Jones Lang Lasalle (NYSE: JLL) is a global professional services firm that specializes in real estate and investment management, including buying, building, occupying, and investing in industrial, commercial, retail, residential, and hotel properties.
Chicago-based JLL has a 250-year history with deep roots in England and Texas. The company went public in 1999 and is known to many for its 2008 merger with The Staubach Company. Football legend Roger Staubach served as its executive chairman until his retirement a decade later.
Now, it’s a Fortune 500 company with 2019 annual revenue of $18.0 billion, operations in more than 80 countries, and an international workforce of more than 94,000.
JLL company profile
JLL ended 2019 with 4.6 billion square feet in its property and facilities management portfolio and another 1.1 billion square feet leased (accounting for 37,500 leasing transactions for the year.)
JLL made a major move to expand its breadth with the mid-2019 purchase of capital markets services firm HFF for $1.8 billion. That added 1,050 employees and more than $650 million in revenue in a move the company says has enhanced its capital markets services -- and cross-selling capabilities -- by expanding client access to market coverage and deal flow through the services of more than 3,700 capital markets professionals working in 47 countries.
The company’s focus now also includes providing strategic advice to help clients adapt their office space to the long-lasting changes wrought by COVID-19. Its second-quarter 2020 earnings presentation said the company is "guiding our clients to re-imagine the future of work."
Thought leadership does seem to be on the company’s mind, indeed. Along with client stories, the company stocks its home page with frequently updated industry analyses, including macro trends and drill-down looks at uber-timely issues, such as building health.
But it’s the numbers that count the most for most investors, and here’s a look at those.
JLL makes the bulk of its money through a diversified mix of revenue from leasing, capital markets, property and facility management, project and development services, and advisory and consulting work.
The second quarter was not kind to the company, which saw its consolidated revenue fall 13% from the year-ago quarter to $3.7 billion.
Net income was $15.2 million for the quarter, a huge drop from $110.5 million in 2Q19, and adjusted EBITDA was $198.9 million, down from $226.7 million a year ago. Earnings per share came in at $0.29, a huge drop from $2.40 in 2Q19.
Leasing revenue was particularly hard hit, falling 43% to $358.6 million for the quarter amid global shutdowns, but property and facility management fared much better, down only 1% from 2Q19 at nearly $2.3 billion.
The company’s Lasalle-branded advisory services also held steady. And for the six months ending June 30, revenue was down only 4% year over year at $7.8 billion. Similar six-month results for other metrics can be seen on the first page of JLL’s second-quarter press release. The worst of the pandemic caused a convulsion in JLL’s books that may be temporary.
Along with a robust lineup of global revenue streams potentially ready to recover, JLL’s debt has been dramatically reduced. The company, with a market cap of about $5.3 billion, reduced its debt to $1.1 billion as of June 30 and it reduced cash used by operating activities to $44.7 million for the first half of 2020, compared with $483.1 million last year.
"Driving a $450 million reduction to net debt this quarter reinforced our financial strength and liquidity," CEO Christian Ulbrich said as JLL announced its second-quarter results. "We are well-positioned to withstand the impact of the pandemic and then resume our growth journey."
That growth journey also includes competing against a formidable lineup of competitors that includes the likes of CBRE Group (CBRE: NYSE), Cushman & Wakefield (NYSE: CWK), Colliers International Group (NASDAQ: CIGI), and other publicly held companies, plus a world full of smaller players in specialized niches and localities.
"Our second quarter top-line performance demonstrated the benefit of a globally diversified and integrated platform amidst unprecedented operating conditions. Next to the safety of our employees, we have focused our complete attention toward serving our clients during these challenging times, and maximizing the generation and preservation of cash," Ulbrich said in that release.
The company also laid the groundwork for continued growth through what it called its expanded work with clients during the pandemic "to ensure continuity of critical operations, facilitate the rapid deployment of temporary medical facilities, and develop and implement safe return-to-work measures."
That would seem a good way to create goodwill and good business.
JLL says it plans to achieve growth in its multiple markets by leveraging internal capabilities to work with clients to take advantage of five long-term macro trends it says will support continued CRE growth. Those trends are CRE outsourcing, rising capital allocations in real estate, growing urbanization, a tech-driven "fourth industrial revolution," and sustainability.
JLL’s stock price and the bottom line
The most recent dividend JLL paid was $0.43 a share at the end of last year, but that followed a payout that had grown nearly every year since 2005. But JLL is not a REIT. It doesn’t have to pay out anything, so let’s look at its stock price for a moment.
This Motley Fool chart shows that after plunging from a 52-week high of nearly $180 a share in February to around $78 in just a few weeks, JLL was trading at about $107 a share in mid-September. The highest it’s closed since going public in 1999 was $179.35 on Aug. 11, 2015, and its average for the past 52 weeks is $129.26.
So, just returning to average would be a nice gain. Adding back a dividend certainly seems a possibility, too, given JLL’s history of steady payouts.
The company also seems to be hitting the right notes on environmental sustainability and social issues -- again, look at its home page. Indeed, JLL makes its own argument with these four reasons it’s poised for recovery and growth:
· Global and integrated platform with a talented workforce.
· Dedication to providing world-class results for our clients and communities.
· Proven ability to manage effectively in an environment filled with uncertainty.
· Sufficient liquidity and operational flexibility.
Heady claims, and much of it subjective, but JLL does have an objective history of sound returns, exposure, and experience across multiple markets and activities to back it up. It’s a blue chip worth considering.