GBE Grubb & Ellis Company Common Stock

Jones Lang LaSalle Incorporated (JLL), a leading full-service real estate firm, reported third quarter 2010 net income of $33.9 million or $0.76 per share compared to $37.1 million or $0.84 in the year-earlier quarter. Excluding non-recurring items, earnings were $49.6 million or $1.12 per share during the reported quarter versus $38.1 million or $0.86 in the year-ago quarter. Recurring earnings for the reported quarter surpassed the Zacks Consensus Estimate of $1.09.

Revenues for the reported quarter came in at $903.2 million compared to $708.4 million in the year-ago quarter. The healthy year-over-year increase in revenue was primarily due to strong revenue growth across all business segments throughout the globe and accretive effect of the acquisition of King Sturge.

Total revenues during the quarter were well above the Zacks Consensus Estimate of $850 million. Total operating expenses were $848.9 million in the quarter compared with $646.5 million in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) were $93.7 million for third quarter 2011 compared with $78.7 million for the same period in 2010.

By segments, revenues from the ‘Real Estate Services’ came in at $827.1 million reflecting a year-over-year increase of 24%, while that of the ‘LaSalle Investment Management’ segment increased 12% to $76.1 million.

Region wise, revenues from the Americas were $379.3 million, reflecting a year-over-year increase of 22% in local currency, while EMEA (Europe, Middle East, and Africa) revenues increased 38% to $247.3 million. In the Asia-Pacific region, revenues in the reported quarter surged 12% to $200.6 million.

The solid year-over-year revenue growth across all the regions was attributable to strong income from ‘Capital Markets & Hotels’ 'Project & Development Services’ and ‘Advisory, Consulting and Other’, which improved 50%, 23% and 24%, respectively, during the quarter. ‘LaSalle Investment Management’ segment has raised net equity of approximately $5 billion year-to-date. At quarter end, assets under management were $47.9 billion.

At quarter-end, Jones Lang had an outstanding debt of $567 million under its $1.1 billion long-term credit facility. During the quarter, the company declared a semi-annual dividend of $0.15 per share, in tune with its previous semi-annual dividend paid in June 2011.

Jones Lang is one of the best-positioned commercial real estate services companies, maintaining steady margin improvements in line with stable revenue growth. Recent acquisitions should incrementally add to earnings and overall expenses should reduce as operating synergies are realized.

We maintain our ‘Neutral’ rating on Jones Lang, which presently has a Zacks #4 Rank that translates into a short-term ‘Sell’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank (short-term ‘Hold’) for Grubb & Ellis Company (GBE), a competitor of Jones Lang.

 
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