JONES LANG LASALLE INC 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements, including the notes thereto, for the three and nine months ended September 30, 2021, and our audited Consolidated Financial Statements, including the notes thereto, for the fiscal year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K, filed with the SEC and also available on our website ( www.jll.com ). You should also refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2020 Annual Report on Form 10-K. The following discussion and analysis contains certain forward-looking statements generally identified by the words anticipates, believes, estimates, expects, forecasts, plans, intends and other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause JLL's actual results, performance, achievements, plans and objectives to be materially different from any future results, performance, achievements, plans and objectives expressed or implied by such forward-looking statements. See the Cautionary Note Regarding Forward-Looking Statements included within this section for further information. We present our quarterly Management's Discussion and Analysis in the following sections: (1) A summary of our critical accounting policies and estimates; (2) Certain items affecting the comparability of results and certain market and other risks we face; (3) The results of our operations, first on a consolidated basis and then for each of our business segments; and (4) Liquidity and capital resources. SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES An understanding of our accounting policies is necessary for a complete analysis of our results, financial position, liquidity and trends. See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for a complete summary of our significant accounting policies. The preparation of our financial statements requires management to make certain critical accounting estimates and judgments that impact (1) the stated amount of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the financial statements, and (3) the reported amount of revenue and expenses during the reporting periods. These accounting estimates are based on management's judgment. We consider them to be critical because of their significance to the financial statements and the possibility that future events may differ from current judgments or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness. Although actual amounts likely differ from such estimated amounts, we believe such differences are not likely to be material. A discussion of our critical accounting policies and estimates used in the preparation of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to these critical accounting policies and estimates during the nine months ended September 30, 2021. ITEMS AFFECTING COMPARABILITY Macroeconomic Conditions Our results of operations and the variability of these results are significantly influenced by (1) macroeconomic trends, (2) the geopolitical environment, (3) the global and regional real estate markets, and (4) the financial and credit markets. These macroeconomic and other conditions have had, and we expect will continue to have, a significant impact on the variability of our results of operations. In 2020 and during the nine months ended September 30, 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits and may continue to do so during the remainder of 2021. 26 Table of Contents Acquisitions and Dispositions The timing of acquisitions and dispositions may impact the comparability of our results on a year-over-year basis. Our results include incremental revenues and expenses following the completion date of an acquisition. Relating to dispositions, comparable results will include the revenues and expenses of recent dispositions and results may also include gains (losses) on the disposition. In addition, there is generally an initial adverse impact on net income from an acquisition as a result of pre-acquisition due diligence expenditures, transaction/deal costs and post-acquisition integration costs, such as fees from third-party advisors engaged to assist with onboarding and process alignment, retention and severance expense, early lease termination costs, and other integration expenses. For dispositions, we may also incur such incremental costs during the disposition process and these costs could have an adverse impact on net income. Investment Performance Equity earnings may vary substantially from period to period for a variety of reasons, including as a result of: (1) gains (losses) on investments reported at fair value, (2) gains (losses) on asset dispositions, and (3) impairment charges. The timing of recognition of these items may impact comparability between quarters, in any one year, or compared to a prior year. The comparability of these items can be seen in Note 4, Business Segments, of the Notes to Condensed Consolidated Financial Statements and is discussed further in Segment Operating Results included herein. Foreign Currency We conduct business using a variety of currencies, but we report our results in U.S. dollars. As a result, the volatility of currencies against the U.S. dollar may positively or negatively impact our results. This volatility can make it more difficult to perform period-to-period comparisons of the reported U.S. dollar results of operations, because such results may indicate a growth or decline rate that might not have been consistent with the real underlying growth or decline rates in the local operations. Consequently, we provide information about the impact of foreign currencies in the period-to-period comparisons of the reported results of operations in our discussion and analysis of financial condition in the Results of Operations section below. Transaction-Based Revenue Transaction-based fees, which are impacted by the size and timing of our clients' transactions, from real estate investment banking, capital markets activities and other services within our RES businesses, and LaSalle, increase the variability of the revenue we earn. Specifically for LaSalle, we are compensated through incentive fees where performance of underlying funds' investments exceeds agreed-to benchmark levels. Depending upon performance, disposition activity, and the contractual timing of measurement periods with clients, these fees can be significant and vary substantially from period to period. The timing and the magnitude of these fees can vary significantly from year to year and quarter to quarter, and from region to region. Seasonality Historically, our quarterly revenue and profits have tended to increase from quarter to quarter as the year progresses. This is a result of a general focus in the real estate industry on completing or documenting transactions by calendar year end and the fact that certain expenses are constant through the year. In addition, this seasonality excludes the recognition of investment-generated performance fees as well as realized and unrealized co-investment equity earnings and losses (the timing of each of these can fluctuate based on a variety of factors). Generally, we recognize incentives fees when assets are sold, the timing of which is geared toward the benefit of our clients. In addition, co-investment equity gains and losses are primarily dependent on valuations of underlying investments, the direction and magnitude of changes to such valuations fluctuate based on a variety of factors. Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis. In 2020 and during the nine months ended September 30, 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits and may continue to do so during the remainder of 2021. A significant portion of our Compensation and benefits expense is from incentive compensation plans, which we generally accrue throughout the year based on progress toward annual performance targets. This quarterly estimation can result in significant fluctuations in quarterly Compensation and benefits expense from period to period. Consequently, the results for the periods ended September 30, 2021 and 2020, are not fully indicative of the results we expect to realize for the full fiscal year. 27 Table of Contents RESULTS OF OPERATIONS Definitions • We define market volumes for Leasing as gross absorption of office real estate space in square feet for the U.S., Europe and selected markets in Asia Pacific. We define market volumes for Capital Markets as investment sales transactions globally. • Assets under management data for LaSalle is reported on a one-quarter lag. • MENA: Middle East and North Africa. Greater China: China, Hong Kong, Macau and Taiwan. • n.m.: not meaningful, represented by a percentage change of greater than 1,000% favorable or unfavorable. • We renamed our Corporate Solutions business to "JLL Work Dynamics" effective June 2021. Consolidated Operating Results Three Months Ended September 30, Change in % Change in Local Currency ($ in millions) 2021 2020 U.S. dollars Leasing $ 738.8 430.3 308.5 72 % 71 % Capital Markets 575.0 284.5 290.5 102 100 Property & Facility Management 2,500.6 2,303.3 197.3 9 7 Project & Development Services 707.9 631.5 76.4 12 11 Advisory, Consulting and Other 237.1 218.2 18.9 9 7 Real Estate Services ("RES") revenue $ 4,759.4 3,867.8 891.6 23 % 22 % LaSalle 129.8 110.3 19.5 18 17 Revenue $ 4,889.2 3,978.1 911.1 23 % 22 % Reimbursements (2,084.3) (1,886.7) 197.6 10 9 Revenue before reimbursements $ 2,804.9 2,091.4 713.5 34 % 32 % Gross contract costs (703.9) (659.1) (44.8) 7 5 Net non-cash MSR and mortgage banking derivative activity (28.1) (14.7) (13.4) 91 91 Fee revenue $ 2,072.9 1,417.6 655.3 46 % 45 % Leasing 717.3 412.9 304.4 74 73 Capital Markets 537.9 262.8 275.1 105 103 Property & Facility Management 313.7 302.4 11.3 4 2 Project & Development Services 201.0 188.0 13.0 7 6 Advisory, Consulting and Other 179.6 145.7 33.9 23 21 RES fee revenue $ 1,949.5 1,311.8 637.7 49 % 47 % LaSalle 123.4 105.8 17.6 17 16 Compensation and benefits excluding gross contract costs $ 1,467.0 970.3 496.7 51 % 50 % Operating, administrative and other expenses excluding gross contract costs 272.7 218.7 54.0 25 23 Depreciation and amortization 52.8 54.9 (2.1) (4) (5) Restructuring and acquisition charges 15.6 33.5 (17.9) (53) (56) Total fee-based operating expenses 1,808.1 1,277.4 530.7 42 40 Gross contract costs 703.9 659.1 44.8 7 5 Total operating expenses, excluding reimbursed expenses $ 2,512.0 1,936.5 575.5 30 % 28 % Operating income $ 292.9 154.9 138.0 89 % 89 % Equity earnings $ 17.4 15.0 2.4 16 % 15 % Adjusted EBITDA $ 352.0 243.6 108.4 44 % 44 % 28 Table of Contents Consolidated Operating Results (continued) Nine Months Ended September 30, Change in % Change in Local Currency ($ in millions) 2021 2020 U.S. dollars Leasing $ 1,799.2 1,281.3 517.9 40 % 39 % Capital Markets 1,343.8 841.6 502.2 60 56 Property & Facility Management 7,381.2 6,944.3 436.9 6 4 Project & Development Services 1,877.4 1,772.7 104.7 6 3 Advisory, Consulting and Other 682.9 589.5 93.4 16 12 Real Estate Services ("RES") revenue $ 13,084.5 11,429.4 1,655.1 14 % 12 % LaSalle 336.8 315.1 21.7 7 4 Revenue $ 13,421.3 11,744.5 1,676.8 14 % 11 % Reimbursements (5,979.3) (5,591.6) 387.7 7 5 Revenue before reimbursements $ 7,442.0 6,152.9 1,289.1 21 % 18 % Gross contract costs (2,066.0) (1,963.5) (102.5) 5 1 Net non-cash MSR and mortgage banking derivative activity (43.5) (21.7) (21.8) 100 100 Fee revenue $ 5,332.5 4,167.7 1,164.8 28 % 25 % Leasing 1,738.8 1,231.9 506.9 41 39 Capital Markets 1,275.7 796.3 479.4 60 57 Property & Facility Management 936.2 870.2 66.0 8 4 Project & Development Services 562.2 554.9 7.3 1 (2) Advisory, Consulting and Other 502.4 415.0 87.4 21 16 RES fee revenue $ 5,015.3 3,868.3 1,147.0 30 % 27 % LaSalle 317.2 299.4 17.8 6 3 Compensation and benefits excluding gross contract costs $ 3,820.3 2,963.3 857.0 29 % 26 % Operating, administrative and other expenses excluding gross contract costs 746.6 753.2 (6.6) (1) (4) Depreciation and amortization 160.3 166.8 (6.5) (4) (6) Restructuring and acquisition charges 50.9 75.8 (24.9) (33) (33) Total fee-based operating expenses 4,778.1 3,959.1 819.0 21 18 Gross contract costs 2,066.0 1,963.5 102.5 5 1 Total operating expenses, excluding reimbursed expenses $ 6,844.1 5,922.6 921.5 16 % 12 % Operating income $ 597.9 230.3 367.6 160 % 157 % Equity earnings $ 106.7 1.4 105.3 n.m. n.m. Adjusted EBITDA $ 874.5 442.5 432.0 98 % 95 % 29 Table of Contents Non-GAAP Financial Measures Management uses certain non-GAAP financial measures to develop budgets and forecasts, measure and reward performance against those budgets and forecasts, and enhance comparability to prior periods. These measures are believed to be useful to investors and other external stakeholders as supplemental measures of core operating performance and include the following: a. Fee revenue and Fee-based operating expenses; b. Adjusted EBITDA attributable to common shareholders ("Adjusted EBITDA") and Adjusted EBITDA margin; and c. Percentage changes against prior periods, presented on a local currency basis. However, non-GAAP financial measures should not be considered alternatives to measures determined in accordance with U.S. generally accepted accounting principles (“GAAP”). Any measure that eliminates components of a company’s capital structure, cost of operations or investment, or other results has limitations as a performance measure. In light of these limitations, management also considers GAAP financial measures and does not rely solely on non-GAAP financial measures. Because our non-GAAP financial measures are not calculated in accordance with GAAP, they may not be comparable to similarly titled measures used by other companies. Adjustments to GAAP Financial Measures Used to Calculate non-GAAP Financial Measures Gross contract costs represent certain costs associated with client-dedicated employees and third-party vendors and subcontractors and are indirectly reimbursed through the fees we receive. These costs are presented on a gross basis in Operating expenses with the equal amount of corresponding fees in Revenue before reimbursements. Consistent with our treatment of directly reimbursed expenses, excluding gross contract costs from both Fee revenue and Fee-based operating expenses more accurately reflects how we manage our expense base and operating margins and also enables a more consistent performance assessment across a portfolio of contracts with varying payment terms and structures, including those with direct versus indirect reimbursement of such costs. Net non-cash mortgage servicing rights ("MSR") and mortgage banking derivative activity consists of the balances presented within Revenue composed of (i) derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity and (ii) gains recognized from the retention of MSR upon origination and sale of mortgage loans, offset by (iii) amortization of MSR intangible assets over the period that net servicing income is projected to be received. Non-cash derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity are calculated as the estimated fair value of loan commitments and subsequent changes thereof, primarily represented by the estimated net cash flows associated with future servicing rights. MSR gains and corresponding MSR intangible assets are calculated as the present value of estimated net cash flows over the estimated mortgage servicing periods. The above activity is reported entirely within Revenue of the Capital Markets service line of the Americas segment. Excluding net non-cash MSR and mortgage banking derivative activity reflects how we manage and evaluate performance because the excluded activity is non-cash in nature. Restructuring and acquisition charges primarily consist of: (i) severance and employment-related charges, including those related to external service providers, incurred in conjunction with a structural business shift, which can be represented by a notable change in headcount, change in leadership or transformation of business processes; (ii) acquisition, transaction and integration-related charges, including fair value adjustments, which are generally non-cash in the periods such adjustments are made, to assets and liabilities recorded in purchase accounting such as earn-out liabilities and intangible assets; and (iii) other restructuring, including lease exit charges. Such activity is excluded as the amounts are generally either non-cash in nature or the anticipated benefits from the expenditures would not likely be fully realized until future periods. Restructuring and acquisition charges are excluded from segment operating results and therefore not a line item in the segments’ reconciliation to Adjusted EBITDA. Gain on Disposition reflects the gain recognized on the sale of businesses. Given the low frequency of business disposals by the company historically, the gain directly associated with such activity is excluded as it is not considered indicative of core operating performance. In 2021, $12.0 million of the activity related to a business disposition within Americas and $0.4 million related to a sold business within EMEA, while activity in 2020 related to the sale of property management businesses in continental Europe. 30 Table of Contents Reconciliation of Non-GAAP Financial Measures Below are reconciliations of (i) Revenue to fee revenue and (ii) Operating expenses to fee-based operating expenses. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2021 2020 2021 2020 Revenue $ 4,889.2 3,978.1 $ 13,421.3 11,744.5 Less: Reimbursements (2,084.3) (1,886.7) (5,979.3) (5,591.6) Revenue before reimbursements 2,804.9 2,091.4 7,442.0 6,152.9 Adjustments: Gross contract costs (703.9) (659.1) (2,066.0) (1,963.5) Net non-cash MSR and mortgage banking derivative activity (28.1) (14.7) (43.5) (21.7) Fee revenue $ 2,072.9 1,417.6 $ 5,332.5 4,167.7 Operating expenses $ 4,596.3 3,823.2 $ 12,823.4 11,514.2 Less: Reimbursed expenses (2,084.3) (1,886.7) (5,979.3) (5,591.6) Operating expenses, excluding reimbursed expenses 2,512.0 1,936.5 6,844.1 5,922.6 Less: Gross contract costs (703.9) (659.1) (2,066.0) (1,963.5) Fee-based operating expenses $ 1,808.1 1,277.4 $ 4,778.1 3,959.1 Operating income $ 292.9 154.9 $ 597.9 230.3 Below is (i) a reconciliation of Net income attributable to common shareholders to EBITDA and Adjusted EBITDA, (ii) the Net income margin attributable to common shareholders (measured on Revenue before reimbursements), and (iii) the Adjusted EBITDA margin (measured on fee-revenue and presented on a local currency basis). Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2021 2020 2021 2020 Net income attributable to common shareholders $ 237.2 131.9 $ 540.2 152.4 Add: Interest expense, net of interest income 9.6 12.3 30.6 41.8 Provision for income taxes 65.3 25.7 148.4 32.2 Depreciation and amortization 52.8 54.9 160.3 166.8 EBITDA $ 364.9 224.8 $ 879.5 393.2 Adjustments: Restructuring and acquisition charges 15.6 33.5 50.9 75.8 Gain on disposition (0.4) — (12.4) (4.8) Net non-cash MSR and mortgage banking derivative activity (28.1) (14.7) (43.5) (21.7) Adjusted EBITDA $ 352.0 243.6 $ 874.5 442.5 Net income margin attributable to common shareholders 8.5 % 6.3 % 7.3 % 2.5 % Adjusted EBITDA margin 17.1 % 17.2 % 16.6 % 10.6 % 31 Table of Contents In discussing our operating results, we report Adjusted EBITDA margins and refer to percentage changes in local currency, unless otherwise noted. Amounts presented on a local currency basis are calculated by translating the current period results of our foreign operations to U.S. dollars using the foreign currency exchange rates from the comparative period. We believe this methodology provides a framework for assessing performance and operations excluding the effect of foreign currency fluctuations. The following table reflects the reconciliation to local currency amounts for consolidated (i) Revenue, (ii) Fee revenue, (iii) Operating income, and (iv) Adjusted EBITDA. Three Months Ended September 30, Nine Months Ended September 30, ($ in millions) 2021 % Change 2021 % Change Revenue: At current period exchange rates $ 4,889.2 23 % $ 13,421.3 14 % Impact of change in exchange rates (54.8) n/a (328.5) n/a At comparative period exchange rates $ 4,834.4 22 % $ 13,092.8 11 % Fee revenue: At current period exchange rates $ 2,072.9 46 % $ 5,332.5 28 % Impact of change in exchange rates (21.0) n/a (125.6) n/a At comparative period exchange rates $ 2,051.9 45 % $ 5,206.9 25 % Operating income: At current period exchange rates $ 292.9 89 % $ 597.9 160 % Impact of change in exchange rates 0.2 n/a (7.2) n/a At comparative period exchange rates $ 293.1 89 % $ 590.7 157 % Adjusted EBITDA: At current period exchange rates $ 352.0 44 % $ 874.5 98 % Impact of change in exchange rates (1.3) n/a (11.5) n/a At comparative period exchange rates $ 350.7 44 % $ 863.0 95 % 32 Table of Contents Revenue We achieved significant third-quarter increases in consolidated RES revenue, up 22% from 2020 to $4.8 billion, and fee revenue, up 47% from last year to $1.9 billion. Third-quarter RES fee revenue exceeded same-quarter 2019, reflecting the continued recovery of transaction-based revenue. Growth was broad-based across all service lines and was led by Leasing (49% of RES fee revenue growth on a local currency basis) and Capital Markets (44% of RES fee revenue growth on a local currency basis), while also reflecting stability in annuity-based revenues, particularly in Americas. In addition, all geographic segments experienced growth, ranging from 15% to 68%. Geographically across service lines, Americas contributed 86% of the RES fee revenue growth for the third quarter, on a local currency basis, with EMEA and Asia Pacific each representing approximately 7% of the growth. The following highlights the proportion of RES service line consolidated fee revenue growth, on a local currency basis, compared with the prior-year quarter, by notable segment. Refer to segment operating results for further detail. • Leasing — Americas (89%), EMEA (6%) and Asia Pacific (5%) • Capital Markets — Americas (80%), EMEA (12%) and Asia Pacific (8%) • Property & Facility Management — Americas drove entire growth, partially offset by EMEA and Asia Pacific • Project & Development Services — Americas (109%) and Asia Pacific (23%), partially offset by EMEA • Advisory, Consulting and Other — Americas (62%), Asia Pacific (24%), and EMEA (15%) LaSalle revenue increased 17% compared with the prior-year quarter, driven by incentive fees and growth in advisory fees, partially offset by lower transaction fees. Refer to the LaSalle segment discussion for further detail. For the first nine months of 2021, consolidated RES revenue and fee revenue increased 12% and 27%, respectively, compared with the prior year. Leasing and Capital Markets also led the year-to-date growth contributing 48% and 44%, respectively, of the RES fee revenue growth on a local currency basis. Americas contributed 80% of the RES fee revenue growth for the first nine months, on a local currency basis. LaSalle revenue increased 4% as higher advisory and incentive fees more than offset the decline in transaction fees. Our consolidated fee revenue increased 46% in U.S. dollars (“USD”) and 45% in local currency for the third quarter of 2021, compared with 2020. Year-to-date, consolidated fee revenue increased 28% in U.S. dollars (“USD”) and 25% in local currency compared with last year. The spreads for the third quarter and year-to-date were driven by the weakening of the U.S. dollar against several major currencies, especially the British pound sterling, euro, Australian dollar and Chinese yuan. Operating Expenses Consolidated operating expenses, excluding reimbursed expenses, were $2.5 billion for the third quarter, up 28% from 2020, and $6.8 billion for the first nine months of 2021, up 12% from 2020, while consolidated fee-based operating expenses were $1.8 billion for the third quarter, up 39% from the prior-year quarter, and $4.8 billion for the first nine months, up 18% from last year. For the third quarter, the increase in fee-based operating expenses was primarily attributable to the Americas, which drove 80% of the increase on a local currency basis (also 80% of the year-to-date increase). Asia Pacific and EMEA represented 12% and 11%, respectively, of the third-quarter increase (16% and 13% year to date, respectively). Americas year-to-date results reflected a $13.8 million non-cash reduction to loan loss credit reserves, compared with a $30.6 million increase in reserves during the prior year. For the third quarter and first nine months of 2021, Restructuring and acquisition charges decreased compared with the prior-year periods; refer to following table for further detail. Charges associated with the acquisition and integration of HFF included retention and severance expense, early lease termination costs, and other integration expenses; since June 30, 2021, such charges have predominantly related to the amortization of retention awards issued in conjunction with the 2019 acquisition. 33 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2021 2020 2021 2020 Severance and other employment-related charges $ 1.2 19.3 $ 2.1 27.6 Restructuring, pre-acquisition and post-acquisition charges 14.4 14.8 47.8 56.4 Fair value adjustments that resulted in a net increase (decrease) to earn-out liabilities from prior-period acquisition activity — (0.6) 1.0 (8.2) Total restructuring & acquisition charges $ 15.6 33.5 $ 50.9 75.8 Portion of total restructuring & acquisition charges related to the acquisition and integration of HFF $ 6.6 13.8 $ 30.5 55.2 Equity Earnings For the third quarter of 2021, we recognized equity earnings of $17.4 million, compared with $15.0 million in the prior-year quarter. For the first nine months of 2021, we recognized equity earnings of $106.7 million, compared with $1.4 million in 2020. Valuation increases of JLL Technologies' investments contributed $7.3 million this quarter and $58.2 million year to date, reflecting continued progress in the strategy to invest in early-stage proptech companies, compared with $4.3 million and $6.8 million in the respective prior-year periods; refer to the Americas segment discussion for additional detail. In addition, substantially all of the $12.7 million of first-quarter 2020 equity earnings in the Americas segment were attributable to gains by consolidated variable interest entities in which we held no equity interest; these gains are also reflected in net income attributable to noncontrolling interest and, therefore, have no impact to net income attributable to common shareholders. LaSalle recognized $8.4 million of equity earnings in third-quarter 2021 ($44.7 million of year-to-date equity earnings), compared with $8.5 million in the prior-year quarter ($20.5 million of equity losses in the first nine months of 2020). Refer to the LaSalle segment discussion for additional detail. Income Taxes The provision for income taxes was $65.3 million and $148.4 million for the three and nine months ended September 30, 2021, respectively, representing an effective tax rate of 21.6% for both periods. For the three and nine months ended September 30, 2020, the provision was $25.7 million and $32.2 million, respectively, representing effective tax rates of 16.0% and 16.2%, respectively. The lower effective tax rates in 2020 reflected comparatively lower pretax earnings as a result of the impact of the pandemic as well as the geographic distribution of the earnings. Net Income and Adjusted EBITDA Net income attributable to common shareholders for the three and nine months ended September 30, 2021 was $237.2 million and $540.2 million, respectively, compared with $131.9 million and $152.4 million in the respective prior-year periods. Adjusted EBITDA was $352.0 million and $874.5 million for the third quarter and first nine months of 2021, respectively. Net income attributable to common shareholders for the nine months ended September 30, 2021 included a $12.0 million gain recognized on the sale of a business as part of a broader investment made in Roofstock, a marketplace for investing in the single-family rental sector. This gain on sale is excluded from adjusted measures. Net income margin attributable to common shareholders for the third quarter (against Revenue before reimbursements) was 8.5%, compared with 6.3% in the prior-year quarter. Adjusted EBITDA margin for the third quarter, calculated on a fee-revenue basis, was 17.0% in USD (17.1% in local currency), compared with 17.2% in 2020. The 20 basis point net reduction in margin was primarily due to (i) the expected reduction of certain non-permanent cost savings from 2020 (including government relief programs) and (ii) incremental investments in people and technology, substantially offset by the significant increase in revenue, particularly from higher margin transaction-based service lines. 34 Table of Contents Segment Operating Results We manage and report our operations as four business segments. Our three geographic RES segments include Americas, EMEA and Asia Pacific. Our fourth segment is LaSalle, our investment management business. Each geographic region offers our full range of real estate services, including tenant representation and agency leasing, capital markets, property management, facility management, project and development services, and advisory, consulting and valuation services. We consider "property management" to be services provided to non-occupying property investors and "facility management" to be services provided to owner-occupiers. LaSalle provides investment management services to institutional investors and high-net-worth individuals. For segment reporting, (i) gross contract costs and (ii) net non-cash MSR and mortgage banking derivative activity are both excluded from revenue in determining "fee revenue". Gross contract costs are excluded from operating expenses in determining "fee-based operating expenses." In addition, our measure of segment results also excludes Restructuring and acquisition charges. Americas - Real Estate Services % Change Three Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 3,083.2 2,380.8 702.4 30 % 29 % Reimbursements (1,525.9) (1,389.6) (136.3) 10 9 Revenue before reimbursements $ 1,557.3 991.2 566.1 57 % 57 % Gross contract costs (227.0) (202.8) (24.2) 12 11 Net non-cash MSR and mortgage banking derivative activity (28.1) (14.7) (13.4) 91 91 Fee Revenue $ 1,302.2 773.7 528.5 68 % 68 % Leasing 582.6 313.6 269.0 86 85 Capital Markets 392.6 175.5 217.1 124 123 Property & Facility Management 160.9 149.6 11.3 8 7 Project & Development Services 101.0 88.7 12.3 14 14 Advisory, Consulting and Other 65.1 46.3 18.8 41 40 Compensation, operating and administrative expenses excluding gross contract costs $ 1,019.1 616.8 402.3 65 % 65 % Depreciation and amortization 33.2 36.4 (3.2) (9) (9) Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,052.3 653.2 399.1 61 61 Gross contract costs 227.0 202.8 24.2 12 11 Segment operating expenses (excluding reimbursed expenses) $ 1,279.3 856.0 423.3 49 % 49 % Equity earnings $ 7.6 4.8 2.8 58 % 60 % Segment income $ 285.6 140.0 145.6 104 % 104 % Adjusted EBITDA $ 291.7 161.9 129.8 80 % 80 % 35 Table of Contents Americas - Real Estate Services (continued) % Change Nine Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 8,228.6 7,132.9 1,095.7 15 % 15 % Reimbursements (4,323.9) (4,128.1) (195.8) 5 4 Revenue before reimbursements $ 3,904.7 3,004.8 899.9 30 % 30 % Gross contract costs (663.1) (607.9) (55.2) 9 8 Net non-cash MSR and mortgage banking derivative activity (43.5) (21.7) (21.8) 100 100 Fee revenue $ 3,198.1 2,375.2 822.9 35 % 34 % Leasing 1,407.1 986.2 420.9 43 42 Capital Markets 888.3 553.6 334.7 60 60 Property & Facility Management 461.6 425.6 36.0 8 8 Project & Development Services 274.8 273.2 1.6 1 — Advisory, Consulting and Other 166.3 136.6 29.7 22 21 Compensation, operating and administrative expenses excluding gross contract costs $ 2,562.4 2,027.3 535.1 26 % 26 % Depreciation and amortization 100.6 112.9 (12.3) (11) (11) Segment fee-based operating expenses (excluding restructuring and acquisition charges) 2,663.0 2,140.2 522.8 24 24 Gross contract costs 663.1 607.9 55.2 9 8 Segment operating expenses (excluding reimbursed expenses) $ 3,326.1 2,748.1 578.0 21 % 21 % Equity earnings $ 58.6 20.4 38.2 187 % 188 % Segment income $ 637.2 277.1 360.1 130 % 129 % Adjusted EBITDA $ 696.6 357.2 339.4 95 % 94 % Year-to-date and quarter-to-date revenue and fee revenue expansion in the Americas was driven by transaction-based revenues, with third-quarter fee revenue outpacing the same period in 2019. The growth in Leasing was driven by both higher transaction volumes and an increase in deal size in the U.S., with strong momentum in office, industrial and retail sectors in certain markets. Capital Markets more than doubled the prior-year quarter's fee revenue for the second consecutive quarter, reflecting increased deal activity across investment sales, debt advisory and equity advisory, as well as a 35% increase in third-quarter servicing revenue from the multifamily business (25% year to date). Valuation Advisory and JLL Technologies Solutions led the increase in Advisory, Consulting and Other. Solid growth in Property & Facility Management was driven by new client wins and was particularly notable given the prior-year quarter grew 24% over 2019. Equity earnings for the third quarter and first nine months of 2021 were attributable to valuation increases of JLL Technologies' investments in early-stage proptech entities. In the prior year, substantially all of the $12.7 million first-quarter equity earnings were attributable to gains by consolidated variable interest entities in which the company held no equity interest; therefore, these gains had no net impact to Adjusted EBITDA. The increases in segment operating expenses and segment fee-based operating expenses for the third quarter and first nine months of 2021, compared with the prior-year periods, were driven by revenue-related expense growth and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020). Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 22.4% in USD and local currency, compared with 20.9% in 2020. The margin expansion was primarily driven by transaction-based revenue growth, mostly offset by the above-noted expected reduction of certain prior-year cost savings, and incremental investments in people and technology. 36 Table of Contents EMEA - Real Estate Services % Change Three Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 830.0 743.8 86.2 12 % 8 % Reimbursements (185.5) (149.1) (36.4) 24 20 Revenue before reimbursements $ 644.5 594.7 49.8 8 % 5 % Gross contract costs (259.3) (270.1) 10.8 (4) (8) Fee revenue $ 385.2 324.6 60.6 19 % 15 % Leasing 76.3 56.6 19.7 35 32 Capital Markets 105.0 69.1 35.9 52 47 Property & Facility Management 77.5 76.9 0.6 1 (4) Project & Development Services 65.8 68.1 (2.3) (3) (5) Advisory, Consulting and Other 60.6 53.9 6.7 12 8 Compensation, operating and administrative expenses excluding gross contract costs $ 385.2 317.5 67.7 21 % 17 % Depreciation and amortization 10.3 9.8 0.5 5 1 Segment fee-based operating expenses (excluding restructuring and acquisition charges) 395.5 327.3 68.2 21 17 Gross contract costs 259.3 270.1 (10.8) (4) (8) Segment operating expenses (excluding reimbursed expenses) $ 654.8 597.4 57.4 10 % 6 % Equity earnings $ — 0.8 (0.8) (100) % (100) % Segment loss $ (10.3) (1.9) (8.4) (442) % (411) % Adjusted EBITDA $ 1.0 7.7 (6.7) (87) % (88) % 37 Table of Contents EMEA - Real Estate Services (continued) % Change Nine Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 2,356.0 2,125.9 230.1 11 % 3 % Reimbursements (516.4) (500.7) (15.7) 3 (4) Revenue before reimbursements $ 1,839.6 1,625.2 214.4 13 % 6 % Gross contract costs (769.3) (722.1) (47.2) 7 (1) Fee revenue $ 1,070.3 903.1 167.2 19 % 11 % Leasing 196.9 149.1 47.8 32 24 Capital Markets 267.9 184.2 83.7 45 36 Property & Facility Management 238.4 221.0 17.4 8 — Project & Development Services 189.2 193.0 (3.8) (2) (7) Advisory, Consulting and Other 177.9 155.8 22.1 14 7 Compensation, operating and administrative expenses excluding gross contract costs $ 1,083.9 931.7 152.2 16 % 9 % Depreciation and amortization 32.2 28.0 4.2 15 7 Segment fee-based operating expenses (excluding restructuring and acquisition charges) 1,116.1 959.7 156.4 16 9 Gross contract costs 769.3 722.1 47.2 7 (1) Segment operating expenses (excluding reimbursed expenses) $ 1,885.4 1,681.8 203.6 12 % 5 % Equity earnings $ — 0.8 (0.8) (100) % (100) % Segment loss $ (45.8) (55.8) 10.0 18 % 20 % Adjusted EBITDA $ (12.6) (26.6) 14.0 53 % 43 % EMEA's revenue and fee revenue growth for the third quarter was led by transaction-based revenue, reflecting the continued recovery in several geographies, particularly those with higher COVID-19 vaccination rates. Notably, Capital Markets and Leasing together exceeded same-quarter 2019 fee revenue performance for the second consecutive quarter. The continued growth in Capital Markets reflected higher deal volumes, particularly in industrial, residential and office sectors, compared with the prior-year quarter. The increase in Leasing revenue was driven by transaction volume increases primarily in office and industrial as average deal size for office remains below pre-pandemic levels. In addition, Valuation Advisory again led the growth in Advisory, Consulting and Other. Geographically across service lines, EMEA fee revenue growth for the quarter was led by the UK and Germany. Year-to-date revenue and fee revenue growth for EMEA was also driven by transaction-based revenues and the service lines had drivers consistent with the quarterly commentary above. Geographically across service lines, EMEA year-to-date fee revenue growth was led by the UK, France, Switzerland and Spain. The increases in segment operating expenses and segment fee-based operating expenses, compared with the prior-year quarter, were primarily due to revenue-related expense growth and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020). Adjusted EBITDA margin for the quarter, calculated on a fee-revenue basis, was 0.3% in USD (0.2% in local currency), compared with 2.4% in the prior-year quarter. The decline in margin was driven by the above-noted impact of prior-year cost savings as well as incremental investments in people and technology, partially offset by the increase in higher margin transaction-based revenue. 38 Table of Contents Asia Pacific - Real Estate Services % Change Three Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 846.2 743.2 103.0 14 % 12 % Reimbursements (371.2) (347.2) (24.0) 7 5 Revenue before reimbursements $ 475.0 396.0 79.0 20 % 18 % Gross contract costs (212.9) (182.5) (30.4) 17 15 Fee revenue $ 262.1 213.5 48.6 23 % 20 % Leasing 58.4 42.7 15.7 37 33 Capital Markets 40.3 18.2 22.1 121 119 Property & Facility Management 75.3 75.9 (0.6) (1) (2) Project & Development Services 34.2 31.2 3.0 10 8 Advisory, Consulting and Other 53.9 45.5 8.4 18 16 Compensation, operating and administrative expenses excluding gross contract costs $ 235.1 171.7 63.4 37 % 35 % Depreciation and amortization 7.5 6.9 0.6 9 8 Segment fee-based operating expenses (excluding restructuring and acquisition charges) 242.6 178.6 64.0 36 34 Gross contract costs 212.9 182.5 30.4 17 15 Segment operating expenses (excluding reimbursed expenses) $ 455.5 361.1 94.4 26 % 24 % Equity earnings $ 1.4 0.9 0.5 56 % 40 % Segment income $ 20.9 35.8 (14.9) (42) % (44) % Adjusted EBITDA $ 28.3 42.7 (14.4) (34) % (36) % 39 Table of Contents Asia Pacific - Real Estate Services (continued) % Change Nine Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 2,499.9 2,170.6 329.3 15 % 9 % Reimbursements (1,133.4) (959.1) (174.3) 18 11 Revenue before reimbursements $ 1,366.5 1,211.5 155.0 13 % 7 % Gross contract costs (619.6) (621.5) 1.9 — (4) Fee revenue $ 746.9 590.0 156.9 27 % 20 % Leasing 134.8 96.6 38.2 40 33 Capital Markets 119.5 58.5 61.0 104 92 Property & Facility Management 236.2 223.6 12.6 6 — Project & Development Services 98.2 88.7 9.5 11 5 Advisory, Consulting and Other 158.2 122.6 35.6 29 21 Compensation, operating and administrative expenses excluding gross contract costs $ 652.7 512.8 139.9 27 % 21 % Depreciation and amortization 22.4 20.5 1.9 9 5 Segment fee-based operating expenses (excluding restructuring and acquisition charges) 675.1 533.3 141.8 27 20 Gross contract costs 619.6 621.5 (1.9) — (4) Segment operating expenses (excluding reimbursed expenses) $ 1,294.7 1,154.8 139.9 12 % 7 % Equity earnings $ 3.4 0.7 2.7 386 % 334 % Segment income $ 75.2 57.4 17.8 31 % 20 % Adjusted EBITDA $ 97.5 78.2 19.3 25 % 15 % Asia Pacific's double-digit fee revenue increase for the third quarter and first nine months of 2021 reflected the ongoing rebound in transaction-based revenue. A continued increase in large-deal transactions across nearly all asset classes, most notably in Australia (for the quarter and year to date), Japan (for the quarter) and Singapore (for the first nine months), drove revenue expansion in Capital Markets. Growth in Leasing for the quarter and first nine months was led by Greater China and Australia, extending the momentum in office and industrial. Significant business growth continued in Valuation Advisory, predominantly in Australia, which led to the fee revenue increase in Advisory, Consulting and Other for both the third quarter and year to date. Higher segment operating expenses for the third quarter and first nine months of 2021 and fee-based operating expenses for the third quarter and first nine months of 2021, compared with respective prior-year periods, were primarily attributable to revenue-related expense increases and the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020). Adjusted EBITDA margin for the third quarter, calculated on a fee-revenue basis, was 10.8% in USD (10.7% in local currency), compared with 20.0% last year. The margin decline was attributable to the above-noted impact of prior-year cost savings as well as incremental investments in people and technology, partially offset by the increase in higher-margin transaction-based revenue. 40 Table of Contents LaSalle % Change Three Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 129.8 110.3 19.5 18 % 17 % Reimbursements (1.7) (0.8) (0.9) 113 113 Revenue before reimbursements $ 128.1 109.5 18.6 17 % 16 % Gross contract costs (4.7) (3.7) (1.0) 27 27 Fee Revenue $ 123.4 105.8 17.6 17 % 16 % Advisory fees 92.8 81.0 11.8 15 13 Transaction fees & other 8.3 16.8 (8.5) (51) (51) Incentive fees 22.3 8.0 14.3 179 184 Compensation, operating and administrative expenses excluding gross contract costs $ 100.3 83.0 17.3 21 % 20 % Depreciation and amortization 1.8 1.8 — — (3) Segment fee-based operating expenses (excluding restructuring and acquisition charges) 102.1 84.8 17.3 20 19 Gross contract costs 4.7 3.7 1.0 27 27 Segment operating expenses (excluding reimbursed expenses) $ 106.8 88.5 18.3 21 % 19 % Equity earnings $ 8.4 8.5 (0.1) (1) % (2) % Segment income $ 29.7 29.5 0.2 1 % 1 % Adjusted EBITDA $ 31.0 31.3 (0.3) (1) % — % 41 Table of Contents LaSalle (continued) % Change Nine Months Ended September 30, Change in in Local ($ in millions) 2021 2020 U.S. dollars Currency Revenue $ 336.8 315.1 21.7 7 % 4 % Reimbursements (5.6) (3.7) (1.9) 51 44 Revenue before reimbursements $ 331.2 311.4 19.8 6 % 4 % Gross contract costs (14.0) (12.0) (2.0) 17 17 Fee revenue $ 317.2 299.4 17.8 6 % 3 % Advisory fees 257.0 239.5 17.5 7 4 Transaction fees & other 22.7 32.0 (9.3) (29) (30) Incentive fees 37.5 27.9 9.6 34 36 Compensation, operating and administrative expenses excluding gross contract costs $ 267.9 244.7 23.2 9 % 7 % Depreciation and amortization 5.1 5.4 (0.3) (6) (9) Segment fee-based operating expenses (excluding restructuring and acquisition charges) 273.0 250.1 22.9 9 6 Gross contract costs 14.0 12.0 2.0 17 17 Segment operating expenses (excluding reimbursed expenses) $ 287.0 262.1 24.9 10 % 7 % Equity earnings (losses) $ 44.7 (20.5) 65.2 318 % 316 % Segment income $ 88.9 28.8 60.1 209 % 206 % Adjusted EBITDA $ 93.0 33.7 59.3 176 % 174 % LaSalle advisory fee growth for the third quarter and first nine months of 2021 was led by core open-end funds, a result of recent capital raising and valuation increases in assets under management ("AUM"), as well as a recently launched fund in Asia Pacific. Fees related to a secondary offering for a LaSalle-managed publicly traded REIT in Japan in the third quarter of 2020, which did not recur this year, primarily drove the decline in transaction fees. The increase in incentive fees was due to real estate dispositions on behalf of clients in Asia Pacific and continental Europe. Equity earnings in the first nine months of 2021 were driven by increases to the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio across asset classes and geographies. For the first nine months of 2020, equity losses were largely driven by the pandemic's impact on real estate prices which drove lower estimated fair values within the portfolio. The increases in segment operating expenses and segment fee-based operating expenses for the current quarter, compared with the prior-year quarter, were primarily driven by compensation expense related to the higher incentive fees and deferred variable compensation expenses associated with the run-off of a previous compensation program. Adjusted EBITDA margin for the third quarter was 25.1% in USD (25.4% local currency), compared with 29.5% last year. The decline in margin was primarily attributable to incremental investments in people and technology as well as the deferred compensation impact noted above, partially offset by higher incentive fees. AUM reached a record $74.7 billion as of September 30, 2021, an increase of 2% in both USD and local currency from $73.4 billion as of June 30, 2021. The AUM increase resulted from (i) $1.7 billion of net valuation increases, (ii) $1.5 billion of acquisitions and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $2.1 billion of dispositions and withdrawals. 42 Table of Contents LIQUIDITY AND CAPITAL RESOURCES We finance our operations, co-investment activity, share repurchases, capital expenditures and business acquisitions with internally generated funds, borrowings on our Facility, and through issuance of Long-term debt. Cash Flows from Operating Activities Operating activities provided $210.3 million of cash in the first nine months of 2021, compared with $363.1 million of cash provided by operating activities during the same period in 2020. The decrease in cash provided was primarily due to a significant increase in trade receivables, reflecting higher year-over-year third-quarter revenue this year, as well as the timing of payments related to taxes and other government obligations. This was partially offset by (i) less incentive compensation paid in 2021 compared with 2020, reflecting our performance in 2020 compared with 2019, and (ii) higher cash provided by earnings in 2021, driven by a substantial increase in net income. Cash Flows from Investing Activities We used $316.0 million of cash for investing activities during the first nine months of 2021, as compared to $124.2 million used during the same period in 2020. The increase in cash used was driven by (i) incremental JLL Technologies investments in early-stage proptech companies, (ii) an increase in net capital contributions to real estate ventures, (iii) acquisitions in investment properties (less than wholly-owned), and (iv) business acquisitions. We discuss these key drivers individually below in further detail. Cash Flows from Financing Activities Financing activities provided $39.3 million of cash during the first nine months of 2021, as compared to $243.8 million used by financing activities during the same period in 2020. The net increase of $283.1 million in cash inflows from financing activities is substantially driven by an increase in borrowings on our Facility. This increase resulted from lower cash inflows for operating activities and higher cash outflows from investing activities as discussed above, as well as incremental share repurchases and higher payments of deferred acquisition-related obligations. Debt Our $2.75 billion Facility matures on April 14, 2026. As of September 30, 2021, we had outstanding borrowings under the Facility of $225.0 million and outstanding letters of credit of $0.7 million. As of December 31, 2020, we had no outstanding borrowings under the Facility and outstanding letters of credit of $0.7 million. The average outstanding borrowings under the Facility were $497.1 million and $758.9 million during the three months ended September 30, 2021 and 2020, respectively, and $432.5 million and $1,014.3 million during the nine months ended September 30, 2021 and 2020. In addition to our Facility, we had the capacity to borrow up to $57.0 million under local overdraft facilities as of September 30, 2021. We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $117.6 million and $62.0 million as of September 30, 2021 and December 31, 2020, respectively, of which $13.0 million and $12.0 million, respectively, were attributable to local overdraft facilities. We will continue to use the Facility for working capital needs (including payment of accrued incentive compensation), co-investment activities, share repurchases, capital expenditures and acquisitions. See Note 9, Debt, in the Notes to Condensed Consolidated Financial Statements for additional information on our Facility, Long-term debt and Short-term borrowings. Investment Activity As of September 30, 2021, we had a carrying value of $646.6 million in investments, primarily related to LaSalle co-investments in real estate ventures and investments by JLL Technologies in early-stage proptech companies. For the nine months ended September 30, 2021, and 2020, funding of investments exceeded return of capital by $93.2 million and $32.7 million, respectively. We expect continued investments by JLL Technologies as well as strategic co-investment opportunities with our investment management clients globally as co-investment remains an important foundation to the continued growth of LaSalle's business. See Note 6, Investments in Real Estate Ventures, in the Notes to Condensed Consolidated Financial Statements for additional information on our investment activity. In addition, JLL Technologies funded a $45.0 million convertible note to Turntide Technologies in the second quarter of 2021. This activity is included within "Other" in the cash flows from investing activities and primarily included in Long-term receivables on the Condensed Consolidated Balance Sheet. 43 Table of Contents 44 Table of Contents Share Repurchase and Dividend Programs On February 21, 2021, our Board of Directors authorized an additional $500.0 million for the repurchase of our common stock in the open market and privately negotiated transactions in addition to the $100.0 million remaining from the initial authorization. The number of shares repurchased and cash paid for repurchases is noted in the following table. Three Months Ended September 30, Nine Months Ended September 30, ($'s in millions) 2021 2020 2021 2020 Total number of shares repurchased (in 000's) 658.9 258.0 858.9 446.0 Total paid for shares repurchased $ 149.9 25.0 $ 191.0 50.0 As of September 30, 2021, $409.0 million remained authorized for repurchases under our share repurchase program. Capital Expenditures Net capital additions for the nine months ended September 30, 2021 and 2020, were $111.6 million and $112.5 million, respectively. Our capital expenditures in 2021 were primarily for leased office space improvements, purchased/developed software and hardware. Investment Asset Activity of Consolidated Less Than Wholly-Owned Entities Net capital additions made by consolidated VIEs in which we held no equity interest for the nine months ended September 30, 2021 and 2020, were $53.8 million and $10.2 million, respectively, primarily to acquire real estate (net of real estate sales). The funding for these investments (largely from employee-investors and related third-party debt) is included within financing activities. Business Acquisitions During the nine months ended September 30, 2021, we paid $104.7 million for business acquisitions. This included $22.2 million of payments relating to acquisitions in 2021 and $82.5 million for deferred business acquisition and earn-out obligations related to acquisitions completed in prior years, which are primarily reflected in cash flows from financing activities. Terms for many of our past acquisitions have typically included cash paid at closing with provisions for additional deferred consideration and earn-out payments subject to certain contract requirements, including the passage of time and performance, respectively. Deferred business acquisition obligations totaled $22.1 million as of September 30, 2021. These obligations represent the current discounted values of payments due to sellers of businesses for which our acquisition had been completed as of the balance sheet date and for which the only remaining condition on those payments is the passage of time. As of September 30, 2021, we had the potential to make earn-out payments for a maximum of $119.1 million on 21 completed acquisitions subject to the achievement of certain performance conditions. Refer to Note 5, Business Combinations, Goodwill and Other Intangible Assets, in the Notes to the Condensed Consolidated Financial Statements for further information on Business Acquisitions. We will continue to consider acquisitions that we believe will strengthen our market position, increase our profitability, and supplement our organic growth. Repatriation of Foreign Earnings Based on our historical experience and future business plans, we do not expect to repatriate our foreign-sourced earnings to the United States. We believe our policy of permanently investing earnings of foreign subsidiaries does not significantly impact our liquidity. As of September 30, 2021 and December 31, 2020, we had total cash and cash equivalents of $535.9 million and $574.3 million, respectively, of which approximately $422.3 million and $445.2 million, respectively, was held by foreign subsidiaries. 45 Table of Contents Restricted Net Assets We face regulatory restrictions in certain countries that limit or prevent the transfer of funds to other countries or the exchange of the local currency to other currencies. However, we generally face no such restrictions with regard to the use or application of funds for ordinary course business activities within such countries. The assets of these countries aggregated to approximately 4% of our total assets as of both September 30, 2021 and December 31, 2020. Off-Balance Sheet Arrangements We have unfunded capital commitments to investment vehicles and direct investments for future co-investments, totaling a maximum of $315.9 million as of September 30, 2021. See our discussion of unfunded commitments in Note 6, Investments in Real Estate Ventures, in the Notes to Condensed Consolidated Financial Statements. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report, including this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may also be included in our other public filings, press releases, our website, and oral and written presentations by management. Statements in the future tense, and all statements accompanied by terms such as “believe,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan” and variations thereof and similar terms, are intended to be forward-looking statements. Such statements do not relate strictly to historical or current facts as they relate to our intent, belief and current expectations about our strategic direction, prospects and future results, and give our current expectations or forecasts of future events. This includes, but is not limited to, our expectations regarding the potential impact of the COVID-19 pandemic and the efficacy of vaccines and therapeutics on reducing the spread of the virus, as well as any further impacts to us, the economy as a whole, and/or related government and regulatory restrictions issued to combat the global pandemic, including any adverse changes in such restrictions that may impact us. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties are described in our Annual Report on Form 10-K for the year ended December 31, 2020 in Part I, Item 1A. Risk Factors and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and may also be described from time to time in our subsequent filings with the Securities and Exchange Commission. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations or the occurrence of unanticipated events after the date of those statements. 46 Table of Contents