Colin Dyer - Global Chief Executive Officer, President and Director Christie B. Kelly - Chief Financial Officer and Executive Vice President.

David Gold - Sidoti & Company, LLC David Ridley-Lane - BofA Merrill Lynch, Research Division Mitchell B. Germain - JMP Securities LLC, Research Division Bradley K. Burke - Goldman Sachs Group Inc., Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division Keane McCarthy.

Good day, and welcome to the First Quarter 2014 Earnings Release Conference Call for Jones Lang LaSalle Incorporated. Today's call is being recorded. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements.

Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the company's annual report on Form 10-K for the year ended December 31, 2013, and in our other reports filed with the SEC. The company disclaims any undertaking to update or revise any forward-looking statements.

A transcript of this call will be posted and available on the company's website. A web audio replay will also be available for download. Information and the link can be found on the company's website. At this time, I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer, for opening remarks. Please go ahead, sir..

Thank you. Well, hello, everybody, and thank you for joining this review of our results for the first quarter of 2014. I'm in Switzerland today attending a meeting with various clients including Procter & Gamble, a valued and long time client of our firm.

Christie Kelly, our CFO, is joining me from Chicago and Christie will discuss details of our financial performance in a couple of minutes. But let me begin, as I usually do, with a few headlines. Our fee revenue in the quarter reached $878 million, 13% higher than the first quarter of last year.

Adjusted net income totaled $17 million and that's $0.39 a share, which compares with $16 million or $0.36 a share, a year ago. And our Board of Directors had announced a 5% increase in our semiannual dividend and that's up to $0.23 per share, which indicates our confidence in the firm's continuing growth in cash generation.

Revenue growth in all 3 regions was driven primarily by strong performances in Leasing, and by growth in our Property & Facility Management and Project and Development Services businesses. Our first quarter Capital Markets growth slowed year-on-year, following a very active close to 2013.

But strongly, investment sales pipelines indicate that this is a timing issue and not a trend. LaSalle Investment Management continue to attract capital from institutional investors, and after raising $7 billion in 2013, saw nearly $1 billion of equity commitments during this first quarter. LaSalle also has a very good pipeline for the second quarter.

Conditions in the global economy and in real estate markets continue to have broadly positive trend. In addition to my comments here, you will find more detailed information on the slides posted in the Investor Relations section at jll.com. The steady economic recovery remains on track and it's now into its fifth year.

Global GDP is expected to grow by 3.4% this year and by 3.8% in 2015. Regionally, we forecast 5% growth in Asia Pacific, 2.9% growth in the Americas and 1.5% in Europe this year. Turning to global real estate markets. As you will see on Slide 3, investment sales volumes continue to build and were up 28% over the last 12-month period.

And in the first quarter, market volumes totaled $136 billion. The wave of capital targeting real estate continues to push up prices, with capital values on prime assets in 25 major markets, increasing by more than 8% year-on-year. Prime office yields continue to compress in major cities like London, Paris and Tokyo.

While Leasing market activity measured by gross absorption remains flat, we think that many markets have turned a corner. Growing market optimism and evidence of increased occupier activity of a strong evidence of the shift. In the U.S.

during the quarter, demand was more evenly distributed across markets, and shortages of grade A space are boosting occupancy in grade B space. European leasing volumes were marginally below the first quarter of last year, but solidly in line with the region's 5-year average.

Most West European leasing markets saw increased activity from a year ago, but volumes in Central and Eastern Europe declined by 22%, heavily impacted by reduced corporate activity in Moscow. First quarter leasing volumes in Asia Pacific were up a healthy 21% year-on-year.

Rental rates increased in all 3 regions for the first time since the first quarter of 2012. Asking rents grew by 4.2% in the U.S., 1.1% in Asia Pacific, while European rental growth moved positive for the first time in 2 years, increasing by just under 1%.

In general then, the first quarter produced a solid start to the year for commercial real estate. Capital markets remain strong, while leasing gained momentum on the back of renewed business confidence and investment. So for our performance, I'll turn the call over to Christie..

Thank you, Colin. Good morning, and good afternoon, to everyone on our call. As Colin mentioned, we had a solid first quarter to start out the year. We delivered record first quarter fee revenue results and strong fee revenue growth.

Notably, we increased adjusted net income and achieved our third highest adjusted earnings per share ever for our first quarter period. Our performance was broad-based, reflecting the market dynamics that the last 2 quarters, where we have seen an improvement in occupier sentiment, further supporting investor decision-making.

Our consolidated results demonstrate our ability to produce profitable revenue growth, while consistently investing in our business for long-term benefits. We delivered these results within a global economy that continues to improve steadily, particularly in developed economies, overshadowed by emerging risks elsewhere and continuing challenges.

As Colin noted in his introduction, adjusted earnings per share was $0.39 for first quarter 2014, an increase of 8% over 2013, calculated on adjusted net income of $17 million. Consolidated fee revenue was $878 million for first quarter 2014, up 13% over last year on a local currency basis.

All 3 of our geographic segments demonstrated our ability to deliver healthy year-over-year increases in revenue performance across varied markets globally. Our revenue increase of 18% in Leasing demonstrates our ability to continue to capture market share and reflects the improving momentum in leasing markets led by the U.S.

The Capital Markets & Hotels decreased at 6% versus first quarter 2013, primarily reflects EMEA's year-over-year impact of Russia versus a strong comparable quarter in 2013, as well as a general slowing of investment volumes in APAC region for the first quarter after a very active fourth quarter.

We continued to grow our annuity real estate services businesses, such as Property & Facility Management, where fee revenue was up 20% in the quarter versus first quarter 2013. Our LaSalle Investment Management business continued the momentum of robust capital raise in 2013, and also benefited from equity earnings in the first quarter of 2014.

We continue to make investments in our platform to drive growth and enhance our client experience. We also are focusing on productivity enhancements to increase revenue in key markets, while achieving improved long-term profitability.

Adjusted operating income margin calculated on a fee revenue basis was 2.4% for the quarter, compared with 3.1% first quarter last year. This decrease is primarily driven by Russia and investments in our platform, which impacted our quarterly performance by approximately 130 basis points.

We remain focused on balancing top line growth, platform investments and productivity to achieve incremental margin and earnings per share growth. We will start to look at the segment results of the Americas, where first quarter fee revenue increased 20% on a local currency basis over 2013.

Growth was driven by a 24% increase in local currency and leasing and 21% increase in local currency and Property & Facility Management. We had positive growth in U.S. Leasing, despite a decline in overall market volume activity.

And our Corporate Solutions business continued to win new assignments and increase the scope of relationships with long-standing clients. Revenue in Capital Markets & Hotels in the Americas was up 4% against a very strong first quarter 2013, which was 39% higher than first quarter 2012.

Excluding our debt business in the Americas, our capital markets revenue increased 19%. The Americas' operating income margins were down slightly, while adjusted EBITDA margins were up 20 basis points during the quarter.

The operating margin declined, primarily resulted from the shift in revenue mix to more Property & Facility Management revenue and less capital markets revenue, as well as our ongoing platform investment.

We continue to both invest in future growth for the Americas, while also focusing on productivity and cost discipline to drive incremental full year margin and long-term profitable growth. In our EMEA business, fee revenue grew $23 million or 6% local currency.

Russia's contribution to operating income for the quarter was down $5.4 million year-on-year, against a strong first quarter of 2013. Property & Facility Management and Project and Development services, both had double-digit fee revenue growth in local currency for the quarter.

EMEA's leasing revenue was up 6% and Capital Markets & Hotels saw a decrease in revenue compared to a strong first quarter 2013, which was 50% higher than the first quarter 2012.

The decrease in Capital Markets & Hotels revenue is primarily due to Russia, which for context represented 4% of our total EMEA revenue and 1% of our total firm revenue for the 2013 year. Excluding the impact of Russia, our EMEA operating income margins improved 120 basis points from the first quarter of last year.

This underlying operating improvement reflected the positive impact of turning to profit or pruning loss-making businesses, as well as the strength of our performance in a majority of the markets in which we compete.

Our EMEA business outlook for the year remains positive, as we capitalize on improving economic and real estate fundamentals, continue to effectively drive efficiency through productivity combined with technology investments and seek M&A opportunities to supplement long-term profitable growth. Moving onto our Asia Pacific business.

Fee revenue across the region was up 11% in local currency over 2013. Property & Facility Management fee revenue grew 17% in local currency, continuing the sustained growth in this annuity revenue base. Leasing revenue grew 5% in local currency.

Slower than overall market volume growth due to a number of deals that moved into the second quarter, an indication that good business momentum continues. Our Capital Markets & Hotels revenue was down 7% in the quarter, favorably comparing to a 15% decline in overall investment market volume against record 2013 levels.

The Asia Pacific operating income margins decreased slightly from both the shift in revenue mix to more Property & Facility Management revenue and lower Capital Markets & Hotels revenue, combined with our ongoing investments for the future in the region.

The outlook for the year in our Asia Pacific business remains positive given improving market sentiment and our continued focus on productivity and cost control. LaSalle Investment Management deployed capital and did prudent acquisitions and maintained ongoing disposition activity to generate incentive fees and equity earnings.

Advisory fees for the quarter decreased slightly from a year ago with the wind down of legacy funds in 2013, being offset by new mandates and acquisitions. Incentive fees were over $3 million for the quarter, a slight increase from a year ago.

Equity earnings for the quarter were just under $9 million, driven by gains from disposition activity and value increases. Our long-term view for LaSalle is upbeat as we continue to focus on outstanding investment performance for clients, successfully leveraging our current scale and further improving productivity across our platform.

If I could now turn briefly to our consolidated income statement results under GAAP. First quarter includes 2 offsetting non-cash purchase accounting items from prior year's acquisition activity, with no effect to net income. These items are more fully explained in footnote 4 of our press release.

Importantly, our effective tax rate of approximately 25% excluding these items is more representative of our continuing effective tax rate going forward. Regarding the strengthening of our investment-grade balance sheet, we reduced total net debt by $139 million, compared with a year ago, reflecting our strong cash generating business model.

Favorable pricing on our debt and lower debt levels resulted in a decrease in net interest expense from $7.9 million in the first quarter last year to $6.6 million this quarter. In addition, we announced a semi-annual dividend of $0.23 per share, which is a 5% increase from the December 2013 dividend and reflects our confidence in the business.

To sum it up, we had a strong first quarter and start to the year. I will now turn the call back over to Colin..

Thank you, Christie. So turning to some business wins for the first quarter. On slide, you'll see recent activity from across our different service lines and geographies. In our corporate outsourcing business, we won 11 new assignments in the quarter, expanded 5 relationships and renewed another 8 contracts.

You will see on the slides that they ranged from Scania and Crédit Suisse to Volkswagen and Godrej & Boyce. We also continued to build a local market Corporate Solutions business, which serves corporate clients who purchase real estate services locally.

During the quarter, we won 14 assignments, covering 31 million square feet space in this rapidly growing segment. Finally, in the first -- fourth quarter of 2013, when J.P. Morgan Chase selected JLL for outsourcing services, the bank also named us its global provider for technology and application services.

Our JLL tech technology platform has now been fully implemented in every country in which JPMC operates, meeting their very stringent security and compliance standards, and it's being used by every service provider for the bank's global portfolio. Turning to investment sales transactions completed in the quarter.

In New York we advised on the $105 million sale of 12 East 88th Street, which is a prewar apartment building that will be converted to high-end condominiums.

In Spain, we represented UBS in the EUR 61 million acquisition of the Urbil Shopping Centre in San Sebastian and signed a renewed investor -- both of which were signed renewed investor activity in Southern Europe. And in Australia, we completed the sale of a 50% interest in 1 William Street in Brisbane and that for AUD 395 million.

And when this development is completed in 2016, the building will be the city's largest office property.

In Leasing, tenant representation and management transactions completed during the quarter, those included a 3.25 million square foot build-to-suite headquarters lease in the Chicago suburbs for Zurich American, a 108,000 square foot lease for Nestle in Warsaw and a 210,000 square foot lease on behalf of Deloitte in Hong Kong.

And finally, JLL is the proud partner of Toyota in their consolidation and relocation of their North American headquarters to Texas, a transaction which was announced on Monday.

As I said earlier, LaSalle Investment Management continued to attract capital in the first quarter, building on a strong relationship with the leading institution investors globally. This confirms that those investors are continuing to target commercial real estate by partnering with trusted and top-performing advisors.

LaSalle's assets under management stood at $48 billion at the end of March, and clearly, with these commitments in hand, we have significant investment partners to deploy. Looking forward, Slide 3 summarizes our full year projections for global investment sales and leasing volumes.

In the Capital Markets, we are maintaining our forecast for market volumes of $650 billion for the year and that's a 15% increase. In addition, the momentum we see currently among investors combined with increasing numbers, large, single and portfolio assets on the market confirmed this expected growth.

And the distinct improvement in occupier segment -- sentiment, which we've recently seen is also feeding investment momentum. We are forecasting single-digit growth in capital values in most major office markets this year. This will largely be due to rental growth with yields remaining generally flat.

The largest increases in values will be in Tokyo, New York, San Francisco and the city of London. And Madrid will bounce back stronly this year after several very slow years. With economic fundamentals and corporate sentiment improving, gross leasing volumes will increase by 5% to 10% this year.

We will see the greatest growth in Asia Pacific rising between 10% and 15%, and overall latency is expected to decline only marginally as occupiers continue to release space back into the markets and development pipeline is delivering increasing levels of new stock.

Rents on prime assets, currently growing by about 2% annually, are expected to increase to 4% a year by the end of 2014. LaSalle Investment Management sees institutional investors continuing to allocate capital to commercial real estate throughout the year.

With attractive deals becoming more and more difficult to find, however, investors are going to be accepting greater risk, low returns or some combination of the 2, as they pursue their investment goals. Turning to our own prospects for the year. Our outlook remains positive for 2014.

As markets improve, we continue to see very healthy momentum across our business. Our clients are generally more confident and optimistic about the future than they have been for several years.

We have the financial strength to maintain our long-term policy of investing revenue, both in our business infrastructure and for growth, and to invest capital through M&A, capital investment and co-investments along the side of LaSalle's clients.

And the final news item, during the quarter, we shortened our name to JLL, which is more memorable, visible and easy to understand, particularly for international markets. It's well-suited to the digital and mobile technologies, which we are increasingly relying upon.

And since many people already know this is JLL, it simply reflects the reality and allows us to go-to-market with a single unified identity. Our legal name is still Jones Lang LaSelle and LaSalle Investment Management also retains its identity.

It is important to know that while our name has evolved, it will not be accompanied by changing policies, cultures or values, which remain constant, values of superior client service, team work in collaboration and adhering to the highest ethical standards.

And so before we take your questions, I want to mention a few of the awards, which we received recently from industry groups and independent third parties. Honors which reflect the values that I just mentioned and confirm our position as leader in real estate services and investment management.

So during the quarter, we were selected as one of the World's Most Ethical Companies' for the 7th consecutive year by the Ethisphere Institute. We were named in the Global Outsourcing 100 list for the 6th straight year. The U.S. EPA awarded us 2014's Energy Star Partner of the Year and Sustained Excellence Awards.

And Information Week magazine named as to its Elite 100 list of Innovative Companies in Technology. And so with that, we'll be happy to take your questions.

So operator, would you please explain the process?.

[Operator Instructions] Your first question comes from the line of David Gold of Sidoti..

Couple of quick points of follow-up.

First, Colin, you spoke a little bit the leasing side and evidence there of a pick up, and we would certainly see some of it in the numbers with necessary -- some delay in the second quarter, but curious if you can give some additional color on the evidence that you're seeing, I mean, is it as simple as pipeline build up or increase, or is there more to it?.

We can take both of those and bank them. We have a solid pipeline across both our leasing portfolio and our tenant rep activity. I think, Christie referred to those. We are seeing actual quarter activity levels in leasing, which are either at the same level as last year or indicated Asia Pacific up over 20%.

And that's kind of market or it's a backward looking stat, which is a market dynamic, which we haven't seen for a couple of years. And in particular, not last year, during the periods of U.S. fiscal cliff and euro crisis, which stood [ph] over from 2012. We are seeing more inquiries, more showings.

We have had, for example, here a group of our corporate clients, a meeting in Switzerland and they reflect that same sentiment that they internally are increasingly looking to growth as well as cost saving and productivity measures. So those are some of the kind of things that we're seeing and hearing as to which cities are likely to be concerned.

We think that across Asia or across the U.S., first of all, as I refer to in my remarks, the levels of demand are broadening out from the tech driven San Francisco, Silicon Valley, Austin initial burst of activity we saw. And we're seeing now activity in Salt Lake City, Atlanta, Los Angeles growing across Asia. Korea had a strong Q1.

Manila is also showing growth. And these have been pretty quiet markets for the last couple of years. And in Europe, we saw significant uptick of activity in Paris, which has been very muted for a while. London, continues to be strong and robust market.

I've said here on the negative, on the whole situation, and we refer to that a couple of times was Moscow, and that's producing a little bit of hesitancy across parts of Eastern Europe, as well as people just sort of watch and evaluate the situation.

So it's a jurisdiction, generally broad trend across the world and all the indicators we use sort of back it up..

Perfect. That's helpful.

And then second, with the values picking up, can you give us a sense, might not be easy, but would we expect to see higher equity earnings this year given that the pickup in values presumably pushes civilization there?.

Equity earnings, as you know, they are very difficult to predict. We have a couple of things in the pipelines that we are working, but we will see that translate to equity earnings performance through the year or if it's something that materializes into 2015..

Okay.

But directionally would it be safe to assume that the pickup in values, essentially push on -- essentially if value is stepping up that there will be more sales out of your portfolio?.

Yes. That's safe to assume, David..

Okay. And then just one last, Christie. Well, I have here -- on the investment side, just thinking about the rest of the year by way of, I guess, you call that in the release a piece of recruitment, IT and data.

Just curious how we should think about further investments for this year, would it be at a stepped up level or when you are entering into that?.

No. I think you can expect from our business, David, for the long term, consistent investment in the platform. We've stepped up a bit as it relates to IT and big data, in terms of looking towards the benefit of our clients. But specifically, as we pegged that 70 to 80 basis points, is pretty much the norm for our business, give or take..

Your next question comes from the line of David Ridley-Lane of Merrill Lynch..

I was just wondering is there anything unusual in the gross margin, it was a lot better year-over-year, any color on that?.

David, this is Christie. There is nothing unusual in the growth margin. No. And I think just from a run rate perspective, the one piece that we are seeing, we have really positive incremental margin drivers associated with the volume performance and the productivity initiatives in our business.

And that's even on top of the investments in the past [ph] in our platform, for our strategic initiatives, IT, people, et cetera. Yes, the only negative, really, is Russia..

Okay. And then....

And that's also, David, [indiscernible], given the fact that first quarter was well in 2013. We had a very strong comp coming out of Russia..

Okay. And then, how much spare capacity do you have in your U.S.

Leasing staff given the strong results this quarter? Are you going to be needing to hire brokers to meet that demand? Or can you mostly leverage the existing headcount?.

No, we think there's a good business capacity. I mean, we are continuing to hire. We had a net, from memory, 30 highs in the first quarter of this year. But you have to remember last year, we saw very flat markets, and so we think there's quite a lot of activity in the pipeline. The deal size is beginning to pick up again.

We expect the fees, which haven't slipped too far and on the tenant rep side, will continue to harden. And there'll be more incentive attached to them as well. So the outlook for the tenant rep market is very positive. In particular, as -- we are predicting across all of our geographies, an increase in the total volumes transacted in the markets.

For the U.S., we are predicting a sort of 5% to 10% growth. And overall, globally -- 5% to 10% globally as well. So the activity levels -- the underlying activity levels in the market are up and generally will pickup, many points in market share over and above them..

I'll just jump in there too David, because a couple of things from our recruiting perspective, we're out everyday recruiting the best in the market and specifically to, we're really focused on driving productivity and revenue producer.

So with those marks, in terms of where we've been year-over-year, we're not only attracting top talent, but we're increasing our productivity with that top talent too..

Sounds good. If I could, maybe, read between the lines here, you're predicting strong Capital Markets gains in Madrid.

I know Russia is a weak spot, but couldn't -- as you look out in 2014, could Spain be an offsetting positive with potentially more distress selling in that market?.

It could be. You can add Italy. We saw Ireland recovering from it. Problems quite strong last year. So I'd expect the same pattern to be repeated. So yes, it could be an offsetting situation. Q1, as we said, was strong for Russia last year. So good deal of the annual profits, we're actually producing in quarter 1. So, indeed, there could be healthy offsets.

I mean, we don't understand yet what will happen in Russia and how much impact that will have on general business confidence, not only that, but across Eastern Europe. We are not worried about it, but we are watching it.

It doesn't help -- by the way, that we are market leaders in Russia -- it doesn't help that we are market leaders in Russia, which is these were unduly impacted..

Your next question comes from the line of Mitch Germain of JMP Securities..

Colin, you mentioned renewed sales activity in some parts of Europe.

Curious, is that local investors or is it across regional investment that's driving that demand?.

No, in the recovering Southern European countries, it's been international capital over more risk-seeking times. It's been private equity. We have been showing private equity around Spanish opportunities for the last 12, 18 months. And the 2 deals that I referred to in my script were both foreign capital as well. So it's overwhelming at this point.

It's foreign captain..

Great. I know you guys were a little quieter in the acquisition front.

I'm curious just to maybe some commentary on the overall environment and are there any specific deals or any specific business lines you are looking to strengthen here in the coming quarters?.

Yes, the world has gone mad this quarter, at least this week, certainly, in the farmer sector. And we got [indiscernible] doing well in France, but we've been continuing to look at acquisitions. We must have processed dozens this first quarter already. I think there's a general sense of people are up for sale.

There is a supply and there is a demand and there is a reasonable level of balance of deals to be done, with the exception of the investment management sector, which still remains incredibly deal free, the entity level at least.

So we're looking, we're evaluating, but we have, as you know, very high standards starting with strategic and financial fit. But then this important matching of values, which means that anything we look at has to pass quite a few tests. So we continuously look.

We're not -- we haven't gotten our budget, we got to burn through when we see opportunities that fit the template and then we'll not hesitate to move forward. There have been a number of smaller deals through the quarter.

And groups of 10 or 20 people coming in as an entity, we did a small deal in Paris with a supply chain management company, for example, supply chain management advisory company last month. So these sort of deals that have continued through the quarter..

Great. Last one for me. Just -- I'm sorry..

So the only thing I was going to add to that is that this is part of our regular business process. We are always looking at opportunities. And from that perspective, we have got a keen eye and we are consistently working that through with our leadership team..

Got you. Last one for me. And I don't want -- just want to circle back. You did -- we did see a decline in your forecast for '14 market volumes, capital markets and then gross absorption leasing for Europe.

Is that attributed to some of the noise in Russia right now? Is that really what's driving that decline?.

Principally, and -- plus we had a pretty strong run through the last 2 years. So as a level of caution there, an awful lot is transacted. But Russia has certainly had a dampening effect on as you said Eastern Europe and Russia itself. I think fundamental -- nothing fundamental, no big strike on the part of the equity community.

No lack of availability of debt. It's sort of simply our evaluation of the margin..

Your next question comes from the line of Brad Burke of Goldman Sachs..

Just sticking with the Russia theme. So obviously, Q1 2013 looks like it was a really good quarter for Russia. And presumably, you are expecting to see continued weakness in that market for at least the foreseeable future.

So just wondering how the comps are going to trend for the remainder of the 2014 versus 2013, specifically as it relates to Russia?.

It's hard to call. We -- you shouldn't forget after you have a couple of good years, you tend to forget the Russia as with the other BRIC's as a developing country. And they have just switch back rides. And so while the overall long-term trend is the growth, our overall long-term position is to continue to grow in that market.

You do get short-term issues, which impact that growth and throw the business off trend line, significantly. And so we're watching Russia. We are not at this stage overly concerned. We certainly haven't been cutting back on staff. And we haven't been hiring either. But we will see -- we just have to wait and see how long this thing lasts.

As we said -- as Christie said, it represents a very small proportion of less than 5% of Europe's revenue, which is vanishingly small proportion of our total revenue. And so it's not going to have a major overall impact at the year end when 3 big quarters, or second, third, and fourth quarter, which grow significantly through the year.

When they come in, they will [indiscernible] any impact from Russia. But just in Q1, because of the big comps last year, we had a disproportionate impact..

Okay. So the comps were disproportionately high in Q1. Okay..

Yes..

That's right, Brad..

And then I was reading, it looks like you didn't bid for renewal for what seemed like a pretty big Facilities Management contract with Citi.

So I was just wondering whether you would add more color on whether you are seeing more competition for less favorable contracts or whether this was a one-off kind of event? Or should I read it that the market is so strong that you are comfortable walking away from business when you don't like the margin?.

Well, we qualify our opportunities to bid and we bid on roughly 2/3 of the opportunities put to us. And we win roughly 2/3 of those. That's our matching[ph] rate. But in that pre-qualification process, we look at a lot of things, including the prospects for profitability on the individual opportunity being presented to us.

We look at client approach, we look at whether clients can deliver the business opportunities that they're asking us to hire [indiscernible] because there often a lot of internal political issues. We also look at our own resources and the competition for those resources, in particular, in this case within the banking sector.

And we pull the lot together and just form a judgment on whether we choose to bid or not. And so the Citibank situation went through all of those processes and we came out with the no bid decision. I should mention, by the way, we did bid on parts of the regional activity, and we did -- we have picked up that business in South America.

So it was not a blanket though. It was just a selected one..

Okay. And then just last one looking at the operating and admin costs. Looks like as a percentage of fee revenue that was up slightly year-over-year, realized you are also making some investments during the first quarter.

So I wanted to know how you think about these costs trending, concerning that you do have strong growth in fee revenue? And would you eventually expect to see some leverage on these costs in 2014? Or is there going to be more investment going forward to offset any fixed cost leverage that we want to expect?.

So Brad, yes, we absolutely do view that we will gain leverage on these costs. In terms of fixed costs, we are gaining leverage on those costs given the volume profile. And in terms of variable costs, they are up, but are up to measure [ph] it with the pipeline and really look towards the growth profile in the business..

Your next question comes from the line of Michael Mueller of JP Morgan..

Just you touched on Russia a few times, if we're looking at that, what is the, I guess, the Russia impact in EMEA.

How much of that is just high to Capital Markets versus other parts of the business as well?.

In Q1, it's principally Capital Markets because the big comp last year was the Capital Markets comp. Just generally what we're hearing from our business there is that it is impacting Leasing activity as well. Corporate is less active in seeking out new spaces. And so it is a kind of just a wait and see attitude.

Again, prior comments on how long it will last? We don't know. We're not taking any drastic measures at this phase. We're watching it very carefully..

Okay, but the revenue split, it's predominantly Capital Markets in a normalized year?.

No, no, no. It's very much a balanced business. It just happened that this Q1 issue was a big capital -- focused in Capital Markets. Through the balance of the year, we would expect in a normal year to be doing U.S. Capital Markets business, but a significant amount of leasing.

Consulting work is also a big part of our business there as people find their way into the market and understand how the real estate market works..

Okay.

And then, I think you said in the Americas, you said for Capital Markets, excluding the debt business, you were up 19%, was that correct?.

That's correct, Michael..

Okay.

And how much of the business, that business overall is generally tied to the debt market and what specifically kind of drove it this quarter -- drove that change?.

Specifically..

I'm going to....

Yes. I was just going to say -- I was just going to say, Michael that at Capital Markets perspective, the banking and structured capital business, really, had a strong comp last quarter, last year. And so that was part of the differential. And in the market stats, the debt numbers aren't included.

So when you take a look at our stats versus the market, it's appropriate to back that out. And really looked to the 19%..

Okay. And last question from me.

Thinking about the outsourcing business, how do you look at the penetration of that business today, and how does that vary by region?.

This is not -- sort of not a quarterly question, more of an annual or longer-term question. The outsourcing activity -- outsourcing markets are most mature in the U.S. because it's been underway in the real estate sector for 15 to 20 years.

The last 10 years or so, we are seeing significant growth on maturing of the outsourcing business in Asia Pacific. And I'm referring to companies domiciled in these areas. So Asia Pacific domiciled business is all the Asian subsidiaries of major corporations, given its good growth in outsourcing for the last decade.

Europe is really a very recent phenomenally, sort of post great financial crisis when corporations started to learn from that subsidiaries abroad in many cases and adopted the outsourcing approach to real estate thereof to be done at -- in other business areas as well. So that is the least mature and that's what offers us the most growth opportunity.

When you say which regions offer the most growth opportunity in absolute dollars? It's probably Europe and the U.S.

in similar measure, because although it's more mature in the U.S., number of corporations are still hard to get down this track really, the extra business that any one corporation can offer us as it gets -- as it outsources more and more services. That is a large number because of the [indiscernible] scale of the market.

And Europe's growth is it's a big mature continent with lots of big corporations, but they really just started down this track. So good deal of opportunity to our mind everywhere..

Your next question comes from the line of Keane McCarthy of William Blair..

Just go back to the market growth rates, as it relates to the U.S. Leasing market, and maybe, this is semantics, if you could help me parse it out, but I think previously was the Americas or U.S. was expected from the absorption trend, were expected to increase somewhere between 5 and 10, I think, this quarter you kind of rattled that down to 5.

So hoping you could walk us through that a little bit?.

Yes. I just dig up, people have perhaps got a little bit more cautious about the pace of the uptick. I think we've been expecting from the sort of depths of Q2, Q3 last year going into Q4. We expected the uptick to be faster and stronger everywhere. As we go into it, we can now see positive momentum.

We described it in the numbers of market activity, show it with the U.S. in the quarter sort of around break even or slight negatives on year-on-year activity. But as we get closer, our views is to how fast it will turn up to moderating a little bit, so that tenants come down indeed to 5 for the U.S..

Okay. And then maybe with, obviously, some rent growth adding a couple of points.

Probably, kind of make the overall market kind of in that high single digit range, is that fair to say?.

The market for fee, if you like, yes, which is that if we get a 5% growth in volume and the fee kicker as well because rental rates go up than your high single digits, is what the market will offer us. We would expect to pick up share on those sorts of numbers..

Okay.

And then not to beat the dead horse, but transitioning back to Europe, I mean, outside of kind of the Central, Eastern European issues with Russia noise, I'm just curious how London is performing versus some of the other Western European markets?.

Yes, London remains the strongest -- I mean, certainly, in real estate terms remains the strongest market for us and for everybody else. I think the other European market following we had a particularly strong quarter in Germany, and Germany itself had a particularly strong quarter. But I think France is coming along as well.

What the European corporates would say is that, you can point to Eastern Europe and you can point to the lack of reforming on European countries and you can point to some continued, certainly, levels of continued economic weakness. But basically European corporations are growing in confidence. They're getting back to doing business.

And they're focusing on the positives rather than the negatives.

And so, when you could put it all together, despite the thing you can worry about from the point of view of European corporate leaders, this is as good as a set of circumstances that they have been looking at around that business for, let's say, since 2006, 2007, with positive growth everywhere.

And none of the European countries, with the exception of Russia, possibly are in recession. You've got good levels of world growth according to numbers, which were up. On the last time, we recorded those numbers. So there's good global demand for services and businesses originating in Europe. And the levels of consumer and business confidence arising.

So put it all together and despite the fact that it's a slow growth confident -- continent, confidence is up. And frankly, nowhere is confidence higher. Nowhere our growth rate is higher than in London and the U.K. So London is performing strongly.

Our French business is continuing to pick up market share and doing very solid business in good markets or in a good market around Paris. And the German businesses continue to do well also in an economy, which is also doing relatively strong growth rates by European standards..

Okay, that's helpful. And then just a final one for me.

Could you remind us again your multi-family exposure in the U.S.?.

Not large. We have a multi-family activity. It's probably on an annualized basis, represents about 20% of our -- including debt of our overall $200 million or so of U.S. Capital Markets activity..

Yes, that's exactly right, Keane. Yes, it's smaller..

There are no further questions in queue at this time. I'll turn the call back to Mr. Dyer for any closing remarks..

Thank you, operator. And thank you, everybody, for joining us on the call today and for your interest in the company. We look forward to speaking with you again at the end of the quarter 2. Good day, and thanks for joining us..

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..