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View the full results from this year’s Euromoney/Liquid Real Estate poll |
Jones Lang LaSalle thrives on size & sustainability
Jones Lang LaSalle is expanding with the global real estate markets. CEO Colin Dyer speaks to Rachel Wolcott about moving into investment banking and fund management and its star billing on the green scene.
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“Growth is not about size for its own sake. Growth is about strengthening and deepening the business, the operation, the platform and the client services that we offer” |
As global real estate firms go, Jones Lang LaSalle ticks all the boxes. It offers a staggering array of services worldwide. The firm has surely benefited in recent years from love for all things real estate, which has fuelled a global boom in the sector. But the firm is not simply riding a benign wave. Jones Lang LaSalle has been carefully growing its business organically and through strategic acquisitions. Jones Lang LaSalle ranked first in six of the global categories in the Liquid Real Estate poll – consultancy, agency/letting, corporate real estate, research and property management. It also ranked second in global transactions.
Its most recent financial results speak to its success. In July, Jones Lang LaSalle posted a record-breaking second-quarter income of $77.9 million and revenues of $676 million – 33% up on 2006. That translates into first-half revenues of $1.2 billion, 38% up on 2006.
Those aren’t the only impressive numbers the firm has posted. In the past 12 months, Jones Lang LaSalle has opened 18 new offices in 11 different countries and has made 11 acquisitions since the start of 2006. On top of that, over the past three years its investment arm, LaSalle Investment Management, has nearly doubled its assets under management from $24 billion to $46 billion.
Colin Dyer has been leading Jones Lang LaSalle since 2004. His curriculum vitae might not read like that of a chief executive of a real estate company, but if the first-half results are anything to go by, it doesn’t really matter. Before taking on the top role at Jones Lang LaSalle, Dyer was the founding CEO of the WorldWide Retail Exchange, an internet-based business-to-business exchange. He also served as CEO of Courtaulds Textiles, a UK-based international clothing and fabrics company, from 1996 to 2000.
Dyer, who proudly wears a Jones Lang LaSalle logo lapel pin, stresses the parallels between running an international manufacturing company and a global real estate business.
“I come essentially from a manufacturing background, but a very international business-oriented background. I’ve run a company with activities in 17 countries and 20,000 people around the world,” he says. “That experience gives a good basis and understanding of the major regions of the world, which all contributes to a good basis for being involved in an international business such as Jones Lang LaSalle.”
A cooperative culture
Reflecting on his three years at the helm, Dyer says that making his start in real estate was easy because the culture of Jones Lang LaSalle is one of collaboration and cooperation between individuals.
“There is a style about the organization that is actually quite welcoming to newcomers, as long as the newcomers show commitment and interest in the business,” he says. “It’s not a business that puts up barriers to new people, it’s a business that accepts new people, and I’ve been fortunate to come into real estate through this organization and not any other.”
When Dyer came on the scene in 2004, Jones Lang LaSalle was poised for substantive change. The business had just been through a somewhat quiet period of paying down debt. It had posted modest growth but expansion had been approached with caution. Dyer and the senior management team set about putting a plan into place to propel the business forward.
“What we’ve done as a senior management team over the past three years across the three major regions of the world and our investment management business is to have been committed and driven to grow the business, both the top line and, more important, the bottom line and the cashflow of the organization,” says Dyer. “And we have done so while keeping the hard-earned, high-quality balance sheet intact and have kept the credit rating of the organization at its current Baa2 Moody’s level.”
The watchword for driving growth has been consistency. The senior management team has stuck with the business plan it came up with and has been applying it in a uniform way throughout Jones Lang LaSalle’s global network. It focused on three business lines where the management team believed the firm was in a prime position to excel.
One was the global corporates solutions business, which outsources corporate real estate service activities. The global capital markets business, which drives relationships between providers of capital looking for international acquisitions and real estate that’s being marketed internationally, was the second area identified for growth. The third piece was to be the LaSalle Investment Management business.
As part of this effort, the firm added a US-based debt structuring team, a move that enabled it to step beyond its usual boundaries of expertise and get involved in an investment banking deal. Last year, in concert with the investment management business, the debt structuring team acted on the $3.4 billion buyout of CenterPoint Properties Trust. Not only did Jones Lang LaSalle organize the deal on behalf of the California Public Employees’ Retirement System (CalPers), but it is also managing the resulting privatized entity.
“That’s a step-up in terms of scale of deal and the sort of transaction we’ve been involved with,” says Dyer.
In London, the firm established an in-house property derivatives practice in response to the rapidly growing market. The team is a self-contained unit operating under the corporate finance umbrella and led by Alex Kinsman and Jamie Goss, who joined from Fimat International Banque and TFS Derivatives, respectively. They are tasked with sourcing derivative opportunities, and structuring and arranging trades.
Building local expertise
The firm has invested revenue to buy teams and hire in individuals to build those different business lines. But hiring in talent is just part of the plan. Jones Lang LaSalle has invested heavily in acquisitions to reinforce those business lines. This plan of growing its corporate solutions and capital markets businesses, and the investment management business, while continuing to invest in talented individuals and businesses, is set to continue for the next two years.
“Growth is not about size for its own sake,” Dyer stresses. “Growth is about strengthening and deepening the business, the operation, the platform and the client services that we offer. This year, we’ve grown our top line by some 38%.”
A lot has been going on behind the scenes, too. The firm has been investing in its infrastructure, which is all the service infrastructure of the business, the systems, the information technology. This large investment is to make sure the business was running on one set of standardized operations. In the past three years, Jones Lang LaSalle has made 12 acquisitions. The firm now has 169 offices in 162 cities in 48 countries. Still, it is keen to further the development of its local market presence. Being a leader in local markets, Dyer believes, is crucial to the success of any modern international company.
It is on the look-out for acquisition targets, aiming to generate $100 million in revenue – mostly private businesses that can be relatively easily integrated. The way Dyer likes to see it, even if financially Jones Lang LaSalle is acquiring a business on the ground, the deal has to look like a merger.
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An artist’s impression of Bank of America Tower at One Bryant Park. Jones Lang LaSalle is managing the construction of New York City’s sustainability sensation |
A case in point is the June merger with Trammel Crow Meghraj (TCM), a New Delhi-based real estate services company. Anuj Puri, previously managing director of TCM, has been appointed chairman and country head of the newly created entity Jones Lang LaSalle Meghraj. The same policy was followed in another recent merger. In April, when Jones Lang LaSalle acquired Netherlands-based independent property advisers Troostwijk Makelaars, Marijn Snijders, its managing director, was appointed chairman of the combined business. “The leader of the acquired business is now the leader of the whole operation, which helps enormously in passing the right message to the company that’s joining us,” says Dyer. “When we acquire a business, we want it to be as good or better than our own local business so we can put the teams together and make a successful operation.”
And, for the most part, these mergers have enabled Jones Lang LaSalle to do exactly that. The firm had slipped to number four or five in the Dutch market but with the Troostwijk acquisition it’s back up to number two. In India, Jones Lang LaSalle had been growing its business for several years. In the first half of this year, the firm grew its India business by more than 200%. Now, combined with Meghraj, the business has doubled again, making Jones Lang LaSalle a local market leader.
“So in a country like India, which has huge long-term potential for us, we’ve now established ourselves firmly through acquisitions to be the market leader. That’s what I mean by targeting acquisitions to achieve particular strategic goals,” says Dyer.
This strategy has also paid off in the Middle East. Until last year, Jones Lang LaSalle had no presence in the increasingly important Middle Eastern region. In September last year, the firm acquired Dubai-based RSP Group, a real estate investment and advisory firm. That purchase has already borne fruit. Through the RSP Group, Jones Lang LaSalle picked up the leasing mandate for the Dubai World Trade Centre, which wouldn’t have happened without that acquisition.
Sense in sustainability
The initiative that brings a sparkle to Dyer’s eye is the energy and sustainability services practice Jones Lang LaSalle unveiled in July this year. The firm is no newcomer to the green scene. It has played a pivotal role in the construction of Bank of America’s New York headquarters, the sustainability sensation that is One Bryant Park. The Bank of America building is a showcase – once its construction is completed in 2008, it will be the most environment-friendly office tower in New York City.
The building supplies 70% of its own energy from an on-site natural gas-burning power plant. In a city where temperatures in the summer soar and then plunge below zero in winter, climate control is crucial but also a huge drain on energy. One Bryant Park uses excess thermal energy from the power plant, an innovative groundwater heat exchanger and an air-conditioning system cooled by ice made with excess power during off-peak hours. Water collected from the roof flushes the toilets. It even has waterless urinals.
Jones Lang LaSalle is managing the construction of One Bryant Park and on the back of that experience has been identified as one of the leaders when it comes to sustainability in real estate. Last year, the firm was named an energy star partner and has just been given the Chairman’s Award from the Alliance to Save Energy. Behind this green initiative is a global cadre of engineering managers who have retrained themselves in the new language of sustainability: efficiency in energy, water use and waste management as well as in building inputs and outputs.
“We took all of that knowledge [from the One Bryant Park project] and we’ve brought these engineers together to form an energy and sustainability board,” says Dyer. “We’ve established our own internal policy goals around energy and sustainability and now we are putting this out as a coordinated package of services. We have a real deep knowledge. This is not spin – we can do this stuff. We have been doing it and we’ve got the technical skills in house to do it.”
Any new offices Jones Lang LaSalle puts up are built to high energy efficiency standards and internally the firm is implementing programmes to save energy and to handle waste in a sustainable way. In developed countries, 40% of electricity supplies go into real estate; in turn, these buildings emit about 40% of the greenhouse gases into the atmosphere. So a global real estate player such as Jones Lang LaSalle is well positioned to make a big difference.
“We can have an enormous influence over this whole subject area,” says Dyer. “We can do it in a way that benefits our clients and is actually revenue-producing for us as well.”
Corporates used to pay lip service to green issues by putting a few recycling bins around their offices; now they are paying attention to sustainability practices, because it’s good business and it’s good to be seen as a green corporate citizen by clients and employees. But there’s now even another level. Investors have put sustainability on their agendas, because there’s value in it and they are now putting up buildings with sustainable credentials. On the flip side, investors see a significant downside to buildings that aren’t up to scratch in the sustainability stakes.
The clients are already lining up at Jones Lang LaSalle’s door. The firm is working on advisory projects for an international restaurant chain, a leading beverage company and a well-known technology company.
Investment management
LaSalle Investment Management has seen its fair share of growth. It has added $9 billion in assets under management over the past year. For a long time, real estate could not compete with fixed income and equities. However, as returns in those asset classes came to look increasingly unattractive, investors revisited real estate, among other alternative investments. As money has flowed in the market has become more transparent in visibility on pricing, and has benefited from secure legislation as well as lack of bureaucracy and underhand practices.
“That means real estate has become a more secure asset for institutions to place their money in,” says Dyer. “These days more and more real estate is coming into the invested market. Coming out of private hands, coming out of corporate hands, government hands – and it’s going into the institutional market and then into the traded institutional market as well. So you’ve got a long-term secular trend of real estate moving into public ownership – more transparent ownership.”
In response to this shift, LaSalle Investment Management has realigned its offerings. More opportunistic funds are on offer. It has rolled out a UK venture fund and its fifth US growth and income fund, which has more of an opportunistic flavour to it. It has also moved geographically. The firm has three developing markets funds on offer: one focused on south and central America; the other two devoted to Asia-Pacific.
“All three of those funds are oversubscribed,” says Dyer. “Those funds are taking clients to new geographies and typically you’ll find American and European investors who want exposure to Asian economies coming into those funds.”
Asia is set to become a staple of LaSalle Investment Management’s offering. The firm has a strong Asia-Pacific platform with a couple of hundred people on the ground who are able to find and execute transactions as well as manage the assets and add value to them. On the back of this expertise, LaSalle will continue to launch Asia-focused funds.
Looking ahead, Jones Lang LaSalle has firm plans to keep growing its global network, with an eye to making gains in Brazil, Russia, India and China. But, as a recent mandate shows, there are still big opportunities to be had in developed markets. Jones Lang LaSalle was the company the Clise family turned to in June when it wanted to sell 12 acres of undeveloped land in downtown Seattle. Worth an estimated $7 billion, the deal is a coup. It could be one of the largest land sales in a metropolitan area in the US, and Jones Lang LaSalle is marketing the property.
