What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-18 · 73 added, 49 removed, 331 unchanged (27% of the section changed)

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COMPETITION FOR TALENT WORLD-WIDE;

EMPLOYEE RETENTION;

DIVERSITY, EQUITY AND INCLUSION INITIATIVES;

SUCCESSION OF KEY LEADERS.

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Our business depends on the continued availability of skilled personnel with industry experience and knowledge, including our senior management team and other key employees.

If we are unable to attract and retain qualified personnel, or to successfully plan for succession of employees holding key management positions, our business and operating results could suffer.

Our success depends on the continued availability of skilled personnel with industry experience and knowledge, and our ability to recruit, attract and retain senior management and other key employees, including through the implementation of diversity, equity and inclusion initiatives, and the succession of senior management.

We are working to advance culture change through the continued implementation of diversity, equity and inclusion initiatives throughout our organization.

If we do not (or are perceived not to) successfully implement these initiatives, our ability to recruit, attract and retain talent may be adversely impacted.

There is a further risk of losing talent (and intellectual property and client contacts) to competitors, particularly in the context of increased use of social media networks and transparency of employment information.

There is also the risk of losing top producers who provide a material margin contribution.

There is also the risk of losing top producers who provide meaningful margin contribution.

These risks increase as we continue to grow as an organization and increase the number of staff, which has expanded significantly over the past decade.

There may also be an increase in recruitment and compensation costs.

We and our competitors use equity incentives and bonuses to help attract, retain and incentivize key personnel.

As competition is significant for the services of such personnel, the expense of incentives and bonuses may increase and we may be unable to attract or retain such personnel to the same extent we have in the past.

The challenge to find and retain sufficiently trained staff is world-wide, including within emerging markets, and as a result, increases the risk of performance for clients.

In particular, in successful emerging markets such as India and China, attrition by highly informed and mobile staff is a challenge for all companies.

Labor costs are rising in emerging economies and are expected to increase further.

The challenge to find and retain sufficiently trained staff is world-wide and, as a result, increases the risk of performance for clients.

In the current competitive labor market, labor and recruitment costs are rising and are expected to increase further.

Corporate payrolls are likely to increase as greater competition for labor and social pressure to raise salaries in line with productivity growth cause even greater wage inflation.

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However, despite investment in our safety platform, management systems and vendor due diligence program, additional efforts are necessary to ensure vendors are aware of our high health and safety expectations.

WE FACE POTENTIAL BUSINESS DISRUPTION AND RELATED RISKS RESULTING FROM HEALTH EPIDEMICS, ESPECIALLY THE NOVEL CORONAVIRUS (COVID-19) PANDEMIC.

Health epidemics that affect the general conduct of business in one or more urban areas (including as the result of travel restrictions and the inability to conduct face-to-face meetings), such as occurred in the past from influenza, occurring at present (COVID-19) or may occur in the future from other types of outbreak, can also adversely affect the volume of business transactions, real estate markets and the cost of operating real estate or providing real estate services.

At present, efforts to contain and mitigate the COVID-19 pandemic are occurring in many countries where we operate, including the United States.

The actions taken have resulted in unprecedented restrictions on businesses, including closures, with a substantial reduction in economic activity in most countries.

The pandemic had a material effect on our financial results in 2020.

Our transaction-based services lines had a significant year-over-year decline in activity as non-essential transactions were delayed, reduced in scope or cancelled, particularly in the last nine months of 2020.

Certain costs in our operating structure are fixed in nature and given the uncertainty of the COVID-19 pandemic and its human and economic impact, immediate cuts to these fixed costs to mirror the declines in revenues were not practical.

Significant uncertainty remains as to the full impact of the COVID-19 pandemic on our operations, and on the global economy as a whole, including potential changes in commercial behavior.

It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to pre-pandemic levels.

WE FACE BUSINESS DISRUPTION AND RELATED RISKS RESULTING FROM HEALTH EPIDEMICS, ESPECIALLY THE NOVEL CORONAVIRUS (COVID-19) PANDEMIC.

Such instances can adversely affect the volume of business transactions, real estate markets and the cost of operating real estate or providing real estate services.

At present, efforts to contain and mitigate the COVID-19 pandemic are still occurring in many countries where we operate, including the United States.

This year saw an increasing percentage of the global population receive a COVID-19 vaccine, but access and availability to COVID-19 vaccines and tests varies across geographies.

New COVID-19 variants continue to emerge which, at times, has resulted in significant spikes in the number of local, regional, and global cases, and uncertainties exist as to the efficacy of vaccines against new variants or mutations of COVID-19.

To mitigate the spread of COVID-19, local, state, and federal governments have imposed various restrictions on businesses, including closures, travel restrictions, vaccine and testing mandates, among other requirements.

While the increased availability of vaccines and vaccination rates gave rise to increased optimism in 2021, the pandemic continued to have a material effect on our financial results in 2021, although less pronounced of an impact on our financial results when compared against the prior year.

Although there has been an easing of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions, or could be reinstated in the future, to manage a resurgence or new outbreak of COVID-19, including in connection with new variants or mutations of the virus.

In addition, the reopening of businesses and economies in certain countries is creating a variety of new challenges, including, for example, higher prices for goods and services, limited availability of products, and disruptions to supply chains.

Furthermore, our management team has spent, and will likely continue to spend, significant time, attention and resources monitoring the COVID-19 pandemic and seeking to manage its effects on our business and workforce.

A long-term continuation of these restrictions could, among other things, negatively impact employee morale and productivity.

Significant uncertainty remains as to the full impact of the COVID-19 pandemic on our operations, and on the global economy as a whole, including potential short-term and long-term changes in commercial behavior.

It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to fully return to pre-pandemic levels.

We expect the ultimate significance of the impact of these disruptions, including the extent of their adverse impact on our financial and operational results, will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration of the COVID-19 pandemic and the impact of governmental regulations that might be imposed in response.

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TECHNOLOGY AND INFORMATION SYSTEMS;

MANAGEMENT OF DATA.

CYBERSECURITY, MANAGEMENT OF DATA.

Our business is highly dependent on our ability to collect, use, store and manage organizational and client data.

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We continue to observe an increased level of cyber threats focused on gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption.

The risk of cyber threats also extends to suppliers and vendors we engage on a principal basis to perform various services.

Additionally, like many large enterprises, since 2020, a portion of our workforce has worked remotely in some capacity in response to the COVID-19 pandemic.

This arrangement introduces potential new vulnerabilities to cyber threats.

We also face increased cybersecurity risk as we deploy additional mobile and cloud technologies.

We are continuously hardening our infrastructure built on these technologies, monitoring for threats, and evaluating our capability to respond to any incidents to minimize any impact to our systems, data, or business operations.

We have experienced various types of cyber-attack incidents, which to-date have been contained and have not been material to us as a whole.

As the result of such incidents, we have continued to implement new controls, governance, technical protections and other procedures.

We may incur substantial costs and suffer other negative consequences such as liability, reputational harm and significant remediation costs and experience material harm to our business and financial results if we fall victim to other successful cyber attacks.

The legislative and regulatory framework for privacy and data protection issues worldwide continues to evolve.

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or (vi) merges with another corporation or otherwise undergoes a change of control, which may result in new management taking over with a different real estate philosophy or in different relationships with other real estate providers.

In the case of LaSalle, concentration of investor clients can lead to fewer sources of investment capital, which can negatively affect assets under management in case a higher-volume client withdraws its funds or does not re-invest them.

In the case of LaSalle, concentration of investor clients can also lead to fewer sources of investment capital, which can negatively affect assets under management in case a higher-volume client withdraws its funds or does not re-invest them.

This is also the case within LaSalle's businesses which are dependent on the continued ability and willingness of certain brokerage firms to attract investment funds from their clients.

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GENERAL ECONOMIC CONDITIONS AND REAL ESTATE MARKET CONDITIONS;

SUPPLY-CHAIN PRESSURES

The success of our business is significantly related to general economic conditions.

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Since then, many of our markets have been affected generally by various economic uncertainties, among them:

continued significant volatility in oil and commodity prices;

continued significant volatility in energy costs, including oil and commodity prices;

the developing effects of climate change and severe weather;

and the continued uncertainty on the direction of global tax policy.

Most recently, we have continued to assess the potential adverse effects of the ongoing global COVID-19 pandemic on general economic conditions.

Most recently, we have continued to assess the potential adverse effects of the ongoing global COVID-19 pandemic on general economic conditions and increased supply-chain pressures which have emerged and may impact our ability to deliver goods and services to our clients.

In this environment, we have continued to grow our business largely by gaining market share and as the result of targeted acquisitions.

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In recent years there have been significant political changes in several countries where we have significant operations, resulting in changes to financial, tax, tariffs, healthcare, governance, immigration and other laws that may directly affect our business and continue to evolve.

The withdrawal of the United Kingdom from the European Union on January 31, 2020 and the ongoing uncertainty with respect to the future relationship of the United Kingdom and the European Union, notwithstanding the impact of the provisional free-trade agreement entered into between the United Kingdom and the European Union on December 24, 2020, may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.

The withdrawal of the United Kingdom from the European Union on January 31, 2020 (Brexit) and the ongoing uncertainty with respect to the future relationship of the United Kingdom and the European Union, notwithstanding the impact of the provisional free-trade agreement entered into between the United Kingdom and the European Union on December 24, 2020, may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.

The economic conditions and outlook could be further adversely affected by (i) new or modified trading arrangements between the United Kingdom and other countries, (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iii) the risk the euro as the single currency of the Eurozone could cease to exist.

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Some may be providing outsourced facility management services to sell clients products that we do not offer.

In some sectors of our business, particularly Corporate Solutions, some of our competitors may have greater financial, technical and marketing resources, larger customer bases, and more established relationships with their customers and suppliers than we have.

In some sectors of our business, particularly Work Dynamics, some of our competitors may have greater financial, technical and marketing resources, larger customer bases, and more established relationships with their customers and suppliers than we have.

Larger or better-capitalized competitors in those sectors may be able to respond faster to the need for technological change, price their services more aggressively, compete more effectively for skilled professionals, finance acquisitions more easily, develop innovative products more effectively, and generally compete more aggressively for market share.

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Considering the continuing need to provide clients with more comprehensive services on a more productive and cost-efficient basis, we expect acquisition opportunities to continue to emerge.

However, there is no assurance we will be able to continue our acquisition activity in the future at the same pace as we have in the past, particularly as we weigh acquisition opportunities against other potential uses of capital for technology and other investments in systems and human resources, as well as returning capital to shareholders.

However, there is no assurance we will be able to continue our acquisition activity in the

future at the same pace as we have in the past, particularly as we weigh acquisition opportunities against other potential uses of capital for technology and other investments in systems and human resources, as well as returning capital to shareholders.

Various factors may in some cases lead to a willingness on the part of a competitor to engage in aggressive pricing, advertising or hiring practices in order to maintain market share or client relationships.

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To the extent we are not able to identify and adjust for changes in expectations, or we are confronted with negative conditions that disproportionately impact the fourth quarter of a calendar year, we could experience a material adverse effect on our financial performance.

However, we believe some level of seasonality will always be inherent to our industry and outside of our control, as was the case in 2020.

Growth in our property management and integrated facilities management businesses and other services related to the growth of outsourcing of corporate real estate services has, to an extent, lessened the seasonality in our revenue and profits during the past several years, partially offset by certain acquisitions of heavily-weighted transaction-based companies, most notably HFF, Inc.

While the ongoing effects of COVID-19 continued to impact the historic seasonality of our business into 2021, though to a lesser extent than it did in 2020, we believe some level of seasonality will always be inherent to our industry and outside of our control.

RISKS INHERENT IN MAKING ACQUISITIONS AND ENTERING INTO JOINT VENTURES.

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If a joint venture participant acts contrary to our interests, it could harm our brand, business, results of operations and financial condition.

CO-INVESTMENT, INVESTMENT AND REAL ESTATE INVESTMENT BANKING ACTIVITIES.

An important part of our business strategy includes investing in real estate, both individually and along with our investment management clients.

As of December 31, 2020, we have unfunded commitment obligations of up to $320.7 million to fund future co-investments.

INVESTMENT (INCLUDING CO-INVESTMENT) AND REAL ESTATE INVESTMENT BANKING ACTIVITIES.

An important part of our business strategy includes investing in (i) real estate, both individually and along with our investment management clients, and (ii) proptech funds and early-stage proptech companies.

As of December 31, 2021, we have unfunded commitment obligations of up to $372.4 million to fund future investments across our investment strategies.

To remain competitive with well-capitalized financial services firms, we also may make merchant banking investments for which we may use our capital to acquire properties before the related investment management funds have been established or investment commitments have been received from third-party clients.

Certain service lines we operate have the acquisition, development, management and sale of real estate as part of their strategy.

Certain service lines we operate have the acquisition, development, management and sale of real estate and proptech investments as part of their strategy.

Investing in any of these types of situations exposes us to several risks.

Investing in real estate for the above reasons poses the following risks:

Investing for the above reasons poses the following risks:

• We may lose some or all the capital we invest if the investments underperform.

Real estate investments can underperform as the result of many factors outside of our control, including the general reduction in asset values within a particular geography or asset class.

Starting in 2007 and continuing through 2009, for example, real estate prices in many markets declined as the result of the significant tightening of credit markets and the effects of recessionary economies and significant unemployment.

Looking presently at the three years ended December 31, 2020, we had no notable impairment activity.

• We will have fluctuations in earnings and cash flow as we recognize gains or losses, and receive cash upon the disposition of investments, the timing of which is geared toward the benefit of our clients.

• We generally hold our investments in real estate through subsidiaries with limited liability;

◦ For real estate investments, underperformance may result from many factors outside of our control, including the general reduction in asset values within a particular geography or asset class.

◦ For proptech investments, the concepts and strategic plans underpinning the value of the fund or entity may not be realized or could be poorly executed.

In addition, the fund or entity may be negatively impacted by risks they are exposed to (some of which we are also exposed to and are discussed elsewhere in this Item).

• We will have fluctuations in earnings and cash flow as we recognize gains or losses, and receive cash upon the disposition of investments, the timing of which may be geared toward the benefit of our clients.

• We hold many of our investments in subsidiaries with limited liability;

however, in certain circumstances, it is possible this limited exposure may be expanded in the future based on, among other things, changes in applicable laws.

To the extent this occurs, our liability could exceed the amount we have invested.

• We make co-investments in real estate in many countries, and this presents tax, political/legislative, currency, and other risks as described elsewhere in this Item.

• We make investments in many countries, and this presents tax, political/legislative, currency, and other risks as described elsewhere in this Item.

In certain situations, we raise funds from outside investors where we are the sponsor of real estate investments, developments, or projects.

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The brokerage of real estate sales and leasing transactions;

multifamily real estate lending;

real estate lending;

servicing and asset management;

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Although we believe our current warehouse facilities are sufficient to meet our current needs in connection with our participation in the Agency programs, in the event any of our warehouse lines are terminated or are not renewed, we may be unable to find replacement financing on favorable terms, or at all, and we might not be able to originate loans.

The regulatory environment facing the investment management industry has also grown significantly more complex in recent years.

The regulatory environment facing the investment management industry has also grown significantly more complex in recent years, principally in terms of marketing products and services and screening and advising clients.

Countries are expanding the criteria requiring registration of investment advisors and funds, whether based in their country or not, and expanding the rules applicable to those that are registered, all to provide more protection to investors located within their countries.

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Although we believe we have good processes, policies and controls in place to address the new requirements, these additional registrations and increasingly complex rules increase the possibility violations may occur.

These risks also apply separately to the LaSalle-managed real estate investment trust we launched during 2012.

These risks also apply separately to the LaSalle-managed public real estate investment trust we launched during 2012.

That entity has registered the securities it is issuing with the SEC in the United States and is subject to regulation as a public company, albeit not one separately listed on a stock exchange.

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We also anticipate the potential effects of climate change will increasingly impact our own operations and those of client properties we manage, especially when they are in coastal cities.

We anticipate the potential effects of climate change will increasingly impact the decisions and analysis LaSalle makes with respect to the properties it considers for acquisition on behalf of clients, since climate change considerations can impact the relative desirability of locations and the cost of operating and insuring acquired properties.

We anticipate the potential effects of climate change will increasingly impact the decisions and analysis LaSalle makes with respect to investments in the properties it manages as well as those it considers for acquisition or disposition on behalf of clients, since climate change considerations can impact the relative desirability of locations and the cost of operating and insuring properties.

Future legislation that requires specific performance levels for building operations could make non-compliant buildings obsolete, which could materially affect investments in properties we have made on behalf of clients, including those in which we may have co-invested.

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Around the world, many countries are enacting stricter regulations to protect the environment and preserve their natural resources.

Firms also may face several layers of national and regional regulations.

Firms also may face several layers of national, regional and local regulations.

In Europe, the EU’s Environmental Liability Directive establishes a comprehensive liability standard, but individual EU countries may have stricter regulations.

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This follows environmental protection laws passed in 2014 designed to limit contaminated water, air and soil linked to economic growth and public health.

New environmental legislation and regulations may require the Company to make material changes to its operations, which could adversely affect our operating results.

Furthermore, the perspectives of shareholders, employees and other stakeholders regarding these standards may affect our business activities and increase disclosure requirements, which may increase our costs.

Declining air quality in major cities may have consequences for our business in various ways, including the need to respond to new regulations that affect the management of buildings, declines in the desire of investors or corporates to invest in or occupy properties in such cities, and our ability to retain staff in locations that may be relatively undesirable as places to live.

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VOLATILITY IN TRANSACTIONAL-BASED REVENUE.

LaSalle's portfolio is of sufficient size to periodically generate large incentive fees and equity gains (losses) that significantly influence our earnings and the changes in earnings from one year to the next.

Volatility in this component of our earnings is inevitable due to the nature of this aspect of our business, and the amount of incentive fees or equity earnings or losses we may recognize in future quarters is inherently unpredictable as it relates to client needs, the market and other dynamics in effect at the time.

We have business lines other than LaSalle that also generate fees based on the timing, size and pricing of closed transactions, and these fees may significantly contribute to our earnings and to changes in earnings from one quarter or year to the next.

We have product offerings, such as Leasing and Capital Markets, that generate fees based on the timing, size and pricing of closed transactions, and these fees may significantly contribute to our earnings and to changes in earnings from one quarter or year to the next.

Volatility in this component of our earnings is inevitable due to the nature of these businesses and the amount of the fees we will recognize in future quarters is inherently unpredictable.

In addition, LaSalle's portfolio is of sufficient size to periodically generate large incentive fees and equity earnings (losses) that significantly influence our earnings and the changes in earnings from one year to the next.

Volatility in this component of our earnings is also inevitable due to the nature of this aspect of our business, and the amount of incentive fees or equity earnings or losses we may recognize in future quarters is inherently unpredictable as it relates to client needs, the market and other dynamics in effect at the time.

CURRENCY RESTRICTIONS AND EXCHANGE RATE FLUCTUATIONS;

INFLATIONARY RISK.

We produce positive cash flows in various countries and currencies that can be most effectively used to fund operations in other countries or to repay our indebtedness, which is currently primarily denominated in U.S.

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As an example, the euro and the pound sterling, each a currency used in a significant portion of our operations, have fluctuated notably in recent years.

Our revenue from outside of the United States approximated 43% our total revenue for 2020.

Our revenue from outside of the United States approximated 42% of our total revenue for 2021.

In addition to the potential negative impact on reported earnings, fluctuations in currencies relative to the U.S.

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In addition, there can be no guarantee the counterparty will fulfill its obligations under the contractual agreement, especially in the event of a bankruptcy or insolvency of the counterparty, which would effectively leave us unhedged.

The COVID-19 pandemic caused significant volatility in U.S.

and international markets.

The impact of the pandemic may increase the possibility of uncertainty in the global financial markets, high inflation and extended economic downturn.

We are subject to inflationary pressures on employee wages, salaries, and the cost of various goods and services including energy costs that we procure which can materially impact our financial results.

In addition, while we attempt to mitigate the impact of inflation in our client agreements, some client agreements may be entered into on a fixed or guaranteed maximum price basis where our ability to make price adjustments to take into account inflation may be limited.

DOWNGRADES IN OUR CREDIT RATINGS COULD INCREASE OUR BORROWING COSTS OR REDUCE OUR ACCESS TO FUNDING SOURCES IN THE CREDIT AND CAPITAL MARKETS.

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• Obtaining new credit commitments from lenders

• Refinancing credit commitments or loans that have terminated or matured according to their terms, including funds sponsored by our LaSalle which use leverage in the ordinary course of their investment activities

• Refinancing credit commitments or loans that have terminated or matured according to their terms, including funds sponsored by LaSalle which use leverage in the ordinary course of their investment activities

• Placing insurance

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• Maintaining cash deposits or other investments, both our own and those we hold for the benefit of clients, which are generally much larger than the maximum amount of government-sponsored deposit insurance in effect for a particular account

In addition, certain of LaSalle’s sponsored funds act as a lender to real estate owners with the risk of default by the borrower and the potential for the LaSalle fund to take ownership of those assets.

Defaults by borrowers can also have a negative impact on investment performance.

General Risk Factors

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government enacted comprehensive federal tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act").

The Act included new limitations on business-related deductions and could increase the taxation of foreign earnings in the U.S., which could increase our future tax expense.

The Act included limitations on business-related deductions and increased taxation of foreign earnings in the U.S., which could increase our future tax expense.

Further changes to U.S.

corporate tax law have been proposed in the past year, some of which could further increase our future tax expense if enacted.

In addition, the potential exists for significant legislative policy change in the taxation of multinational corporations, as has recently been the subject of the Base Erosion and Profit Shifting project of the Organization for Economic Co-operation and Development, the European Union Anti-Tax Avoidance Directives, and legislation inspired or required by those initiatives.

corporate tax law have been proposed in the past year, including the proposed Build Back Better Act, some of which could further increase our future tax expense if enacted.

In addition, the potential exists for significant legislative policy change in the taxation of multinational corporations, as has recently been the subject of the “Pillar One” and “Pillar Two” initiatives of the Organization for Economic Co-operation and Development, the European Union Anti-Tax Avoidance Directives, and legislation inspired or required by those initiatives.

It is also possible that some governments will make significant changes to their tax policies in response to factors such as budgetary needs, feedback from the business community and the public view on applicable tax planning activities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors