What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-02-18 · 181 added, 208 removed, 401 unchanged (49% of the section changed)

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In addition, we may record intangible assets as a result of acquisitions, which are primarily composed of customer relationships, management contracts and customer backlog, and are amortized on a straight-line basis over their estimated useful lives.

We establish an intangible upon closing on the sale of a mortgage loan we originated, referred to as a warehouse receivable, concurrent with the retention of its servicing rights and amortize the intangible over the estimated period net servicing income is projected to be received.

We generally use the income approach to determine fair value, which requires management to make significant estimates and assumptions.

These estimates and assumptions primarily include discount rates, terminal growth rates, forecasts of revenue, operating income and capital expenditures.

The discount rates reflect the risk factors, from the perspective of a market participant, associated with forecasts of cash flows.

In addition, we establish an intangible upon closing on the sale of a mortgage loan we originated, concurrent with the retention of its servicing rights and amortize the intangible over the estimated period net servicing income is projected to be received.

Although we believe our intangible asset estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates.

Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair value of the identified intangible assets acquired.

Judgment is also required in determining the useful life of a finite-lived intangible asset.

We evaluate our identified intangibles for impairment at least annually, or as events or changes in circumstances indicate the carrying value may be impaired.

Investments in Real Estate Ventures

We invest in certain real estate ventures that primarily own and operate commercial real estate.

Historically, these investments have primarily been co-investments in funds that LaSalle establishes in the ordinary course of business for its clients.

Substantially all of our investments are grouped within one of the following two categories.

First, we invest in certain real estate ventures that primarily own and operate commercial real estate, historically through co-investments in funds that LaSalle establishes in the ordinary course of business for its clients.

These investments include non-controlling ownership interests generally ranging from less than 1% to 10% of the respective ventures.

We account for these investments at fair value or under the equity method of accounting.

Where applicable, we estimate fair value using the net asset value ("NAV") per share (or its equivalent) our investees provide.

Second, JLL Technologies invests in proptech funds and early to mid-stage companies to improve our strategic position within the real estate technology landscape, including investments through the JLL Spark Global Venture funds.

Generally, we account for these investments at fair value.

Where applicable, we estimate fair value of our investments using the net asset value ("NAV") per share (or its equivalent) our investees provide.

Critical inputs to NAV estimates include valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates.

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GAAP measurement principles, we adjust the NAV accordingly.

For Investments in real estate ventures reported at fair value, our investment is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date.

For JLL Technologies investments in proptech companies, we primarily estimate the fair value based on the per-share pricing.

Subsequent funding rounds or changes in the companies' business strategy/outlook are indicators of a change in fair value.

For all investments reported at fair value, our investment is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date.

We reflect these fair value adjustments as gains or losses on the Consolidated Statements of Comprehensive Income within Equity earnings.

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We generally provide for taxes in each tax jurisdiction in which we operate based on local tax regulations and rules.

Such taxes are provided on net earnings and include the provision for taxes on substantively all differences between financial statement amounts and amounts used in tax returns, excluding certain non-deductible items and permanent differences.

Such taxes are provided on pre-tax earnings and include the provision for taxes on substantively all differences between financial statement amounts and amounts used in tax returns, excluding certain non-deductible items and permanent differences.

Our global effective tax rate is sensitive to the complexity of our operations as well as to changes in the mix of our geographic profitability.

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We provide for the effects of income taxes on interim financial statements based on our estimate of the effective tax rate for the full year.

Our effective tax rates are presented in the following table.

In addition, we present the rate excluding the subsequent changes to the provisional estimate relating to the transition tax component of the U.S.

tax legislation passed in December 2017 commonly known as the Tax Cuts and Jobs Act ("the Act").

For the year ended December 31,

2020 2019 2018

Effective tax rate 20.2 % 22.9 % 30.4 %

Effective tax rate excluding the impact of the transition tax 20.2 % 23.5 % 23.7 %

Our effective tax rate was 21.6%, 20.2% and 22.9% for the year ended December 31, 2021, 2020, and 2019, respectively.

Very low tax rate jurisdictions (those with effective national and local combined tax rates of 25% or lower) providing the most significant contributions to our effective tax rate include:

Hong Kong (16.5%), Singapore (17%), the United Kingdom (19%) and Saudi Arabia (20%).

Hong Kong (16.5%), Singapore (17%), and Saudi Arabia (20%).

Based on our historical experience and future business plans, we do not expect to repatriate our foreign source earnings to the U.S.

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Valuation allowance 128.8 71.4

The increase in gross deferred tax assets in 2020 was primarily the result of increases in compensation accruals in certain jurisdictions.

The increase in gross deferred tax assets in 2021 was primarily the result of (i) the revaluation of existing UK net operating loss carryovers, (ii) net operating losses from acquired companies and (iii) U.S.

capital loss carryovers.

The increase in valuation reserves was primarily the result of new reserves on the acquired net operating losses and the U.S.

capital loss carryovers.

We evaluate our segment operating performance before tax, and do not consider it meaningful to allocate tax by segment.

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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.

Specifically in 2020, macroeconomic conditions influenced by the COVID-19 pandemic impacted our operations.

Specifically in 2020 and also into 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted our operations.

The timing of acquisitions may impact the comparability of our results on a year-over-year basis.

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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.

LaSalle Revenue and Equity Earnings

Our investment management business is, in part, compensated through incentive fees where performance of underlying funds' investments exceeds agreed-to return hurdles.

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.

Equity earnings also may vary substantially from period to period for a variety of reasons, including as a result of (i) gains (losses) on investments reported at fair value, (ii) gains (losses) on asset dispositions and (iii) impairment charges.

Equity Earnings and Incentive Fees

Equity earnings may vary substantially from period to period for a variety of reasons, including as a result of (i) valuation increases (decreases) on investments reported at fair value, (ii) gains (losses) on asset dispositions and (iii) impairment charges.

The timing of recognition of these items may impact comparability between quarters, in any one year, or compared to a prior year.

LaSalle, our investment management business, is in part compensated through incentive fees where performance of underlying funds' investments exceeds agreed-to return hurdles.

Depending upon performance, disposition activity and the contractual timing of measurement periods with clients, these fees can be significant and may vary substantially from period to period.

The comparability of these items can be seen in Note 3, Business Segments, of the Notes to Consolidated Financial Statements, included in Item 8, and is discussed further in Segment Operating Results included herein.

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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.

Transactional-Based Revenue

Transactional-based fees, that are impacted by the size and timing of our clients' transactions, from capital markets activities, leasing activities and other services within our RES business, and LaSalle, increase the variability of the revenue we earn.

Transaction-Based Revenue

Transaction-based fees, that are impacted by the size and timing of our clients' transactions, from capital markets activities, leasing activities and other services within our RES business, and LaSalle, increase the variability of the revenue we earn.

The timing and the magnitude of these fees can vary significantly from year-to-year and quarter-to-quarter, and from segment-to-segment.

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We centrally manage our debt, considering investment opportunities and risks, tax consequences, and overall financing strategies.

Our overall interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.

Our overall interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.

We are primarily exposed to interest rate risk on our Facility, which had a borrowing capacity of $2.75 billion as of December 31, 2021.

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Our average outstanding borrowings under the Facility during 2021 were $432.0 million, with an effective interest rate of 0.9%.

We had no outstanding borrowings under the Facility as of December 31, 2020.

We had $138.2 million of outstanding borrowings under the Facility as of December 31, 2021.

The Facility bears a variable rate of interest that fluctuates based on market rates.

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As of December 31, 2021, we had forward exchange contracts in effect with a gross notional value of $2.61 billion ($1.51 billion on a net basis).

The corresponding net carrying gain is generally offset by a carrying loss in associated intercompany loans.

This corresponding net carrying gain is generally offset by a carrying loss in associated intercompany loans.

Although we operate globally, we report our results in U.S.

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United States dollar $ 11,283.1 58.3 % $ 9,457.8 57.0 %

Euro 1,350.6 8.1 1,507.7 8.4

British pound 1,626.6 8.4 1,341.1 8.1

Euro 1,393.3 7.2 1,350.6 8.1

Australian dollar 1,118.7 5.8 876.1 5.3

Indian rupee 524.5 3.2 651.8 3.6

Hong Kong dollar 545.6 2.8 512.2 3.1

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Canadian dollar 508.3 2.6 432.6 2.6

Japanese yen 257.9 1.6 349.4 1.9

Indian rupee 508.2 2.6 524.5 3.2

Singapore dollar 327.4 1.7 246.6 1.5

Japanese yen 256.8 1.3 257.9 1.6

Other currencies 1,259.9 6.5 1,117.4 6.7

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Had the British pound-to-U.S.

dollar exchange rates been 10% higher throughout the course of 2020, we estimate our reported operating income would have increased by $5.3 million.

dollar exchange rates been 10% higher throughout the course of 2021, we estimate our reported operating income would have decreased by $2.2 million.

Had euro-to-U.S.

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Historically, we have reported a relatively smaller profit in the first quarter and then increasingly larger profits during each of the following three quarters, excluding the recognition of investment-generated performance fees and realized and unrealized co-investment equity earnings and losses (each of which can be unpredictable).

Generally, we recognize incentives fees when assets are sold, the timing of which is geared toward the benefit of our clients.

Generally, we recognize incentives fees when assets are sold or as a result of valuation increases in the portfolio, the timing of which may not be predicable or recurring.

In addition, co-investment equity gains and losses are primarily dependent on underlying valuations, the direction and magnitude of changes to such valuations are not predictable.

Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis.

In 2020, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits.

In 2020 and 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits.

By the end of 2021, the historical seasonality trends began to return.

Our operating expenses fluctuate with our revenue and general economic conditions including inflation.

However, we do not believe inflation has had a material impact on our results of operations during the three-year period ended December 31, 2020.

However, we do not believe inflation had a material impact on our results of operations during the three-year period ended December 31, 2021.

RESULTS OF OPERATIONS

• We define market volumes for Leasing as gross absorption of office real estate space in square feet for the U.S., Europe and select markets in Asia Pacific.

• 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 the U.S.

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not meaningful, represented by a percentage change of greater than 1,000% favorable or unfavorable.

• We renamed our Corporate Solutions business to "Work Dynamics" effective June 2021.

Year Ended December 31, 2021 compared with Year Ended December 31, 2020

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Gross contract costs (2,881.5) (2,703.2) (178.3) 7 4

Net non-cash MSR and mortgage banking derivative activity (66.6) (21.2) (45.4) n.m.

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6) 7.3 (11) (12)

Fee revenue $ 8,104.8 6,130.3 1,974.5 32 % 31 %

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Operating income $ 1,043.5 559.1 484.4 87 % 86 %

Equity earnings $ 8.0 36.3 (28.3) (78) % (78) %

Equity earnings $ 209.4 8.0 201.4 n.m.

Adjusted EBITDA $ 1,496.5 859.6 636.9 74 % 73 %

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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 net gain recognized on the sale of property management businesses in continental Europe.

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.

Reconciliation of Non-GAAP Financial Measures

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Reimbursements (8,321.4) (7,689.8)

(7,689.8) (7,952.6)

Revenue before reimbursements 11,045.6 8,900.1

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Reimbursed expenses (8,321.4) (7,689.8)

(7,689.8) (7,952.6)

Operating expenses, excluding reimbursed expenses 10,002.1 8,341.0

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At comparative period exchange rates $ 1,489.1 73 %

COVID-19 Pandemic

The COVID-19 pandemic (the "pandemic") disrupted our operations in 2020, most significantly in transaction-based service lines.

Offices in China began closing in January and by the end of March, over 90% of JLL's office-based employees across the globe were working remotely.

At the same time, our personnel across the globe, notably in Corporate Solutions and other annuity businesses, partnered with clients to ensure continuity of operations in response to the evolving conditions as well as develop and implement safe return-to-work measures.

In response to the pandemic's sustained disruptions to revenue and business operations, we implemented various cost mitigation actions.

Specifically, our expense management actions delivered nearly $330 million of non-permanent cost savings this year, including $80 million from various government programs implemented around the world in response to the challenging conditions created by the pandemic.

These non-permanent savings represent costs likely to return in future periods as the macroeconomic environment recovers.

In addition, the macroeconomic impact of the pandemic resulted in certain non-cash charges in 2020, including a net $21.6 million increase to loan loss credit reserves in Americas and a $45.7 million year-over-year decline in LaSalle's equity earnings.

Consolidated RES revenue decreased 7% to $16.2 billion and consolidated RES fee revenue decreased 14% to $5.7 billion, compared with 2019, a result of the pandemic's significant impact, especially on transaction-based service lines.

The declines were across all geographic segments and all service lines except Property & Facility Management, which grew modestly in 2020, primarily attributable to strength in the U.S.

offsetting declines in EMEA while Asia Pacific was stable year over year.

Leasing experienced the most significant year-over-year decrease in revenue (25%) and fee revenue (26%), against the backdrop of an over 40% decline in global office market gross absorption for the year, according to JLL Research.

Capital Markets included $215.2 million of incremental revenue from HFF in the first half of 2020 ($220.2 million of fee revenue) due to the July 1, 2019, timing of our acquisition.

HFF contributions are almost entirely within the Americas segment.

Organic Capital Markets fee revenue was down 27% compared with 2020, reflecting the sharp year-over-year drop in global market volumes.

Geographically across service lines, Americas represented nearly half of the year-over-year RES fee revenue decline on a local currency basis;

EMEA represented 32% and Asia Pacific 20%.

Refer to segment operating results discussion for further detail.

The decline in LaSalle revenue was substantially due to expected lower incentive fees compared to an exceptional 2019.

Solid advisory fee performance reflected strong capital raising during the year.

Refer to the LaSalle segment results discussion for further detail.

Our consolidated revenue and fee revenue decreased 8% and 14%, respectively, in both U.S.

dollars and on a local currency basis for 2020, compared with 2019.

The absence of a spread between U.S.

Consolidated RES revenue increased 15% to $18.9 billion and consolidated RES fee revenue increased 31% to $7.6 billion, compared with 2020, with broad-based growth across all geographic segments and service lines.

Leasing led the consolidated RES revenue and fee revenue growth with increases of 47% and 48%, respectively, versus the prior year.

Capital Markets also experienced significant year-over-year growth achieving revenue and fee revenue increases of 54% and 59%, respectively.

New wins and expansions of existing client mandates primarily drove the revenue increase in Property & Facility Management, up $737.3 million compared with 2020.

In addition, strong performance by Valuation Advisory drove the growth in Advisory, Consulting and Other.

Geographically across service lines, Americas contributed 78% of the year-over-year RES fee revenue increase on a local currency basis;

EMEA contributed 12% and Asia Pacific 10%.

The following highlights the proportion of RES service line consolidated fee revenue growth, on a local currency basis, compared with 2020, by notable segment.

• Leasing — Americas (82%), EMEA (10%) and Asia Pacific (8%)

• Capital Markets — Americas (75%), EMEA (16%) and Asia Pacific (9%)

• Property & Facility Management — Americas drove 98% of growth

• Project & Development Services — Americas (92%) and Asia Pacific (49%), partially offset by EMEA

• Advisory, Consulting and Other — Americas (48%), Asia Pacific (43%) and EMEA (9%)

LaSalle's 17% revenue growth, compared with 2020, was driven by higher incentive and advisory fees.

Refer to segment operating results for further detail.

Our consolidated revenue increased 17% in U.S.

dollars and 15% on a local currency basis, compared with 2020, while consolidated fee revenue increased 32% in U.S.

dollars and 31% on a local currency basis, compared with 2020.

The spread between U.S.

dollars and local currency was driven by a strengthening of the U.S.

dollar against the Indian rupee, Australian dollar and Canadian dollar, offset by a modest weakening of the U.S.

dollar against the British pound sterling and euro.

dollar against most currencies, especially the British pound, euro, Australian dollar, Canadian dollar and Chinese yuan.

Operating Expenses

In 2020, consolidated operating expenses, excluding reimbursed expenses, decreased 10% to $8.3 billion.

Consolidated fee-based operating expenses, were $5.6 billion in 2020, down 13% from prior year.

The lower expenses were primarily attributable to Americas, which represented 39% of the decrease in fee-based operating expenses on a local currency basis - Asia Pacific represented 28%, EMEA 21%, and LaSalle 7%.

Amounts received from government COVID-related programs were presented as reductions to Compensation and benefits expense.

In addition, Restructuring and acquisition charges represented 5% of the overall decrease;

In 2021, consolidated operating expenses, excluding reimbursed expenses, increased 18% to $10.0 billion.

Consolidated fee-based operating expenses, were $7.1 billion in 2021, a 25% increase from prior year.

The higher expenses were primarily attributable to Americas, which represented 73% of the increase in fee-based operating expenses on a local currency basis - EMEA represented 14%, Asia Pacific 12% and LaSalle 4%.

Refer to segment operating results for additional detail.

The overall expense increase is net of a partial offset from a decrease in Restructuring and acquisition charges;

refer to the following table and commentary below for additional detail.

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Restructuring, pre-acquisition and post-acquisition charges 67.8 88.2

Fair value adjustments that resulted in a net (decrease) increase to earn-out liabilities from prior-period acquisition activity (14.8) 28.4

Fair value adjustments that resulted in a net increase to earn-out liabilities from prior-period acquisition activity 2.6 (14.8)

Total restructuring & acquisition charges $ 84.7 142.4

Portion of total restructuring & acquisition charges related to the acquisition and integration of HFF $ 40.0 75.9

Charges associated with the acquisition and integration of HFF included transaction/deal costs, retention and severance expense, early lease termination costs, and other integration expenses.

The increase in severance and other employment-related charges, compared with 2019, reflected notable cost mitigation actions taken across the globe in response to the pandemic.

Charges associated with the acquisition and integration of HFF, Inc.

("HFF") primarily included expenses from retention awards granted to employees upon acquisition as well as other integration expenses, such as early lease termination costs.

The decrease in severance and other employment-related charges, compared with 2020, reflected notable cost mitigation actions taken across the globe in response to the pandemic in 2020.

Interest Expense

Interest expense, net of interest income, for 2021 was $40.1 million, down from $52.8 million in 2020.

The decrease was driven by a lower effective interest rate on our Facility.

The average outstanding borrowings under our Facility increased slightly from $851.6 million, with an average effective interest rate of 3.0%, during 2019, to $865.1 million, with an average effective interest rate of 1.6%, in 2020.

The decrease was driven by a lower effective interest rate on our Facility and a year-over-year reduction in the average outstanding borrowings.

The average outstanding borrowings under our Facility decreased to $432.0 million, with an average effective interest rate of 0.9%, in 2021, from $865.1 million, with an average effective interest rate of 1.6%, during 2020.

Equity Earnings

Equity earnings decreased from $36.3 million in 2019 to $8.0 million in 2020.

LaSalle is a key driver of activity in both years;

refer to the LaSalle segment results discussion for additional detail.

In addition, $12.7 million of equity earnings were recognized in the first quarter of 2020 for the Americas segment, substantially attributable to gains by consolidated variable interest entities in which JLL held no equity interest.

These gains are also reflected in net income attributable to noncontrolling interest and, therefore, had no impact to Net income attributable to common shareholders.

Equity earnings were $209.4 million in 2021, up from $8.0 million in 2020.

Valuation increases related to JLL Technologies' investments resulted in $140.8 million of equity earnings this year, compared with $5.8 million in 2020, reflecting continued progress in the strategy to invest in early-stage proptech companies;

refer to the Americas segment discussion for additional detail.

LaSalle recognized $62.6 million of equity earnings in 2021, compared with $12.4 million of equity losses in the prior year.

Refer to the LaSalle 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.

The provision for income taxes was $264.3 million and $106.9 million for the years ended December 31, 2021 and 2020, respectively, representing effective tax rates ("ETR") of 21.6% and 20.2%, respectively.

In 2019, there was a change in the estimated liability associated with the transition tax from the Act;

excluding the $4.3 million benefit from this change in estimate, the ETR was 23.5%.

Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 8, Income Taxes, of the Notes to Consolidated Financial Statements, included in Item 8, for a further discussion of our ETR.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders was $961.6 million for the year, or $18.47 per diluted common share, compared with $402.5 million for 2020, or $7.70 per diluted common share.

The July 2019 issuance of 5.7 million shares in conjunction with the HFF acquisition increased the weighted average shares outstanding in 2020, compared with 2019, impacting earnings per share.

Adjusted EBITDA decreased 24% from the prior year to $859.6 million in 2020.

Net income margin attributable to common shareholders was 4.5% in 2020, down from 5.3% in the prior year.

Adjusted EBITDA increased 73% from the prior year to $1,496.5 million in 2021.

Net income margin attributable to common shareholders was 8.7% in 2021 up from 4.5% in the prior year.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 18.5% in USD for 2021 (18.6% in local currency), compared with 14.0% last year.

The 160 basis-point net reduction was driven by (i) lower transaction-based revenues in RES, (ii) the year-over-year differential in LaSalle incentive fees and equity earnings and (iii) the non-cash charge to increase loan loss credit reserves, partially offset by savings from cost mitigation actions.

The 450 basis point margin expansion was primarily driven by the significant increase in revenue, particularly from higher margin transaction-based service lines, as well as higher equity earnings, as noted above.

These drivers were partially offset by the expected reduction of certain non-permanent cost savings from 2020 and incremental investments in people and technology.

Segment Operating Results

We manage and report our operations as four business segments.

Through 2021, we managed and reported our operations as four business segments.

Our three geographic RES segments include Americas, EMEA and Asia Pacific.

Our fourth segment, LaSalle, offers investment management services on a global basis.

Each geographic region offers our full range of real estate services, including agency leasing and tenant representation, capital markets, property management, facility management, project and development services, and advisory, consulting and valuation services, including digital solutions.

We define "property management" to be services we provide to non-occupying property investors and "facility management" to be services we provide to owner-occupiers.

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Gross contract costs (918.0) (842.5) (75.5) 9 9

Net non-cash MSR and mortgage banking derivative activity (66.6) (21.2) (45.4) n.m.

Net non-cash MSR and mortgage banking derivative activity (59.3) (66.6) 7.3 (11) (11)

Fee revenue $ 4,875.6 3,452.6 1,423.0 41 % 41 %

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Segment operating expenses, excluding reimbursed expenses $ 4,921.3 3,825.8 1,095.5 29 % 28 %

Equity earnings $ 19.0 1.7 17.3 n.m.

Equity earnings $ 142.2 19.0 123.2 648 % 648 %

Segment income $ 1,073.8 554.9 518.9 94 % 93 %

Adjusted EBITDA $ 1,157.6 626.6 531.0 85 % 84 %

Americas transaction-based service lines were negatively affected by the pandemic.

Leasing revenue reflected a substantial decrease in office volumes (office gross absorption down 47% compared with 2019, according to JLL Research), the industrial sector achieved significant growth.

Full-year Capital Markets included $211.5 million of incremental revenue contributions in the first half of 2020 from HFF ($216.6 million of fee revenue) with organic fee revenue down 25% for the year.

Lower investment sales and debt placement activity drove this organic decline, partially offset by notable growth in multifamily origination and servicing fees.

Property & Facility Management achieved significant revenue and fee revenue growth for the year driven by new property management and Corporate Solutions clients as well as expansions of existing Corporate Solutions client relationships.

The decrease in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses, compared with 2019, was primarily due to the decline in revenue-related expenses and an estimated $153 million of non-permanent cost savings achieved in 2020.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 18.1% in USD and local currency in 2020, compared with 18.4% in 2019.

The modest margin contraction was attributable to the decline in transaction-based revenue, largely offset by cost mitigation actions and growth in Property & Facility Management fee revenue.

Transaction-based service lines led revenue and fee revenue growth in Americas, compared with 2020.

In addition, organic fee revenue exceeded 2019 activity.

Leasing growth was driven by higher transaction volumes and an increase in average deal size in the U.S., with strong performance across all sectors, especially office and industrial.

Capital Markets growth reflected investment sales up over 80% for the year, continued momentum in debt and equity advisory (both up approximately 70% compared with last year), and a 28% increase in servicing revenue from our multi-housing business.

The increase in Property & Facility management was driven by new client wins and expansion of existing client mandates, especially in Work Dynamics, and was particularly notable given the prior year grew 23% compared with 2019.

Equity earnings from JLL Technologies' investments were $140.8 million in 2021, compared with $5.8 million in 2020, primarily due to valuation increases on the investments as a result of subsequent rounds of funding at higher per-share valuations.

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, excluding reimbursed expenses, and segment fee-based operating expenses, compared with 2020, were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), incremental investments in people and technology, and $17.6 million of higher medical and dental self-insurance expense compared with the prior year.

Adjusted EBITDA margin for the year, calculated on a fee revenue basis, was 23.7% in USD and local currency in 2021, compared with 18.1% in 2020.

The 560 basis point margin expansion was driven by transaction-based revenue growth and higher equity earnings, partially offset by the above-noted expense drivers.

EMEA - Real Estate Services

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Segment operating expenses, excluding reimbursed expenses $ 2,742.1 2,400.5 341.6 14 % 10 %

Equity losses $ — (1.0) 1.0 n.m.

Segment (loss) income $ (16.0) 46.0 (62.0) n.m.

Equity earnings $ — — — — % — %

Segment loss $ (5.6) (16.0) 10.4 65 % 81 %

Adjusted EBITDA $ 34.4 27.3 7.1 26 % 26 %

EMEA's revenue and fee revenue were significantly impacted by the pandemic in 2020.

Capital Markets revenue declines were most pronounced in the second and third quarters of 2020, compared with the prior-year quarters;

several geographies, including the UK, reflected resiliency and some recovery during the fourth quarter.

While depressed office market volumes drove lower Leasing revenue, strength in the industrial sector partially offset this impact.

The year-over-year decline in Property & Facility Management fee revenue was primarily driven by (i) approximately $52 million of lower fee revenue in our UK mobile engineering business, largely the result of pandemic-driven work delays from client office closures, and (ii) the absence of approximately $30 million of prior-year fee revenue relating to property management businesses in continental Europe that were sold in late 2019.

Geographically across service lines, lower fee revenue was most notable in the UK, Germany and France.

The decrease in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses was primarily due to lower revenue-related expenses and nearly $70 million of non-permanent cost savings, including benefits recognized as reductions to operating expenses from various government COVID-related programs.

EMEA's revenue and fee revenue growth was led by transaction-based revenue, reflecting a continued recovery in most geographies.

Notably, Capital Markets and Leasing both increased nearly 10% compared with their respective 2019 fee revenues.

The growth in Capital Markets was primarily due to higher deal volumes in investment sales across all sectors, particularly in industrial and office, compared with 2020.

The increase in Leasing revenue was driven by transaction volume increases, primarily in office and industrial, and an increase in average deal size, which in the fourth quarter eclipsed the comparative 2019 quarter for the first time this year.

Geographically across service lines, fee revenue growth in EMEA was led by the UK, France and Germany.

The increases in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), incremental investments in people and technology, and a $7.5 million greater year-over-year provision for bad debts (a net provision in 2021 compared with a net reduction in 2020).

Adjusted EBITDA margin, calculated on a fee revenue basis, was 2.1% in USD for the year (2.2% in local currency), compared with 2.0% in 2020.

The decline in Segment income and Adjusted EBITDA as well as the margin contraction were driven by lower transaction-based revenue and losses on certain contracts, partially offset by cost mitigation actions and a net reduction to the allowance for bad debts.

The slight margin improvement was primarily attributable to increased higher margin transaction-based revenue, largely offset by the expense drivers noted above.

Asia Pacific - Real Estate Services

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Adjusted EBITDA $ 160.4 144.9 15.5 11 % 7 %

Consistent with the other geographic segments, Asia Pacific's transaction-based revenue was meaningfully impacted by the pandemic.

Capital Markets revenue declines were most prominent in Singapore, Greater China and Japan, reflecting a significant decline in market volumes and shift in deal activity away from large transactions.

Lower Leasing fee revenue was largely due to declines in office leasing volumes, notably in Greater China, Australia and India.

Pandemic-driven office closures and work stoppages throughout 2020 resulted in delays to project activity within Project & Development Services.

By contrast, resiliency in Property & Facility Management was driven by property management and Corporate Solutions teams, who partnered with new and existing clients to execute on enhanced facilities management in an increasingly complex environment brought on by the pandemic.

The decrease in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses was primarily attributable to lower revenue-related expenses and approximately $96 million of non-permanent cost savings, including over $50 million from government COVID-related programs.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 16.1% in USD for 2020 (15.9% in local currency), compared with 14.4% in 2019.

The margin expansion reflected the non-permanent cost savings noted above partially offset by the decline in transaction-based revenue.

Asia Pacific's double-digit revenue and fee revenue increases were primarily due to a rebound in transaction-based revenue.

Growth in Leasing was led by Greater China, Australia and India, reflecting momentum in office and industrial throughout 2021.

Revenue expansion in Capital Markets was driven by a continued increase in large transactions across most asset classes, highlighted by Australia and Singapore and partially offset by Japan.

Significant business growth continued in Valuation Advisory, predominantly in Australia, which primarily drove the fee revenue increase in Advisory, Consulting and Other.

Geographically across service lines, fee revenue growth was led by Australia, Greater China and Singapore.

The increases in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses were primarily attributable to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from prior year (including the benefit related to government relief programs recognized in 2020), and incremental investments in people and technology.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 14.4% in USD and local currency for 2021, compared with 16.1% in 2020.

The lower margin was attributable to the expense drivers noted above, which more than offset the increase from incremental transaction-based revenue.

Year Ended December 31, Change in in Local

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Segment operating expenses, excluding reimbursed expenses $ 416.4 350.4 66.0 19 % 19 %

Equity (losses) earnings $ (12.4) 33.3 (45.7) n.m.

Equity earnings (losses) $ 62.6 (12.4) 75.0 605 % 602 %

Segment income $ 139.2 54.2 85.0 157 % 154 %

Adjusted EBITDA $ 144.1 60.8 83.3 137 % 134 %

Compared with 2019, expected lower incentive fees substantially drove the decline in LaSalle revenue and fee revenue.

The prior year achieved the second highest incentive fee performance of the previous decade, following only 2018.

Incentive fees in both years were driven by real estate dispositions on behalf of clients, primarily in Asia Pacific and North America.

Stable advisory fee performance reflected strong private equity capital raising over the year, which more than offset limited valuation declines in assets under management ("AUM").

As a direct result of the pandemic's expected impact on real estate prices, we recognized equity losses this year to reflect decreases to the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio.

This drove the majority of the decline in equity earnings, compared with 2019.

In addition, over 40% of the decline was attributable to a lower year-over-year increase in the share price of a co-investment in a LaSalle publicly traded real estate investment trust in Japan.

The year-over-year decrease in segment operating expenses, excluding reimbursed expenses, and segment fee-based operating expenses, was driven by (i) a decrease in the current portion of variable compensation expense related to the decline in incentive fees and (ii) the impact of cost mitigation actions, partially offset by higher deferred compensation expense related to the exceptional incentive fee performance in prior years.

LaSalle advisory fee growth 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.

The increase in incentive fees reflected the strong fund performance in the U.S.

and real estate dispositions on behalf of clients in Asia Pacific and continental Europe.

Equity earnings in 2021 were primarily attributable to increases to the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio across asset classes and geographies.

In the prior year, 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, compared with 2020, were primarily driven by compensation expense related to the higher incentive fees, deferred variable compensation expenses associated with the run-off of a previous compensation program, and incremental investments in people and technology.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 30.4% in USD (30.5% in local currency) for 2021, compared with 15.2% in 2020.

The margin decline was primarily attributable to the change in equity earnings (approximately three-quarters of the margin contraction) and expected lower incentive fees.

As of December 31, 2020, LaSalle had $68.9 billion of AUM, an increase of 2% in USD (down 1% in local currency) from $67.6 billion as of December 31, 2019.

The net increase in AUM during the year resulted from (i) $10.1 billion of acquisitions and (ii) $1.8 billion of foreign currency increases, partially offset by (iii) $10.2 billion of dispositions and withdrawals and (iv) $0.4 billion of net valuation decreases.

The significant margin expansion was largely driven by higher equity earnings and incentive fees, partially offset by the expense drivers noted above.

As of December 31, 2021, LaSalle had $76.6 billion of AUM, an increase of 11% in USD and local currency from $68.9 billion as of December 31, 2020.

The net increase in AUM during the year resulted from (i) $7.3 billion of acquisitions (ii) $7.6 billion of net valuation increases and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $7.4 billion of dispositions and withdrawals.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operating Activities

Operating activities provided a record $1,114.7 million of cash in 2020, compared with $483.8 million in 2019.

The substantial increase in cash flows from operating activities was driven by strong cash collection on receivables, participation in government COVID-related programs this year (including payment deferral opportunities for government cash obligations) and lower cash taxes paid in 2020, compared with 2019.

These items were partially offset by lower net income this year as well as increased annual incentive compensation paid in the first quarter of 2020 compared with 2019.

Operating activities provided $972.4 million of cash in 2021, compared to $1,114.7 million in 2020.

The decrease in cash provided was primarily due to (i) lower cash collections in the first quarter of 2021 compared with the first quarter of 2020 (trade receivables balance was $1,636.1 million as of December 31, 2020 versus $2,034.3 million as of December 31, 2019) and (ii) the timing of payments related to taxes and other government obligations, partially offset by (iii) lower annual incentive compensation paid in early 2021 compared with early 2020 and (iv) higher cash provided by earnings, driven by an increase in net income.

Cash Flows from Investing Activities

We used $805.8 million of cash for investing activities during 2021, compared with $170.6 million used in 2020.

The significant decrease in cash used was primarily driven by an absence of business acquisitions in 2020 (HFF, Inc.

was acquired in July 2019) and a decrease in net acquisitions of investment properties (less than wholly-owned) this year.

We discuss these key drivers individually below in further detail.

The increase in cash used was primarily driven by business acquisitions and incremental JLL Technologies investments in early-stage proptech companies.

We discuss these key drivers, along with other investing activities, individually below in further detail.

Cash Flows from Financing Activities

Financing activities used $771.2 million of cash during 2020, compared with $584.6 million provided by financing activities during 2019.

The significant year-over-year change in cash flows from financing activities is substantially driven by $525.0 million of net repayments on our Facility this year, compared with $525.0 million of net borrowings in 2019, reflecting outstanding operating cash flows generated during 2020 and cash consideration needs in 2019 for acquisitions, respectively.

Our $2.75 billion Facility matures on May 17, 2023.

As of December 31, 2020, we had no outstanding borrowings under the Facility and outstanding letters of credit of $0.7 million.

As of December 31, 2019, we had $525.0 million of outstanding borrowings under the Facility and outstanding letters of credit of $0.8 million.

The average outstanding borrowings under the Facility were $865.1 million and $851.6 million during the years ended December 31, 2020 and 2019, respectively.

In addition to our Facility, we had the capacity to borrow up to an additional $64.7 million under local overdraft facilities as of December 31, 2020.

We had Short-term borrowings (including capital lease obligations, overdrawn bank accounts and local overdraft facilities) of $62.0 million and $120.1 million as of December 31, 2020 and 2019, respectively, of which $12.0 million and $44.8 million as of December 31, 2020 and 2019, respectively, were attributable to local overdraft facilities.

Financing activities used $143.8 million of cash during 2021, compared with $771.2 million used during 2020.

The reduction in cash flows used by financing activities was largely driven by the year-over-year change in net borrowing activity related to our Facility ($150.0 million of net borrowings in 2021 compared with $525.0 million of net repayments in 2020).

The change in net borrowing activity reflected higher cash outflows from investing activities (discussed elsewhere in this section), $243.3 million of incremental share repurchases this year and lower cash provided by operating activities.

Our $2.75 billion Facility matures on April 14, 2026 and bears a variable rate of interest.

As of December 31, 2021, we had outstanding borrowings under the Facility of $138.2 million.

As of December 31, 2020, we had no outstanding borrowings under the Facility.

The average outstanding borrowings under the Facility were $432.0 million (with an average effective interest rate of 0.9%) and $865.1 million (with an average effective interest rate of 1.6%) during the years ended December 31, 2021 and 2020, respectively.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $147.9 million as of December 31, 2021, including $132.7 million related to overdrawn bank accounts and $9.2 million attributable to local overdraft facilities.

As of December 31, 2020 short-term borrowings was $62.0 million, including $44.8 million related to overdrawn bank accounts and $12.0 million attributable to local overdraft facilities.

As of December 31, 2021, we had the capacity to borrow up to an additional $55.5 million under local overdraft facilities.

In addition, as of December 31, 2021, we had the following outstanding senior notes:

• $275.0 million of Notes due November 2022 (with an fixed interest rate of 4.4%)

• €350.0 million of Euro Notes, evenly divided between maturities of June 2027 (with a fixed interest rate of 1.96%) and June 2029 (with a fixed interest rate of 2.21%).

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 10, Debt, of the Notes to Consolidated Financial Statements, included in Item 8, for additional information on our Facility, Short-term borrowings and Long-term debt.

Refer to Note 10, Debt in the Notes to Consolidated Financial Statements, included in Item 8, for additional information on our debt.

Investment Activity

As of December 31, 2020, we had $430.8 million of total Investments in real estate ventures, primarily related to LaSalle co-investments.

In addition, since 2018, we have invested in a number of early-stage proptech (property technology) companies through our JLL Spark Global Venture funds.

As of December 31, 2021, we had a carrying value of $745.7 million in Investments, primarily related to LaSalle co-investments and investments by JLL Technologies in early-stage proptech companies.

In 2021 and 2020, funding of investments exceeded returns of capital by $107.1 million and $38.8 million, respectively.

We expect to continue to pursue strategic co-investment opportunities with our investment management clients across the globe as co-investment remains an important foundation to the continued growth of LaSalle's business.

In addition, we expect continued investments by our JLL Spark funds.

See Note 5, Investments in Real Estate Ventures, of the Notes to Consolidated Financial Statements, included in Item 8, for additional information on our co-investment activity.

Share Repurchases

On October 31, 2019, our Board of Directors approved a new share repurchase program (the "Program") authorizing the repurchase of up to $200.0 million of our common stock in the open market and privately negotiated transactions.

During the year ended December 31, 2020 we repurchased nearly 897,000 shares for $100.0 million.

As of December 31, 2020, $100.0 million remained authorized for repurchases under the Program.

There were no shares repurchased in 2019.

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.

In addition, JLL Technologies funded a $45.0 million convertible note 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 Consolidated Balance Sheet.

We have unfunded capital commitments to investment vehicles and direct investments totaling a maximum of $372.4 million as of December 31, 2021.

See Note 5, Investments, of the Notes to Consolidated Financial Statements, included in Item 8, for additional information on our investment activity.

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 as of December 31, 2020, from the initial authorization.

The number of shares repurchased and cash paid for repurchases is noted in table below.

Year Ended December 31,

($'s in millions) 2021 2020

Total number of shares repurchased (in 000's) 1,451.7 897.0

Total paid for shares repurchased $ 343.3 100.0

As of December 31, 2021, $256.8 million remained authorized for repurchases under our share repurchase program.

Capital Expenditures

Capital expenditures, excluding those made by a consolidated VIE in which we held no equity interest, were $149.4 million and $187.8 million in 2020 and 2019, respectively.

Our capital expenditures are primarily for purchased and developed software, computer hardware and improvements to leased office space.

The decrease of capital expenditures compared with 2019 is primarily due to lower computer hardware and software expenditures, reflecting cash preservation decisions we made during the pandemic.

In addition, property acquisitions and capital expenditures, net of proceeds from distributions, made by consolidated VIEs in which we hold no direct equity interest were net proceeds of $1.0 million in 2020 and net acquisitions of $79.2 million in 2019, primarily to acquire real estate.

Refer to Note 5, Investments in Real Estate Ventures, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our consolidated VIE investments.

Capital expenditures, excluding those made by a consolidated VIE in which we held no equity interest, were $175.9 and $149.4 million in 2021 and 2020, respectively, were primarily for leased office space improvements, hardware and purchased/developed software.

Investment Asset Activity of Consolidated Less Than Wholly-Owned Entities

Net capital additions made by consolidated VIEs in which we held no equity interest were net acquisitions of $70.9 million in 2021, compared with net proceeds of $1.0 million in 2020, primarily to acquire (and dispose of) real estate.

Refer to Note 5, Investments, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our consolidated VIE investments.

Business Acquisitions

In 2020, we paid $67.7 million for deferred business acquisition and earn-out obligations related to acquisitions completed in prior years.

This activity is included in cash flows from operating and financing activities.

The net cash paid for acquisitions compares with $906.0 million paid in 2019, predominantly for the HFF acquisition.

In 2021, we paid $505.5 million for business acquisitions.

This included $416.8 million of payments relating to acquisitions that closed in 2021 and $88.7 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 our acquisitions have typically included cash paid at closing with provisions for additional consideration and earn-out payments subject to certain contract provisions and performance.

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These obligations represent the current discounted values of payments to sellers of businesses for which our acquisition has closed as of the balance sheet dates and for which the only remaining condition on those payments is the passage of time.

As of December 31, 2020, we had $85.7 million accrued for potential earn-out payments, of a potential maximum of $199.2 million (undiscounted), subject to the achievement of certain performance conditions.

As of December 31, 2021, we had the potential to make earn-out payments on 19 acquisitions subject to the achievement of certain performance conditions, representing $84.1 million accrued for potential earn-out payments, of a potential maximum of $149.9 million (undiscounted), subject to the achievement of certain performance conditions.

These earn-outs will come due at various times over the next five years, assuming the achievement of the applicable performance conditions.

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We believe our policy of permanently reinvesting earnings of foreign subsidiaries does not significantly impact our liquidity.

As of December 31, 2020 and 2019, we had total Cash and cash equivalents of $574.3 million and $451.9 million, respectively, of which approximately $445.2 million and $385.4 million, respectively, was held by our foreign subsidiaries.

As of December 31, 2021 and 2020, we had total cash and cash equivalents of $593.7 million and $574.3 million, respectively, of which $487.9 million and $445.2 million, respectively, was held by our foreign subsidiaries.

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 total assets of these countries in aggregate totaled approximately 4% and 5% of our total assets as of December 31, 2020 and 2019, respectively.

Contractual Obligations

We have obligations and commitments to make future payments under contracts in the normal course of business.

The following table summarizes our minimum contractual obligations as of December 31, 2020.

(in millions) PAYMENTS DUE BY PERIOD

CONTRACTUAL OBLIGATIONS TOTAL LESS THAN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS

Debt obligations $ 761.2 56.8 275.0 — 429.4

Interest on debt obligations 90.6 21.3 28.5 17.9 22.9

Business acquisition obligations 32.2 14.6 13.0 4.6 —

Lease obligations 963.0 191.6 284.3 193.4 293.7

Deferred compensation 54.3 15.2 28.9 10.2 —

Defined benefit plan obligations 162.0 14.7 30.6 32.1 84.6

Vendor and other purchase obligations 187.6 82.6 87.7 17.3 —

Total $ 2,250.9 396.8 748.0 275.5 830.6

Debt Obligations.

As of December 31, 2020, we had no outstanding borrowings under our Facility;

we had outstanding borrowings of $12.0 million under our local overdraft facilities and $44.8 million related to overdrawn bank accounts.

We had the ability to borrow up to $2.75 billion on the Facility with a maturity date in 2023.

We had the capacity to borrow up to an additional $64.7 million under local overdraft facilities.

In addition, we had $275.0 million of Notes due November 2022 and €350.0 million of Euro Notes, with €175.0 million of the Euro Notes due June 2027 and June 2029, respectively.

Interest on Debt Obligations.

Our debt obligations incur interest charges primarily at variable rates.

For purposes of preparing an estimated projection of interest on debt obligations for this table, we have estimated our future interest payments based on our borrowing rates and amounts outstanding as of December 31, 2020 and assuming each of our debt obligations is held to maturity.

As of December 31, 2020, the annual interest rate on our Notes was 4.4%.

As of December 31, 2020, the annual interest rates on our Euro Notes were 1.96% and 2.21% for the 10-year and 12-year notes, respectively.

Business Acquisition Obligations .

Our business acquisition obligations represent payments to sellers of businesses for acquisitions closed as of December 31, 2020, with the only condition on those payments being the passage of time.

The contractual obligations table above does not include possible contingent earn-out payments associated with our acquisitions.

As of December 31, 2020, we had the potential to make earn-out payments on 35 acquisitions subject to the achievement of certain performance conditions.

The maximum amount of the potential earn-out payments was $199.2 million as of December 31, 2020.

We anticipate these earn-out payments will come due at various times over the next five years assuming the achievement of the applicable performance conditions.

Lease Obligations .

The total assets of these countries in aggregate totaled approximately 4% of our total assets as of both December 31, 2021 and 2020, respectively.

Our lease obligations primarily consist of operating leases of office space in various buildings for our own use as well as operating leases for equipment.

The total minimum rentals to be received in the future as sublessor under noncancelable operating subleases as of December 31, 2021 was $43.7 million.

Refer to Note 11, Leases, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our lease obligations.

Deferred Compensation

Deferred compensation obligations in the table above represent payments expected to be made pursuant to long-term deferred compensation plans and are inclusive of amounts attributable to service conditions satisfied as of December 31, 2020, as well as service conditions expected to be satisfied in future periods.

The contractual obligations table above does not include a provision for deferred compensation plans, predominantly in the U.S., that allow employees to defer portions of their compensation.

Generally, we invest directly in insurance contracts which yield returns to fund these deferred compensation obligations.

Deferred compensation obligations are inclusive of amounts attributable to service conditions satisfied as of December 31, 2021, as well as service conditions expected to be satisfied in future periods.

The deferred compensation plans include a provision for deferred compensation plans, predominantly in the U.S., that allow employees to defer portions of their compensation.

We recognize an asset for the amount that could be realized under these insurance contracts at the balance sheet date, and the deferred compensation obligation is adjusted to reflect the changes in the fair value of the amount owed to the employees.

Such plans are recorded on the Consolidated Balance Sheets as of December 31, 2020 as Deferred compensation plan assets of $446.3 million and long-term deferred compensation liabilities, included in Deferred compensation, of $427.6 million.

Defined Benefit Plan Obligations .

The defined benefit plan obligations represent estimates of the expected benefits to be paid out by our defined benefit plans over the next ten years.

The timing of payments to employees is, in part, dependent on their employment with JLL and, therefore, cannot be determined with precision.

Refer to the Consolidated Balance Sheets, of the Consolidated Financial Statements, and Note 9, Fair Value Measurements, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our deferred compensation.

Defined Benefit Plans

The defined benefit plan obligations represent estimates of the expected benefits to be paid out by our defined benefit plans.

We will fund these obligations from the assets held by these plans.

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We expect to contribute $8.6 million to our defined benefit pension plans in 2022.

Vendor and Other Purchase Obligations .

Our other purchase obligations primarily relate to various information technology servicing agreements, telephone communications and other administrative support functions.

Other/Off-Balance Sheet Arrangements

We have unfunded capital commitments to investment vehicles and direct investments totaling a maximum of $320.7 million as of December 31, 2020.

We are not able to predict if, when, or in what amounts such capital calls will be made, and therefore we exclude such commitments from the above table.

For additional information on the contractual obligations presented above, see our discussion in Note 4, Business Combinations, Goodwill and Other Intangible Assets, Note 5, Investments in Real Estate Ventures, Note 7, Retirement Plans, Note 10, Debt and Note 11, Leases, in the Notes to Consolidated Financial Statements, included in Item 8.

As payments to recipients are based on their retirement date, age and other factors, we cannot determine the timing of such payments with precision.

Refer to Note 7, Retirement Plans, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on our defined benefit plans.

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 7. Management’s Discussion and Analysis