We are upgrading our long-term recommendation for Jones Lang LaSalle Incorporated (JLL), a leading real estate investment trust (REIT), from ‘Neutral’ to ‘Outperform’ as we anticipate it to perform well above the broader market.
Jones Lang reported record revenues in 2010 and expects to maintain the momentum in 2011 as well. The company expects continued recovery in the market fundamentals, with global transaction volumes projected to exceed $380 billion, up 20%-25% compared to 2010. In the Americas, transaction volumes are anticipated to reach at least $135 billion in 2011, a 40% increase year-over-year. In the Asia Pacific, 2011 investment volumes are expected to be at least $100 billion, a 15%-20% growth over 2010; and direct commercial real estate transaction volumes in EMEA (Europe, Middle East, and Africa) are expected to grow by 10%-15%. We remain bullish on these projections and expect the company to fulfill its growth target in the current fiscal.
Chicago-based Jones Lang provides corporate, financial, and investment management services to corporations and other real estate owners, users, and investors worldwide. A broad real estate product and service range, and extensive knowledge of domestic and international real estate markets enable the company to operate as a single-source provider of real estate solutions.
With about 180 corporate offices across the globe, Jones Lang operates in more than 750 locations in 60 countries. Jones Lang is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.7 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the largest and most diverse in the real estate sector with nearly $41 billion of assets under management.
Jones Lang continually invests in industry-leading research to identify emerging trends and anticipate future conditions to respond to the shifting market and business trends of its clients. This enables the company to develop new investment products and services tailored to the specific investment goals and objectives of its clients, thereby maintaining profitable long-term relationships during challenging market conditions. The company also has a strong balance sheet that provides it with an operating flexibility to protect and enhance market positions.
However, Jones Lang depends on a vibrant global real estate market to fuel its growth engine. Although global real estate fundamentals are gradually picking up, transaction volumes are yet to reach its pre-recession peak values. The Real Estate Services business segment is also cyclical in nature and experiences fluctuations in revenue and operating margins. This in turn could negatively affect the long-term earnings expectations of the company.
Presently, Jones Lang has a Zacks #1 Rank translating into a short-term ‘Strong Buy’ rating. We also have an ‘Outperform’ recommendation and a Zacks #1 Rank for NorthStar Realty Finance Corp. (NRF), one of the peers of Jones Lang.
JONES LANG LASL (JLL): Free Stock Analysis Report
NORTHSTAR RLTY (NRF): Free Stock Analysis Report
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