007 70,164
Depreciation and amortization. . . . 9,950 5,278 36,676 13,455
---------- ---------- ---------- ----------
Total operating expenses
before merger related
non-recurring charges. . . . 198,189 81,592 675,341 256,601
---------- ---------- ---------- ----------
Operating income before
merger related non-
recurring charges. . . . . . 82,513 32,763 80,098 47,863
Merger related non-recurring charges:
Stock compensation expense . . . . . 19,196 -- 101,579 --
Integration and transition expense . 16,833 10,021 49,822 10,021
---------- ---------- ---------- ----------
Total merger related
non-recurring charges. . . . 36,029 10,021 151,401 10,021
---------- ---------- ---------- ----------
Total operating expenses . . . 234,218 91,613 826,742 266,622
---------- ---------- ---------- ----------
Operating income (loss). . . . 46,484 22,742 (71,303) 37,842
Interest expense . . . . . . . . . . . 5,899 3,161 18,211 4,153
---------- ---------- ---------- ----------
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Earnings and Comprehensive Income - CONTINUED
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Earnings (loss) before
provision for income taxes . 40,585 19,581 (89,514) 33,689
Net provision for income taxes . . . . 25,371 7,792 5,328 13,224
---------- ---------- ---------- ----------
Net earnings (loss). . . . . . $ 15,214 11,789 (94,842) 20,465
========== ========== ========== ==========
Other comprehensive income, net of tax:
Foreign currency translation
adjustments. . . . . . . . . . . . $ (2,964) (98) 23 444
---------- ---------- ---------- ----------
Comprehensive income (loss). . . . . $ 12,250 11,691 (94,819) 20,909
========== ========== ========== ==========
Basic earnings (loss)
per common share . . . . . . . . . . $ 0.63 0.73 (4.20) 1.26
========== ========== ========== ==========
Basic weighted average shares
outstanding. . . . . . . . . . . . . 24,103,856 16,230,726 22,607,350 16,215,478
========== ========== ========== ==========
Diluted earnings (loss)
per common share . . . . . . . . . . $ 0.63 0.72 (4.20) 1.25
========== ========== ========== ==========
Diluted weighted average shares
outstanding. . . . . . . . . . . . . 24,258,577 16,322,327 22,607,350 16,387,721
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings
Twelve Months Ended December 31, 1999 and 1998
(in thousands, except share data)
(Unaudited)
<CAPTION>
1999 Results
----------------------------------------------------------------------
First 1998
Quarter Full Year Full Year
Adjusted Second Third Fourth Adjusted Adjusted
Pro Forma Quarter Quarter Quarter Pro Forma Pro Forma
(1) Actual Actual Actual (1) (2)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Fee-based services . . . . $ 159,118 175,391 190,979 268,593 794,081 830,334
Equity in earnings from
unconsolidated
ventures . . . . . . . . 181 1,870 2,371 1,796 6,218 3,911
Gain on sale of
business . . . . . . . . -- -- -- 7,502 7,502 --
Other income . . . . . . . 582 1,883 822 2,811 6,098 14,080
---------- ---------- ---------- ---------- ---------- ----------
Total revenue. . . . . 159,881 179,144 194,172 280,702 813,899 848,325
Operating expenses:
Compensation and
benefits . . . . . . . . 119,049 124,640 135,170 142,409 521,268 472,262
Operating, adminis-
trative and other. . . . 50,777 47,273 36,587 45,830 180,467 251,605
Depreciation and
amortization . . . . . . 10,002 10,106 9,665 9,950 39,723 37,075
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses excluding
merger related
non-recurring
charges. . . . . . 179,828 182,019 181,422 198,189 741,458 760,942
---------- ---------- ---------- ---------- ---------- ----------
Adjusted operating
income (loss)
excluding merger
related non-
recurring charges. (19,947) (2,875) 12,750 82,513 72,441 87,383
Interest expense . . . . . . 2,549 4,703 4,967 5,899 18,118 14,736
---------- ---------- ---------- ---------- ---------- ----------
<PAGE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings - CONTINUED
1999 Results
----------------------------------------------------------------------
First 1998
Quarter Full Year Full Year
Adjusted Second Third Fourth Adjusted Adjusted
Pro Forma Quarter Quarter Quarter Pro Forma Pro Forma
(1) Actual Actual Actual (1) (2)
---------- ---------- ---------- ---------- ---------- ----------
Adjusted earnings
(loss) before
provision (benefit)
for income taxes . (22,496) (7,578) 7,783 76,614 54,323 72,647
Net provision (benefit)
for income taxes . . . . . (8,700) (2,880) 2,958 30,674 22,052 27,727
Minority interest. . . . . . -- -- -- -- -- 658
---------- ---------- ---------- ---------- ---------- ----------
Adjusted net earnings
(loss) excluding
merger related
non-recurring
charges. . . . . . $ (13,796) (4,698) 4,825 45,940 32,271 44,262
========== ========== ========== ========== ========== ==========
Adjusted EBITDA (3). . . . . $ (9,945) 7,231 22,415 92,463 112,164 123,800
========== ========== ========== ========== ========== ==========
Adjusted earnings (loss)
per common share (4) . . . $ (0.45) (0.15) 0.16 1.51 1.07 1.44
========== ========== ========== ========== ========== ==========
Adjusted weighted average
shares outstanding (4) . . 30,538,404 30,566,160 30,189,696 30,335,735 30,298,332 30,644,227
========== ========== ========== ========== ========== ==========
<FN>
(1) First Quarter Adjusted Pro Forma results and Full Year Adjusted Pro Forma results for 1999 give effect to
the operating results of the Jones Lang Wootton companies for the two months ended February 28, 1999, the period
prior to their merger with LaSalle Partners Incorporated, amortization expense of the goodwill resulting from the
merger as if the merger occurred on January 1, 1999, and a benefit for taxes as if the Jones Lang Wootton
companies and LaSalle Partners Incorporated were taxable entities at an effective tax rate of 40% as of January 1,
1999. No effect has been given to the compensation expense incurred associated with the issuance of shares to
former employees of Jones Lang Wootton. Further, this analysis excludes the effect of merger related non-
recurring expenses associated with the merger with Jones Lang Wootton and the acquisition of Compass. This
analysis is not intended to be a presentation in accordance with generally accepted accounting principles.
<PAGE>
JONES LANG LASALLE INCORPORATED
Adjusted Pro Forma Consolidated Statements of Earnings - CONTINUED
(2) Full Year Adjusted Pro Forma results for 1998 gives effect to the operations of Compass and the Jones Lang
Wootton companies for the twelve months ended December 31, 1998 as if the acquisition and merger occurred on
January 1, 1998, amortization expense of the goodwill resulting from the transactions, and a benefit for taxes as
if Compass, the Jones Lang Wootton companies and LaSalle Partners Incorporated were taxable entities at an
effective tax rate of 38% as of January 1, 1998. No effect has been given to the compensation expense incurred
associated with the issuance of shares to former employees of Jones Lang Wootton. Further, this analysis excludes
the effect of merger related non-recurring expenses associated with the merger with Jones Lang Wootton and the
acquisition of Compass. This analysis is not intended to be a presentation in accordance with generally accepted
accounting principles.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation and amortization and
merger related non-recurring charges. Merger related non-recurring charges represent non-cash compensation
expense resulting from the issuance of shares to former Jones Lang Wootton employees including the effect of
quarterly adjustments on certain of those shares as a result of changes in the stock price, in addition to non-
capitalizable integration and transition costs incurred related to the acquisition of Compass and the merger with
Jones Lang Wootton.
(4) Adjusted earnings per common share represents adjusted net earnings divided by the weighted average
committed shares outstanding. Committed shares are inclusive of shares subject to forfeiture, vesting, indemnity
and adjustment provisions which are not considered in the calculation of weighted average basic or diluted shares
outstanding under generally accepted accounting principles. Committed shares outstanding for the three and twelve
months ended December 31, 1999 and for the twelve months ended December 31, 1998 reflect the return of certain
adjustment shares, in accordance with the purchase and sale agreement, as of January 1, 1998.
Certain amounts have been reclassified to conform with the current quarter presentation.
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results
Quarterly Adjusted Pro Forma Results for the Twelve Months ended December 31, 1999
(in thousands)
(Unaudited)
<CAPTION>
First
Quarter Full Year
Adjusted Second Third Fourth Adjusted
Pro Forma Quarter Quarter Quarter Pro Forma
(1) Actual Actual Actual (1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OWNER & OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services. . . . . . . . $ 19,105 23,173 43,010 70,152 155,440
Management fees. . . . . . . . . . . . 26,610 28,739 26,257 35,789 117,395
Equity earnings. . . . . . . . . . . . (180) 281 178 594 873
Gain on sale of business . . . . . . . -- -- -- 7,502 7,502
Other services . . . . . . . . . . . . 2,247 2,246 2,901 4,489 11,883
Intersegment revenue . . . . . . . . . 62 78 1,619 1,902 3,661
---------- ---------- ---------- ---------- ----------
47,844 54,517 73,965 120,428 296,754
Operating expenses:
Compensation, operating and
administrative . . . . . . . . . . . 65,023 60,431 61,895 64,471 251,820
Depreciation and amortization. . . . . 5,324 5,033 5,076 4,691 20,124
---------- ---------- ---------- ---------- ----------
Operating income (loss). . . . . $ (22,503) (10,947) 6,994 51,266 24,810
========== ========== ========== ========== ==========
EUROPE
Revenue:
Implementation services. . . . . . . . $ 45,396 46,808 45,295 61,023 198,522
Management fees. . . . . . . . . . . . 15,697 20,841 22,216 27,407 86,161
Equity earnings. . . . . . . . . . . . (21) (72) (132) 6 (219)
Other services . . . . . . . . . . . . 4,012 434 416 1,143 6,005
---------- ---------- ---------- ---------- ----------
65,084 68,011 67,795 89,579 290,469
Operating expenses:
Compensation, operating and
administrative . . . . . . . . . . . 57,665 60,186 65,230 69,225 252,306
Depreciation and amortization. . . . . 2,257 2,357 2,399 2,676 9,689
---------- ---------- ---------- ---------- ----------
Operating income . . . . . . . . $ 5,162 5,468 166 17,678 28,474
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
First
Quarter Full Year
Adjusted Second Third Fourth Adjusted
Pro Forma Quarter Quarter Quarter Pro Forma
(1) Actual Actual Actual (1)
---------- ---------- ---------- ---------- ----------
ASIA PACIFIC
Revenue:
Implementation services. . . . . . . . $ 13,640 20,324 18,594 25,449 78,007
Management fees. . . . . . . . . . . . 9,700 11,128 10,529 11,526 42,883
Equity earnings. . . . . . . . . . . . (24) 24 -- 117 117
Other services . . . . . . . . . . . . 1,433 1,958 2,554 2,314 8,259
---------- ---------- ---------- ---------- ----------
24,749 33,434 31,677 39,406 129,266
Operating expenses:
Compensation, operating and
administrative . . . . . . . . . . . 28,096 30,043 26,973 33,255 118,367
Depreciation and amortization. . . . . 1,407 1,648 1,200 1,722 5,977
---------- ---------- ---------- ---------- ----------
Operating income (loss). . . . . $ (4,754) 1,743 3,504 4,429 4,922
========== ========== ========== ========== ==========
HOTEL SERVICES -
Revenue:
Implementation services. . . . . . . . $ 1,850 2,246 2,511 4,478 11,085
Management fees. . . . . . . . . . . . -- 473 470 358 1,301
Other services . . . . . . . . . . . . 371 462 734 1,179 2,746
---------- ---------- ---------- ---------- ----------
2,221 3,181 3,715 6,015 15,132
Operating expenses:
Compensation, operating and
administrative . . . . . . . . . . . 2,295 3,619 3,182 3,619 12,715
Depreciation and amortization. . . . . 68 50 45 43 206
---------- ---------- ---------- ---------- ----------
Operating income (loss). . . . . $ (142) (488) 488 2,353 2,211
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
First
Quarter Full Year
Adjusted Second Third Fourth Adjusted
Pro Forma Quarter Quarter Quarter Pro Forma
(1) Actual Actual Actual (1)
---------- ---------- ---------- ---------- ----------
INVESTMENT MANAGEMENT -
Revenue:
Implementation services. . . . . . . . $ 1,942 4,431 2,078 3,373 11,824
Advisory fees. . . . . . . . . . . . . 17,191 14,190 14,153 22,603 68,137
Equity earnings. . . . . . . . . . . . 406 1,637 2,325 1,079 5,447
Other services . . . . . . . . . . . . 506 (179) 83 121 531
Intersegment revenue . . . . . . . . . 35 (35) -- 136 136
---------- ---------- ---------- ---------- ----------
20,080 20,044 18,639 27,312 86,075
Operating expenses:
Compensation, operating and
administrative . . . . . . . . . . . 16,843 17,678 16,096 19,707 70,324
Depreciation and amortization. . . . . 947 1,017 945 818 3,727
---------- ---------- ---------- ---------- ----------
Operating income . . . . . . . . $ 2,290 1,349 1,598 6,787 12,024
========== ========== ========== ========== ==========
Total segment revenue. . . . . . . . . . . $ 159,978 179,187 195,791 282,740 817,696
Intersegment revenue eliminations. . . . . (97) (43) (1,619) (2,038) (3,797)
---------- ---------- ---------- ---------- ----------
Total revenue. . . . . . . . . . $ 159,881 179,144 194,172 280,702 813,899
========== ========== ========== ========== ==========
Total segment operating expenses . . . . . $ 179,925 182,062 183,041 200,227 745,255
Intersegment operating expense
eliminations . . . . . . . . . . . . . . (97) (43) (1,619) (2,038) (3,797)
---------- ---------- ---------- ---------- ----------
Total operating expenses
excluding merger related
non-recurring charges. . . . . $ 179,828 182,019 181,422 198,189 741,458
========== ========== ========== ========== ==========
Operating income (loss)
excluding merger related
non-recurring charges. . . . . $ (19,947) (2,875) 12,750 82,513 72,441
========== ========== ========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Segment Operating Results - CONTINUED
<FN>
(1) First Quarter Adjusted Pro Forma results and Full Year Adjusted Pro Forma results give effect to the
operating results of the Jones Lang Wootton Companies for the two months ended February 28, 1999, the period prior
to their merger with LaSalle Partners Incorporated and amortization expense of the goodwill resulting from the
merger as if the merger occurred on January 1, 1999. No effect has been given to the compensation expense
incurred associated with the issuance of shares to former employees of Jones Lang Wootton. Further, this analysis
excludes the effect of merger related non-recurring expenses associated with the merger with Jones Lang Wootton
and the acquisition of Compass. This analysis is not intended to be a presentation in accordance with generally
accepted accounting principles.
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets
December 31, 1999, September 30, 1999, June 30, 1999 and December 31, 1998
(in thousands)
(Unaudited)
December 31, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents. . . $ 23,308 16,941
Trade receivables, net of
allowances . . . . . . . . . 270,593 116,965
Notes receivable and advances
to real estate ventures. . . 4,519 17,042
Other receivables. . . . . . . 7,045 3,385
Income tax refund receivable . 14,500 --
Prepaid expenses . . . . . . . 9,598 2,185
Deferred tax benefit . . . . . 13,673 9,926
Other assets . . . . . . . . . 5,446 --
---------- ----------
Total current assets . . 348,682 166,444
Property and equipment,
at cost, less accumulated
depreciation . . . . . . . . . 76,470 28,773
Intangibles resulting from
business acquisitions,
net of accumulated
amortization . . . . . . . . . 367,215 229,437
Investments in real estate
ventures . . . . . . . . . . . 67,305 52,976
Long-term receivables, net . . . 27,962 10,950
Deferred tax asset . . . . . . . 5,270 660
Prepaid pension asset. . . . . . 23,956 --
Other assets, net. . . . . . . . 7,940 1,681
---------- ----------
$ 924,800 490,921
========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets - CONTINUED
December 31, December 31,
1999 1998
------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities. . . . . $ 88,257 51,101
Accrued compensation . . . . . 142,960 58,398
Short-term borrowings. . . . . 162,643 --
Other liabilities. . . . . . . 26,259 8,324
---------- ----------
Total current
liabilities. . . . . . 420,119 117,823
Long-term liabilities:
Credit facilities. . . . . . . 159,743 202,923
Deferred tax liability . . . . 7,535 --
Other. . . . . . . . . . . . . 12,878 603
---------- ----------
Total liabilities. . . . 600,275 321,349
Minority interest. . . . . . . . 589 --
Stockholders' equity:
Common stock, $.01 par value
per share, 100,000,000 shares
authorized; 30,285,472 shares
issued and outstanding . . . . 303 163
Additional paid-in capital . . 442,699 123,543
Unallocated ESOT shares. . . . (7) --
Deferred stock compensation. . (70,106) --
Retained earnings (deficit). . (50,050) 44,792
Accumulated other compre-
hensive income . . . . . . . 1,097 1,074
---------- ----------
Total stockholders'
equity . . . . . . . . 323,936 169,572
---------- ----------
$ 924,800 490,921
========== ==========
