Prompt:
Human: During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
The transcript of this conference call will also be posted on our website.
As discussed in our last earnings call, we entered 2021 with a cautious yet optimistic outlook on JLL's ability to take advantage of the expected global recovery.
We are pleased to start the year with a strong first quarter.
Our strong results were yet again driven by the continued hard work and dedication of the entire JLL team.
And I remain impressed by their ability to execute against ongoing rapidly changing and trying circumstances.
We continue to realize the benefits of our One JLL philosophy of bringing the best of JLL to our clients for all our services and products across geographies.
Turning to the market environment.
The global economy had modest growth in the first quarter, although highly concentrated in a small number of large economies.
The macroeconomic outlook has improved meaningfully as the rollout of the vaccination expands and ongoing global government stimulus programs outpace initial expectations, setting the stage for more robust growth expected in the rest of the year.
Our research indicates global office leasing activity has remained subdued, with global leasing volumes down 31% compared with Q1 2020.
EMEA showed relative resilience with a decline of 8% in the quarter, while APAC and the US saw significantly larger declines of 26% and 45%, respectively.
In comparison to the fourth quarter of 2020 which saw global leasing volumes down 43% for the quarter, it is clear that the trajectory is trending in the right direction.
Investment sales also continued to show signs of recovery, with global volumes down 13% versus the same period last year following a 21% decline in the fourth quarter and 44% in the third.
This reflects the steady improvement of liquidity and capital flows.
The signs so far lend credence to the belief that 2021 will be a year of sustained recovery and expansion as the world begins to adjust to new normal, despite certain countries continuing to witness the devastating effects of the pandemic.
We expect an acceleration of vaccination programs across the world, which should lead to increased transaction activity in the second half of the year for many geographies.
Our first quarter results build upon the momentum we closed 2020 with.
We believe these results reflect strong diversification across the business with exposure to high-growth areas like data centers, life science and industrial and JLL's increasing value proposition for clients particularly around technology and sustainability.
In local currency, consolidated revenue fell 4% to $4 billion and fee revenue declined 7% to $1.4 billion.
Adjusted EBITDA of $190 million represented an increase of 96% from the prior year, with adjusted EBITDA margin increasing 700 basis points to 13.4% in local currency driven by discrete items of approximately $50 million, ongoing cost mitigation initiatives and a better-than-expected performance in our transaction-based service lines.
Our adjusted net income totaled $109.7 million for the quarter, resulting in adjusted diluted earnings per share of $2.10.
Our transaction-based service lines continued to face broad-based pressure as a result of the pandemic.
But our strong results for the quarter were buoyed by resilience amid slowly improving market conditions for Capital Markets and Leasing.
Our Property & Facility Management business also continues to demonstrate its strengths, particularly in the Americas.
Further, our Advisory, Consulting and Other service line reflected considerable growth from strong valuation results, with Asia Pacific recording substantial gains over Q1 2020.
Overall, we are encouraged by our strong first quarter results and are increasingly optimistic about the road ahead.
This quarter demonstrated the continued growth of our JLL Technologies platform, a key pillar of our strategy.
JLLT represents our ability to broaden client access to leading-edge technology and transform the real estate industry through innovation.
We will continue to expand upon our portfolio of investments, focusing on strategic investments, such as the multi-faceted Roofstock transaction and believe that the value of our portfolio will continue to yield considerable upside for JLL as demonstrated in the first quarter.
Overall, I'm encouraged with the start of the year.
First quarter top and bottom line results exceeded our expectations and demonstrated continued momentum in the pace of the recovery we saw in the latter part of 2020.
The outperformance versus our expectations was relatively broad based, both by geography and business line within real estate services and also due to several discrete items that I'll discuss in more detail later in my remarks.
Our adjusted EBITDA margin improved 700 basis points year-over-year, driven primarily by the discrete items and cost reduction measures we instituted over the past several quarters.
Given the trends in our pipeline, improving macro indicators and our view of the evolving market, we remain cautiously optimistic on the outlook for the year, particularly the second half.
However, the global economic recovery remains uneven with continued uncertainty.
We intend to use our strong financial and competitive position to invest for growth and create value for all stakeholders.
Moving to a detailed review of our operating performance.
Our overall real estate services fee revenue declined 6% in the first quarter, an improvement from the 17% decline in the fourth quarter.
This was driven by a return to growth in Asia Pacific and a moderation in the pace of decline in both EMEA and the Americas.
The real estate services adjusted EBITDA margin was 12.7%, which compares with 8.5% a year earlier.
Absent discrete items, which include $35 million of noncash valuation increases to investments by JLL Technologies and early stage prop tech companies as well as an $8 million multifamily loan loss reserve release this year and the $31 million increase to the corresponding reserve a year ago, the real estate services adjusted EBITDA margin would have been relatively flat year-over-year.
Benefits from our cost reduction actions largely offset the impact from lower transaction-based revenues and investments in growth initiatives, including JLL Technologies.
Turning to the Americas.
The fee revenue decline showed steady improvement on a sequential basis, primarily due to performance in Leasing, continued robust growth in Property & Facility Management and a return to growth in Advisory and Consulting.
While Americas Leasing saw a few large transactions pulled forward into the first quarter, our leasing platform is benefiting from diversification across asset classes, including the higher growth areas, such as industrial, life sciences and data centers.
In addition, our data-driven and experiential technology platform is leading to increased client engagements, and we believe it is a key differentiator.
Based on our leasing pipeline, client activity and our overall view of the market, we expect leasing activity to accelerate slightly more than the typical seasonality in the second half of the year, though we emphasize closing rates and timing remain highly uncertain.
The Americas office sector continues to be soft, though there are some early indications of improvement, such as an increase in property tours.
According to JLL Research, the decline in net effective rents in offices across major US cities stabilized in the first quarter, down approximately 13% since the beginning of the pandemic.
Also, after four consecutive quarters of declines, average lease terms increased, albeit slightly from 7.1 years from 6.7 years.
The Americas Capital Markets growth trajectory was slightly impacted by the pull forward of some transactions from 2021 into fourth quarter of 2020.
But we are encouraged by the underlying business fundamentals and signs of thawing in the hardest hit sectors.
The Americas industrial sector remains strong, and our multifamily debt origination and loan servicing businesses have been resilient.
Encouragingly, our Americas Capital Markets pipeline continues to build.
From a profitability standpoint, the Americas adjusted EBITDA margin increased approximately 700 basis points.
Noncash valuation increases within our JLL Technologies investments and movement in the multifamily loan loss reserve were the primary drivers of the expansion.
Our cost mitigation actions taken over the past several quarters were mostly offset by the impact from lower fee revenues in Capital Markets and Leasing.
In EMEA, fee revenue remains down year-over-year, though the rate of decline has moderated meaningfully from prior quarters, in part due to partially lapping pandemic headwinds.
Growth and valuations advisory, along with a relatively resilient leasing fee revenue, continues to be more than offset by lower activity in Project & Development Services and our U.K. mobile engineering business.
Continued robust industrial sector leasing growth was offset by softness in most other sectors, though we are encouraged by early indications of improving activity.
Material moderation in the EMEA Capital Markets rate of decline was driven by improvement in the office sector, mainly due to a few large transactions in Switzerland.
In terms of EMEA's profitability, the cost savings from actions taken over the past several quarters were more than offset by the lower fee revenue as well as a contract loss in the U.K., timing of expenses and investments in global growth initiatives, driving a decline in the adjusted EBITDA margin.
Asia Pacific generated robust double-digit fee revenue growth as activity picked up across most business lines in key markets with the region lapping pandemic headwinds.
Growth was particularly strong in Capital Markets due to the timing of several large transactions in the office, life sciences and data center sectors.
In addition, our valuations advisory business grew year-over-year.
Leasing activities are picking up in some markets, particularly in Greater China, but the pandemic resurgence continues to weigh on momentum across the region.
On a global basis, our Property & Facility Management service line continues to grow, led by new business wins and contract expansions in the Americas, including an uptick in reentry work.
Property & Facility Management has grown throughout the pandemic as corporate occupiers and investors seek our services not only for higher building management standards but also our broad view on best practices and reopening the workplace.
Our Corporate Solutions business fee revenue grew 2%.
A strong growth in the Americas was mostly offset by ongoing EMEA headwinds.
We continue to be encouraged by the secular outsourcing trend, especially as clients increasingly seek our extensive knowledge and breadth of services, including sustainability, offered under our One JLL philosophy.
Fee revenue declined 17%, primarily on lower transaction fees and the expected absence of incentive fees.
We expect the lower level of transaction activity caused by the pandemic to continue in the near term.
We continue to forecast full year 2021 incentive fees of approximately $25 million, with about 1/4 of those hitting in the second quarter.
The 8% decline in advisory fees was primarily attributable to pandemic-driven AUM valuation declines.
LaSalle's assets under management grew about $2 billion or 3% from the prior quarter to total $71 billion.
LaSalle's equity earnings reflect $13 million of noncash valuation increases in our co-investment portfolio, which compares with a $40 million decrease in estimated fair value a year earlier at the onset of the pandemic.
As discussed on our last earnings call, we allocate capital by adhering to our framework, maintaining an investment-grade balance sheet, driving future growth through organic and inorganic investments in the business and returning 20% of free cash flow to shareholders over the long term.
In the first quarter, we prioritized internal cash needs and investments in areas where clients have increasing demand, which serves to enhance the attractiveness of our products and solutions.
We did not repurchase any shares during the quarter.
Shifting now to an update on our balance sheet and cash flows.
At the end of March, reported leverage was 0.7 times, within our targeted range and seasonally up from 0.2 times at the end of December.
Our liquidity stood at $2.9 billion, with 87% available on our $2.75 billion revolving credit facility.
We recently renewed the credit facility under essentially the same terms while extending the maturity date three years to April 2026.
The renewal also included incentives linked to achieving certain sustainability goals.
Lower incentive compensation payouts from prior year performance and our ongoing focus on improving capital efficiency helped drive a nearly $100 million improvement in the free cash flow deficit compared to the prior year.
Looking ahead to the full year 2021, the pipeline and business trends I discussed paint a picture of a gradually accelerating recovery as we move through the year.
We continue to expect to operate within a 14% to 16% long-term adjusted EBITDA margin target range for the full year.
We remain confident in our ability to meet our 2025 Beyond targets.
Our investments in near-term and longer-term growth initiatives, along with our continued focus on providing a leading data-driven and technology-enabled platform, position us well to deliver for our clients and all stakeholders.
As we look ahead, the outlook for the global economy is beginning to brighten.
There's particular optimism for the second half of the year, but the recovery will be uneven and staggered across geographies.
For example, the US and UK are progressing well with their vaccination efforts, but the news out of India and Brazil is devastating.
We are taking complete steps to support our employees and their families during this difficult time.
We are also leveraging our global organization to ensure business continuity.
Overall, we see promising economic indicators as signs of pent-up demand that could benefit general economic activity.
Further, JLL Research predicts that by Labor Day, US office physical occupancy levels will top at least 50%, up significantly from the levels observed through the first quarter of approximately 15%.
We expect this year we'll see continued recovery in expansion even while the pandemic causes further ways of disruption.
Before we close, I would like to provide an update on advancements in our efforts to create value for all of our stakeholders through a continued focus on environmental sustainability practices.
Central to our stated purpose of shaping the future of real estate for a better world is our commitment to sustainability, which we believe benefits not only our clients but our communities and society as well.
Cognizant of the real estate industry's impact on the environment, we continue to play a leading role in advancing the focus on sustainability within the broader business landscape.
As a company, we successfully ensure that our goals and targets for greenhouse gas reduction, safety and diversity remain at the center of our strategic decisions.
It's integrating our long-term sustainable growth objectives throughout our business.
Regarding environmental sustainability, I would like to share a number of developments.
In signing the climate pledge, we announced our aim to achieve net zero carbon emissions by 2040 across all areas of our operations, including the client sites we manage globally.
We are continuing to partner with Bloomberg Green for second year to address critical issues related to climate and sustainability.
As part of our strategic partnership with World Economic Forum and a member of the CEO Alliance of Climate Leaders, we have to committed to publicly disclose performance against sustainability goals.
We conform one Broadgate as our new UK flagship office, which represents an opportunity to achieve one of the most sustainable and technologically advanced workplaces in the UK Lastly, building on Karen's comments, we further formalized our commitment to environmental sustainability as we successfully extended the maturity of our revolving credit facility, leading within our industry by integrating select incentives to the achievement of certain sustainability goals.
We will continue to proactively execute against our environmental sustainability strategic road map and raise the bar on acting as a responsible corporate citizen throughout our communities.
As we emerge into the next normal, we remain focused on our employee safety, supporting our communities and serving our clients.
Our first quarter results are a testament of the benefits of our global and scale platform.
We are emerging from this period as a stronger company with more integrated services and expertise allowing us to capitalize on new opportunities because of our continued investment in our technology and platform.
While it's clear that the post-pandemic world will look much different, we are encouraged by the fact that clients are seeking the high-quality services, meaningful insight and global connectivity and consistency that JLL is uniquely positioned to offer.
We serve our clients with best-in-class services and advise while simultaneously bolstering our strong financial position and continuing to make intelligent investments aimed at enhancing long-term value for all stakeholders.
Operator, please explain the Q&A process.
 Assistant:

Chosen response: q1 adjusted earnings per share $2.10.


Prompt:
Human: During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
A transcript of this conference call will also be posted on our website.
In what continues to be a challenging and volatile year, I remain impressed by the resilience of our employees across the world.
Their dedication and success in providing unparalleled service to our clients has been nothing short of remarkable and I'm extremely proud and grateful for all that they have done.
As cases begin to rise and impact the reentry process to various degrees across the world, we continued to monitor the situation carefully and strictly adhere to the guidance of local and global health authorities to help manage the spread of the virus.
The health and well-being of our people, clients and communities remain our first priority.
Turning to the market environment, global economic activity recovered some ground in the third quarter, despite the pandemic's continuing impact on both global and regional real estate fundamentals.
Improving economic indicators remain vulnerable to a potential resurgence of the virus as cases and hospitalizations rising in many countries around the world.
Near-term uncertainty continues to dampen forecast into the severity and longevity of the effects of the pandemic, as the world awaits the broad-based distribution of an effective vaccine before we can begin to regain some semblance of normality.
COVID-19 has accelerated many workplace trends that were prevalent in the commercial real estate industry prior to the Pandemic.
These include experiential workspaces, outsource real estate functions, and increased focus on employee wellbeing.
As a result of the changes the pandemic has had on how people work in suits and boards have increased their focus on real estate decisions to ensure their office spaces will suit their future needs.
Turning specifically to the global office leasing market, JLL Research reported that activity in the third quarter was down 46% from a year earlier, reflecting an improvement from Q2, but a continuation of subdued demand.
Asia-Pacific recorded a decrease in activity of only 5% relative to last year while EMEA and the United States were down 52% and 55% respectively.
Vacancy rates moved up across all regions in Q3, so the global vacancy right now recorded at 12.1%, reflecting a 90 basis point increase.
Declines in investment sales decelerated in the third quarter as global volumes down 44% compared to the same period last year.
Despite the headwinds associated with the pandemic, I'm pleased that our diversified and scaled platform generated solid results for the third quarter.
Overall third quarter results were at the upper end of our expectations due to -- in part to stable one-time items that are not expected to benefit future quarters to the same extent.
Consolidated revenue fell 12% to $4 billion and fee revenue declined 23% to $1.4 billion, in local currency.
Adjusted EBITDA of $244 million represented a decline of 19% from the prior year although adjusted EBITDA margin increased 90 basis points to 17.4% in local currency, driven by cost mitigation initiatives as well as government relief program.
Adjusted net income totaled $156 million for the quarter and adjusted diluted earnings per share totaled $2.99.
Corporate Solutions, again, demonstrated its ability to withstand challenging market conditions, posting a modest fee revenue decline of 2% for the quarter.
Strengths in Facility Management was slightly offset by declines in EMEA Mobile Engineering, which continues to face pandemic related headwinds.
Current pipelines for Corporate Solutions are stronger than last year, though the pandemic continues to create delays on real estate decisions affecting the closure rate.
As expected, our transaction-based service lines, capital markets and leasing recorded notable declines for the quarter as activity remains depressed due to the uncertainty caused by the pandemic.
Despite the overall declines, we're encouraged by our performance in some of the less impacted sub sectors such as industrial and logistics, which have shown significant resiliency throughout this year.
Furthermore, we have seen a strong rebuilding of our transactions pipeline since Q2.
These improving pipeline figures offer encouraging indicators for future performance though near-term uncertainty continues to linger.
Clients increasingly turn to JLL for our insights on operating the real estate and preparing for post-pandemic world.
Our conversations focus, first, on helping them evaluate their workplace challenge and objectives.
Then we develop long-term solutions that will enable successful transitions while preserving their ability to be agile, adaptable and resilient, as well as productive and profitable.
We've crafted the framework for reimagining the workplace to assist in this transition, which is focused on four strategic pillars; business, people, workplace, and commercial real estate.
Our consultancy expertise is in significant demand because JLL is uniquely capable of providing our clients advisory and execution services as a result of our global reach and full service platform.
Further investments in our technology platform have proven to be a strong differentiator when conveying our capabilities and dialog with our clients as the pandemic has accelerated technological disruption in the commercial real estate industry.
We continue to expand our collaborations across business lines to respond to clients' evolving needs.
For instance, we were able to expand an existing engagement with a major regional American bank to a five year mandate.
Multiple services in this assignment are facility management, transaction management and brokerage, project and development services, occupancy planning and the management and administration of all leases.
The bank identified several benefits of consolidating these services into JLL including our single provider technology platform, our shared services centers, the ability to consolidate services and the opportunity to provide a sustainable carrier roadmap for the internal staff transferring to JLL.
This is just one successful outcome of acting as one JLL.
It reflects our ability to deliver the full value of JLL across business lines in every client engagement.
In this quarter, we took further action as part of our disciplined cost mitigation program while simultaneously preserving our ability to maintain prudent investments across our business.
The actions taken better align our cost structure with current demand.
Karen will discuss this in more detail, but let me assure you that we are positioning the Company to drive strong growth and play a leading role in the recovery.
I'm confident that JLL will gain market share over the medium and longer term, as clients increasingly seek an advisor with global full-service capabilities but has the expertise and resources to help them reimagine their workplaces.
Strong earnings and cash flow management led to another standout quarter for cash generation, as evidenced by $320 million of net debt reduction, resulting in our leverage now below pre-HFF transaction level.
Our capital allocation policy is anchored in maintaining a strong investment grade balance sheet and ample liquidity to support seasonality in economic cycles, organic and inorganic investments to drive growth and long-term value.
In addition, we remain committed to returning cash to our shareholders.
In the third quarter, we repurchased $25 million worth of shares, bringing our year-to-date cash return to shareholders to $50 million.
This is slightly ahead of the amount returned in previous years via dividend.
For at least the foreseeable future, we do not expect to resume paying a dividend and instead will return cash to shareholders via share repurchases.
As we move through the fourth quarter and 2021, we will continue to evaluate business and market conditions to determine the appropriate mechanism to return value to shareholders in alignment with our long-term strategy.
Overall, I'm pleased with our third quarter performance, given the current environment.
There are three points I'll highlight to summarize the quarter.
First, while our consolidated year-over-year fee revenue percentage decline improved slightly from the second quarter on an organic basis, our top and bottom lines reflected meaningful growth in dollar terms over the second quarter.
This is an important trend in an unusual year when seasonal revenue growth is at risk of being disrupted.
Second we, again, generated strong cash flow which were used to repay debt to below pre-HFF acquisition levels.
Finally, we are taking actions to align our cost structure to the current environment, while continuing to invest in strategic priorities that we believe will drive long-term value.
Our diversified business continues to be impacted in different ways by the pandemic's economic shock.
The most significant impact continues to be on our transactional businesses.
While our pipelines in both leasing and capital markets has increased since the end of June, uncertainty remains regarding the evolution of the pandemic and its impact to decision making by corporate occupiers and investors.
Conversely, Property & Facility Management remains a growth area, driven largely by new business wins as corporate occupiers and investors seek our services due to increased building management standards.
Partially offsetting this top line growth were continued headwinds from our U.K. Mobile Engineering business and the late 2019 divestiture of our Continental Europe Property Management Business.
Moving now to a detailed review of operating performance.
Our consolidated adjusted EBITDA margin expanded 90 basis points to 17.4%, driven by our ongoing cost management actions and a 240 basis point impact from various government relief programs globally, partially offset by lower transactional revenue.
Consolidated leasing fee revenue declined 30%.
Our investment in the higher growth asset classes of industrial, supply chain and logistics continue to provide partial offsets to the current softness in the office sector.
We compared favorably with the 46% decline in global office leasing activity, reflecting the strength of our platform.
Broadly, clients remain cost conscious and seek to delay significant decisions regarding future real estate strategies.
According to JLL Research, the U.S. office market has seen an increase in the share of lease activity from renewals to 55% in the third quarter from 29% in 2019, as well as a reduction in aggregate effective rents of roughly 7% in mid-March, through both an increase in free rent concessions and a decline in starting rents relative to pre-COVID.
Looking ahead, our fourth quarter U.S. gross leasing pipeline increased 16% from three months prior.
We are encouraged by these trends but emphasize closing rates and timing could be delayed in this environment.
Capital Markets' fee revenue declined 43%, driven by an over 50% decline in investment advisory and debt placement.
However, we did see stability in our multifamily business, again, reflecting the resiliency of our diversified platform.
Looking at the global capital market environment, markets of scale with access to domestic capital in Asia Pacific and Western Europe outperformed while the Americas continued to experience the most significant declines.
Global investment volume dropped 44%.
Activity has been curtailed as investors adjust valuations and pricing to reflect the current environment.
So we are seeing a tightening of the bid-ask spread in some markets.
The Industrial and U.S. multifamily sectors have been the most resilient to-date.
Our Capital Markets 2020 pipeline improved modestly across geographies as the quarter progressed, with pipeline at the end of the September up high single-digits, in percentage terms, from the end of June.
We are also encouraged by the recent reemergence of cross-border activities.
The longer-term trend of increased allocations to real estate is very much intact with significant capital on the side-lines ready to be deployed with highly liquid debt markets.
There was no change to our multifamily portfolio loan loss reserve and forbearance activity has been minimal to-date.
As Christian mentioned, our Corporate Solutions business was down 2% in the quarter and flat year-to-date.
We continue to be encouraged about the secular outsourcing trends.
Turning to our Real Estate Services segment, we experienced relatively consistent percentage declines in fee revenue across geographies, but meaningful differences in profitability.
In the Americas, strong fee revenue growth in Property & Facility Management was more than offset by material declines in other service lines.
We are encouraged by the moderation and the pace of decline in Americas Leasing and the reasonably stable rate of organic decline in Americas Capital Markets compared with the prior quarter.
Our ongoing cost mitigation actions and a 180 basis point benefit from government relief programs drove an adjusted EBITDA margin of 20.9% compared with 19.3% a year earlier.
In EMEA, all service lines reported fee revenue declines, with the most significant decline in Capital Markets due to softness in the office sector.
EMEA leasing, while down 24% materially outperformed the approximate 50% decline in market volumes.
Including a 120 basis point benefit from government relief program, the adjusted EBITDA margin was 2.7% compared with 6.1% a year earlier.
The decline in profitability was driven primarily by lower transactional revenue, partially offset by ongoing cost saving actions.
Within our Asia-Pacific business, Property & Facility Management and Advisory & Consulting fee revenue were reasonably stable, but the transactional businesses were down meaningfully, particularly Capital Markets.
Our underperformance in Asia Pacific Capital Markets was largely concentrated in Japan and Greater China.
Including a 710 basis point net benefit from government relief programs, the adjusted EBITDA margin was 20.2% compared with 14.2% a year earlier.
The relative stability and profitability excluding the government relief was primarily due to ongoing cost mitigation action.
Turning to LaSalle; fee revenue was down 2%.
Advisory fees, which are annuity like and comprised approximately 80% of LaSalle's fee revenue this quarter grew 4%.
Higher transaction fees tied to a Japanese REIT secondary offering mostly offset lower incentive fees.
We expect a similar level of incentive fees in the fourth quarter as the third quarter which would be considerably lower than the level earned in fourth quarter 2019.
Equity earnings were $8 million, driven mostly by our co-investment in a publicly traded REIT in Japan.
LaSalle's AUM totaled $66 billion at quarter end, sequentially up about $1 billion.
Now, I'll comment on how we are thinking about our cost structure.
Changes in client needs, particularly in our transactional businesses and continued uncertainty about the pace of recovery made it clear that we needed to accelerate certain cost management action.
Year-to-date through October, we have taken actions that will result in over $135 million of annualized fixed cost savings.
Separately, our expense management focus delivered over $240 million of non-permanent savings over the first nine months of 2020, including about $180 million from cost mitigation actions and $67 million from government relief.
Roughly half of these non-permanent savings were realized in the third quarter.
These non-permanent savings represent cost likely to return in future periods as business volumes recover.
Our cost actions are part of an ongoing process to improve our operating efficiency.
We are confident these actions combined with process improvements and leveraging our technology platform will allow us to continue to deliver exceptional value to our clients and not impede our long-term growth potential.
Pivoting to our balance sheet; the sequential improvement in earnings and modest capex and investment spending drove a $320 million reduction to net debt, which ended the quarter at $752 million.
At the end of September, leverage was 0.8 times, down from 1.1 times at the end of June, and just below levels prior to the HFF acquisition, one quarter ahead of our initial expectation.
We have nearly $2.8 billion of liquidity, including approximately $440 million of cash and 85% of capacity available on our $2.75 billion revolver.
We are well positioned to invest in strategies which generate long-term profitable growth, while also returning cash to shareholders.
Looking ahead, much will depend on the evolution of the pandemic and client's decisions on their go forward real estate strategy and investment.
Long term, we are confident that our continuous efforts to refine and enhance our differentiated global platform position JLL to fulfill the evolving needs of our clients, capture market share and benefit from the long-term secular growth tailwinds of our industry.
As such, we remain focused on achieving our 2025 Beyond target and believe we are well positioned to continue to generate significant free cash flow and stakeholder value in the years ahead.
Back to Christian for further remarks.
As we look to the rest of the year, a sharp rebound in global GDP growth experienced in the third quarter compared to the second quarter is expect to slow due to a combination of unwinding fiscal stimulus and ongoing caution leading to a more prolonged recovery period.
With that backdrop and realizing the difficulty in forecasting the recovery from the pandemic, we expect the fourth quarter operating environment to be relatively consistent with previous quarters on a year-over-year comparison.
We expect that our higher margin transaction-based service lines will continue to face significant headwinds which has a disproportionate impact on profitability.
I'd like to take a minute to provide our latest thoughts regarding the future of commercial real estate and specifically the office.
Commercial real estate remains a very valuable asset class for investors and a beneficiary of continued rising allocations of that capital, as they are keenly aware of the long-term fundamentals that position the industry for growth.
With regard to the future of office, we view the transition to a hybrid work environment as the new normal, one in which employees have a greater sense of empowerment in determining where and how they want to work.
This sustained increase in remote work opportunities will largely be offset by a combination of job creation and the de-densification of the office space.
Depending upon this, we believe that the transformation to a hybrid workplace will see a reallocation of office space to enable creation, collaboration, communication and culture.
As I stated in the second quarter call, while it may look different and be utilized in new ways, the office will continue to have a vital future, specifically as a key driver of corporate culture.
These changes strengthen the value proposition of JLL as there are a few corporations that can guide our clients through this evolution of the workspace on a global scale.
As I mentioned, JLL's solid third quarter performance is a testament to our dedicated employees and our collective commitment to providing world-class advice and solutions to our clients, regardless of market conditions.
Our results demonstrate the strength of our business model, diversified exposure to both business lines and geographies, and our ability to transact across asset classes.
We remain very well positioned to capitalize on not only the anticipated recovery from the pandemic, but the long-term macro trends that support robust commercial real estate growth.
I'm confident in JLL's ability to succeed regardless of the circumstances in delivering sustainable long-term growth and achieving our goal of shaping the future of real estate for a better world.
Operator, please explain the Q&A process.
 Assistant:

Chosen response:
q3 adjusted earnings per share $2.99.
jones lang lasalle - pandemic continued to disrupt jll's operations, most significantly in transaction-based service lines.


Prompt:
Human: Joining me on the call today are Don Kimble, our chief financial officer, and Mark Midkiff, our chief risk officer.
I'm now moving to Slide 3.
We delivered another strong quarter with earnings per share of $0.72.
This is an increase of 18% from the first quarter and up significantly from the year-ago period.
Our results reflect our success in acquiring and deepening relationships across our franchise, further improvement in credit quality, and contributions from targeted investments.
We generated positive operating leverage on a year-to-date basis and remain on track to deliver positive operating leverage for the full year.
We generated record second-quarter revenue, driven by an 8% year-over-year increase in noninterest income.
In our consumer business, we experienced record growth in new households in the first six months, in every one of our markets, and in every age group.
Importantly, some of our strongest growth has come from younger clients in the western part of our franchise.
Our new client growth over the past six months exceeds our growth in any full-year period over the last decade.
Additionally, our consumer business generated over 4 billion in loan originations for the quarter.
Mortgage originations reached another all-time high and we expect to exceed last year's record level of 8.3 billion for the full year.
Laurel Road also had another strong quarter despite the federal student loan holiday.
Since the launch of our National Digital Bank, Laurel Road for doctors, we have added over 2,500 new doctors and dentists.
The launch was an important milestone in our digital journey, which brings together several critical elements of our strategy, targeted scale, digital, healthcare, and primacy.
Moving to our commercial businesses.
We had another strong quarter.
Our investment banking business generated fees of 217 million, a record second-quarter level and the second-highest quarterly level in our history.
We experienced growth across the entire platform.
We have grown this business consistently over the past decade, and we expect to grow it again in 2021.
Importantly, this is a business driven primarily by repeat clients.
Our pipelines are currently at record levels, supporting our strong growth outlook for the business.
This quarter, we raised $21 billion for our clients, of which we retained approximately 20% on our balance sheet.
Expenses this quarter reflect higher production-related incentives and the investments we continue to make across our franchise, in digital, in analytics, and in our teammates.
Let me highlight just a few of these investments.
I've already mentioned Laurel Road and the launch of our National Digital Bank.
Not only have we accelerated client acquisition, but our new clients are doing more with us with approximately half of our new doctor and dentist using multiple products.
We also continued to build out our analytic capabilities, including our recent acquisition of AQN Strategies, we have doubled the size of our analytics team.
Year to date, we have increased our senior bankers by 5% and in our targeted growth areas.
This has resulted in a 21% increase in client pitches on a year-to-date basis.
We also consolidated 54 branches this quarter with an additional 14 planned for next quarter.
These consolidations will drive future cost savings and support our ongoing investments.
Shifting to credit quality.
Our trends remained positive this quarter.
Nonperforming loans, net charge-offs, and criticized loans were all down from the prior quarter and net charge-offs to average loans were nine basis points.
We continue to support our clients while maintaining our moderate risk profile, which has and will continue to position the company to perform well through all business cycles.
Finally, we have maintained our strong capital position while continuing to return capital to our shareholders.
Our common equity Tier 1 ratio ended the quarter at 9.9%, which is above our targeted range of 9 to 9.5%.
Our strong capital position enables us to continue to execute against each of our capital priorities, namely organic growth, dividends, and share repurchases.
Combining our share repurchases and dividends paid this quarter, we have returned capital representing $0.50 a share for an annualized return of capital of approximately 11% at our current valuation.
Earlier this month, our board of directors approved a new share repurchase authorization of up to 1.5 billion beginning in the third quarter of this year and continuing through the third quarter of 2022.
The board will also evaluate an increase to our common stock dividend in the fourth quarter of 2021.
Overall, I was very pleased with the quarter, which reflects the hard work and dedication of our team.
We grew our top line, and we made targeted investments to position the company for continued growth.
As always, we remain committed to our disciplined approach to risk management and our commitment to return capital to our shareholders through dividends and share repurchases.
I'm now on Slide 5.
As Chris said, it was a strong quarter with net income from continuing operations of $0.72 per common share, up 18% from the prior quarter, and four times from the year-ago period.
The quarter reflected a net benefit from our provision for credit losses.
The reserve release was largely driven by our strong credit metrics and expected improvement in the economic environment.
Importantly, we generated record second-quarter revenue, driven by strength in our fee-based businesses.
Our reported return on tangible common equity for the quarter was 22.3%.
Adjusting for the reserve release, ROTCE was 16% within our targeted range of 16 to 19%.
Turning to Slide 6.
Total average loans were $101 billion, down 7% from the second quarter of last year.
C&I loans were down $9 billion, reflecting decreased utilization levels.
Consumer loans were up 9%, benefiting from continued growth from Laurel Road and, as Chris mentioned, record performance from our consumer mortgage business.
Combined, we had over $4 billion of originations this quarter between our residential mortgage and Laurel Road production.
The investments we've made in these areas continue to drive results and, importantly, add high-quality loans and relationships.
Linked-quarter average loan balances were relatively flat as commercial loans declined due to the commercial utilization rates, partly offset by growth in PPP loans.
Consumer loans grew 2%, again related to the continued strength from our consumer mortgage and Laurel Road.
PPP average balances were $7.5 billion for the quarter, up from $7 billion in the first quarter.
The PPP balances ended the quarter at $5.7 billion, reflecting $2.8 billion of forgiveness, and $900 million of new production.
Continuing on to Slide 7.
Average deposits totaled $144 billion for the second quarter of 2021, up $16 billion or 13% compared to the year-ago period, and up 5% from the prior quarter.
The linked quarter and year-ago comparisons reflect growth in both commercial and consumer balances, which benefited from government stimulus.
The growth was partially offset by a continued and expected decline in time deposits.
Total interest-bearing costs came down another two basis points from the first quarter, following a three-basis-point decline last quarter.
We continue to have a strong, stable core deposit base with consumer deposits accounting for over 60% of our total deposit mix.
Turning to Slide 8.
Taxable equivalent net interest income was 1.023 billion for the second quarter of 2021, compared to 1.025 billion a year ago, and 1.012 billion from the prior quarter.
Our net interest margin was 2.52% for the second quarter, compared to 2.76% from the same period last year and 2.61% for the prior quarter.
Both net interest income and net interest margin were meaningfully impacted by the significant growth in our balance sheet compared to the year-ago period.
The larger balance sheet benefited net interest income but reduced the net interest margin due to the significant increase in liquidity driven by strong deposit inflows.
Compared to the prior quarter, net interest income increased $11 million and the margin declined nine basis points.
Lower interest-bearing deposit costs and higher loan fees from PPP forgiveness were offset by lower-earning asset yields and continued elevated liquidity levels.
For the quarter, PPP loan fees, including the impact of forgiveness, totaled $50 million, up $2 million from the prior quarter.
The significant build in liquidity continues to be the largest driver of our net interest margin.
We are maintaining around $20 billion in excess cash.
Cumulatively, excess liquidity has negatively impacted our net interest margin by about 35 basis points with seven basis points of incremental impact for the second quarter.
Moving to Slide 9.
We've continued to see strong growth in our fee-based businesses, which have benefited from the investments we've made.
Noninterest income was $750 million for the second quarter of 2021, compared to 692 million for the year-ago period and 738 million in the first quarter.
Compared to the year-ago period, noninterest income increased 8%.
We had a record second quarter for investment banking and debt placement fees, which reached $217 million driven by a broad base across the platform, including strong M&A fees.
Commercial mortgage servicing fees increased $32 million.
Cards and payments income also increased $22 million related to broad-based growth across product categories, including debit, credit, and merchant products.
This growth was offset by lower consumer mortgage fees resulting from lower gains on sale margin and also the impact of MSR valuation changes.
Lower operating lease income resulted from leverage lease gains in the year-ago period.
Compared to the first quarter, noninterest income increased by $12 million.
The largest driver of the quarterly increase was a record second quarter and the second-highest ever quarter for investment banking and debt placement fees.
Service charges on deposit accounts and commercial mortgage servicing income also showed strength versus the prior quarter.
These were partially offset by lower other income due to positive market-related valuation adjustments in the prior period, offset by negative adjustments in the current quarter.
I'm now on Slide 10.
Total noninterest expense for the quarter was $1.076 billion, compared to 1.013 billion last year and 1.071 billion in the prior quarter.
Our expense levels reflect production-related incentives and the investments we've made to drive future growth.
We have highlighted some of the significant investments on the lower left of this slide.
We continue to invest in Laurel Road, including the launch of the National Digital Bank, including spend in marketing and technology.
We also grew senior relationship bankers by 5% year to date in our targeted focus areas, including renewables team that we added in May.
We've also continued to invest in our digital capabilities, as well as analytics.
Our analytics team has grown by two and a half times, including our recent acquisition of AQN.
The increase from the prior year is primarily in personnel expense related to higher production-related incentive compensation and an increase in our stock price.
Employee benefit costs also increased $16 million as healthcare-related costs were low in the second quarter of last year.
Computer processing expense this quarter was elevated related to software investments across the platform.
Compared to the prior quarter, noninterest expense was relatively stable.
Higher incentive and stock-based compensation was offset by seasonally lower employee benefit cost.
Marketing costs were up $5 million, primarily related to the launch of the Laurel Road for doctors.
I'm now on Slide 11.
Overall, credit quality continues to outperform expectations.
For the second quarter, net charge-offs were $22 million or nine basis points of average loans.
Our provision for credit losses was a net benefit of $222 million.
This was determined based on our continued strong credit metrics, as well as our outlook for the overall economy.
Nonperforming loans were $694 million this quarter or 69 basis points of period-end loans, a decline of $34 million from the prior quarter.
Additionally, criticized loans declined and the over 90-day delinquencies improved quarter over quarter.
Now on to Slide 12.
Key's capital position remains an area of strength.
We ended the second quarter with a common equity Tier 1 ratio of 9.9%, which places us above our targeted range of 9 to 9.5%.
This provides us with sufficient capacity to continue to support our customers and their borrowing needs and return capital to our shareholders.
Importantly, we continue to return capital to our shareholders in accordance with our capital priorities.
We repurchased $300 million of common shares during the quarter, and our board of directors authorized a second-quarter dividend of $0.185 per common share.
As Chris mentioned, combined, this return of capital represents $0.50 a share this quarter an annualized return of 11% of our current valuation.
Earlier this month, the board of directors approved a new share repurchase authorization of up to $1.5 billion beginning in the third quarter of this year and continue through the third quarter of 2022.
The board will also evaluate and increase the common stock dividend in the fourth quarter of 2021.
On Slide 13, we provide our updated full-year 2021 outlook, which we have adjusted to reflect our outlook for the remainder of the year.
Consistent with our prior guidance, we expect to deliver positive operating leverage this year.
Average loans are still expected to be relatively stable, reflecting continued momentum in our consumer areas, the impact of the PPP program, and a pickup in commercial loan growth later this year.
We expect deposits to be up high single digits, reflecting the continued outperformance we have seen to date.
We will continue to benefit from our low-cost deposit base.
Net interest income is now expected to be relatively stable, reflecting a low-rate environment, as well as the slightly lower-than-expected loan balances.
Our net interest margin will continue to reflect the impact of excess liquidity on our balance sheet.
Noninterest income should be now up in the high single-digit to low double-digit range, reflecting the broad-based growth in most of our core fee-based businesses, including what is expected to be another record year for our investment banking business.
Given the stronger revenue outlook, we now expect noninterest expense to be up low single digits, with the primary driver being higher production-related incentives.
As we identified on our expense side, we are also continuing to invest in areas that will drive future growth, namely teammates, technology, and also rolling out new capabilities such as Laurel Road, does not change our focus on core expenses and driving further efficiencies, including our commitment to generate positive operating leverage for the year.
Moving to credit quality.
We have reduced our net charge-off guidance once again, which is now expected to be in the 20 to 30-basis-point range for the year.
This reflects the quality of our portfolio, our current outlook, and performance to date.
And our guidance for the GAAP tax rate has increased to 20% for the full year, reflecting the higher expected earnings for this year.
Finally, shown at the bottom of the slide are our long-term targets, which remain unchanged.
We expect to continue to make progress on these targets by maintaining our moderate risk profile and improving our productivity and efficiency, which will drive returns.
Overall, it was another strong quarter, and we remain confident in our ability to deliver on our commitments to all of our shareholders.
 Assistant:

Chosen response:
announced new common share repurchase authorization of up to $1.5 billion.
qtrly earnings per share from continuing operations $0.72.
key's provision for credit losses was a net benefit of $222 million, including a $244 million reserve release for q2 of 2021.
net loan charge-offs for q2 of 2021 totaled $22 million, or 0.09% of average total loans.
will evaluate an increase to common stock dividend in q4 2021.


Prompt:
Human: The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; and David Jamieson, Kimco's Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call.
Reconciliations of these non-GAAP financial measures can be found in the Investor Relations area of our website.
Also in the event our call was to incur technical difficulties, we'll try to resolve as quickly as possible and if the need arises, we'll post additional information to our IR website.
Today, I will share the highlights of the quarter, provide a recap of our now closed strategic merger with Weingarten and give an update on the strong leasing environment.
Ross will give an update on the transaction market, and Glenn will cover our operating metrics in detail, discuss our improved balance sheet, Albertsons valuation and the proactive use of our ATM and how we can take advantage of opportunities in the market.
He'll close with an updated outlook for the balance of the year.
While we have only owned Weingarten for a partial quarter, our expanded portfolio of grocery-anchored and mixed-use properties is already validating our investment thesis.
To date, we are exceeding our initial underwriting on all major metrics, including FFO, occupancy, spreads and renewal rates.
Our dedicated team has done a remarkable job closing on the merger ahead of schedule and implementing an integration plan that included onboarding and training over 100 new employees, significant systems integration and property management, all while staying focused on executing our strategy.
On the operational front, leasing demand continues to be robust across the portfolio with the bright spot being the rebound in demand for small shops.
This was illustrated by the portfolio delivering another quarter of improved results, including a sequential increase in occupancy and positive leasing spreads.
Our pro-rata U.S. occupancy is up 20 basis points to 94.1 percent, while anchor occupancy remained flat at 96.9 percent.
And small shop occupancy rose 180 basis points over prior quarter to 87.3 percent, an increase of 60 basis points year-over-year.
New lease spreads were a positive 5 percent, with 141 new leases signed, totaling 605,000 square feet.
Spreads for renewals and options finished at positive 4.9 percent.
We closed the quarter with 270 renewals and options totaling 1.4 million square feet, exceeding the five-year average number of renewals and options reported during the third quarter by 40 percent and exceeded average GLA renewed by 38 percent.
Combined spreads for third quarter 2021 were positive 4.9 percent and with total 3Q, '21 deal volume reaching 411 deals totaling 2,050,321 square feet.
411 leases executed represents the most transactions reported during a quarter since the first quarter of 2018.
Our same-site NOI growth was positive 12.1 percent, including a 30 basis point contribution from redevelopments.
The same-site population does not include the Weingarten sites since we only had them for a partial quarter.
With the continued strength in leasing, we have maintained our 300 basis point spread of leased versus economic occupancy similar to last quarter.
As of September 30, 2021, we had over 400 signed leases representing $44.8 million of pro-rata annualized base rents awaiting rent commencement.
While the operating environment remains favorable, we cannot let down our guard, inflation, supply chain issues in the labor market, together or alone, can impact our business, and that is why we continue to look for the most resilient assets, improve operational efficiencies and seek out ways to help our tenants succeed.
We continue to grow our portfolio in the high-growth Sunbelt markets and are committed to being the last-mile solution for tenants.
There is no question that our mission-critical, last-mile brick-and-mortar locations are proving to be durable solutions for consumers, retailers and many other businesses that want scale and reach to serve the end customer.
In closing, we are pleased with the progress we have made and believe that we have positioned Kimco for sustainable growth over the long term with a combination of internal and external growth levers.
Our talented and deep team is focused on execution as we're in a unique position to take advantage of a wide range of opportunities.
We continue to believe we're building something special, and the best is yet to come.
It's been quite an exciting quarter at Kimco, and the excitement has continued into the fourth quarter, as I will discuss shortly.
There is no question that open-air shopping centers provide one of the best risk-adjusted returns of all asset classes.
We continue to see additional capital sources, new and old, gaining conviction in quality open-air retail, leading to the compression of cap rates.
We are fortunate to be in a position with multiple investment strategies that enable us to be active when opportunities arise, but also patient when things become too frothy.
With the finalization of the Weingarten merger, we've been able to execute on several accretive investments and new initiatives and with the addition of new joint venture partners inherited through Weingarten, we are excited about potential growth opportunities.
Subsequent to quarter end, we acquired the remaining 70 percent interest in a portfolio of six Publix-anchored Sunbelt-region shopping centers from our existing joint venture partner, Jamestown, for a gross purchase price of $425.8 million.
The Publix-anchored assets represent over 1.2 million square feet of gross leasable area in infill markets throughout the Southeast, with five located in the top-performing South Florida market and one in the high-growth Atlanta market.
Subsequently, Kimco entered into a joint venture partnership with Blackstone Real Estate Income Trust, under which we will both own 50 percent and Kimco will continue to manage the portfolio.
It is rare to have the ability to buy a portfolio like this with short-term mark-to-market opportunities and exceptional tenant sales.
We are thrilled to be partnering with Blackstone again on our new strategic venture.
Also post quarter end and in line with our value creation strategy, we were successful in buying out our partner's 85 percent interest in two grocery-anchored centers in California.
Anaheim Plaza is one of the jewels of our Southern California portfolio with extraordinary highway visibility in frontage and two grocery anchors at the same property both performing exceptionally well.
The second asset is Brookvale Shopping Center located in Fremont, California anchored by a lucky supermarket in CVS.
The gross purchase price of the two assets was $134 million.
Turning to our redevelopment program.
It continues to move ahead, beginning with property-level entitlements and then selectively and creatively activating a few at a time.
While the structure and exit strategy are determined on a case-by-case basis, we see the upside knowing these infill locations are being built at a significant relative spread to the stabilized cap rate.
Comps in multifamily, industrial and other asset classes are regularly transacting with cap rates starting in the 2s and 3s.
Additionally, we're continuing our structured investment program with a disciplined approach and an emphasis placed on location, demographics, quality of tenancy and operational strength of the sponsors.
We view the base case of these investments as a true win-win, either generating an attractive return with a repayment down the road or exercising our right of first refusal and owning the properties outright.
On that front, we completed a $21.5 million mezzanine financing on a strong performing center in San Antonio called Alamo Ranch.
In just a few short months, San Antonio has gone from a market that was on our target list at Kimco to a major contributor in our portfolio with the Weingarten merger and now our second structured investment there.
We continue to pursue additional opportunities in San Antonio, one of the fastest-growing MSAs in the country.
We also sold three small low-growth assets this quarter.
Two single tenant boxes and an undeveloped parcel for a total of $23.5 million at a flat 5 percent cap.
While dispositions will remain a relatively small component of our investment strategy, we will be prudent in disposing of low-growth assets and undeveloped parcels from which we can redeploy the capital.
To repeat Conor's statement, we are confident that the best is yet to come.
Off to Glenn for the financials.
We are pleased to report very strong third-quarter results.
Overall, the portfolio continues to produce improving results, including record quarterly revenue, increased occupancy, positive leasing spreads, strong same-site NOI growth, increased collections, and lower credit loss.
Our balance sheet metrics are also at the strongest levels ever.
As you might expect, the completion of the $5.9 billion Weingarten merger, which closed in early August was a key contributor.
While we did not have a full quarter of contribution from the addition of the Weingarten portfolio, the benefits are clearly apparent.
Our team has put in enormous effort to accomplish the successful integration of Weingarten in a very short period of time.
We couldn't be prouder.
Now for some details on our third-quarter results.
NAREIT FFO was $173.7 million or $0.32 per diluted share and includes $47 million or $0.08 per diluted share of merger-related expenses.
This compares to the third quarter 2020 NAREIT FFO of $106.7 million or $0.25 per diluted share, which includes aggregate charges of $16.1 million or $0.04 per diluted share related to severance for our voluntary early retirement program and early redemption of $485 million of unsecured bonds.
The increase in FFO was primarily driven by higher NOI of $98.7 million, of which the Weingarten merger contributed $62.6 million.
In addition, NOI benefited from lower credit loss of $30.7 million and higher straight-line rent of $14.5 million, including $2 million from the Weingarten portfolio.
Improvements in collections and new leases commencing during the quarter were the major contributors.
Specifically, during the third quarter, we collected approximately 98 percent of base rents.
We also collected 80 percent of rents due from cash basis tenants, up from 77 percent last quarter.
Furthermore, collections of prior period amounts from cash basis tenants totaled $8 million during the third quarter of 2021.
Our cash basis tenants comprise 9.1 percent of pro-rata annualized base rents.
If we excluded the addition of the Weingarten cash basis tenants, this amount would have been 7.3 percent, which compares favorably to the 8.8 percent level reported last quarter.
In connection with the preliminary purchase price allocation for the Weingarten transaction, the debt we assumed was recorded at a fair value, which was $107 million higher than the face amount.
This resulted in $6.2 million of fair market value amortization for the third quarter, which reduces interest expense and is also part of the FFO improvement.
We expect to finalize our purchase price allocation by year-end.
During the third quarter, FFO also included approximately $6 million or $0.01 per diluted share related to one-time contributions from several joint ventures and higher lease termination fees.
Turning to the balance sheet.
We had an active quarter in the capital markets.
We issued a new $500 million unsecured bond at a coupon of 2.25 percent, the lowest coupon for 10-year unsecured financing in the company's history.
Proceeds from this issuance were primarily used to fund the cash component of the merger consideration and the merger costs.
We also opportunistically used our ATM equity program to issue 3.5 million shares of common stock, raising almost $77 million in net proceeds to fund some of the investment activity Ross just mentioned.
This is in addition to the 179.9 million shares of common stock issued in connection with the Weingarten merger valued at $3.7 billion.
We also assumed $1.8 billion of debt, including the fair value adjustment as part of the Weingarten merger.
Total common shares outstanding at quarter-end was 616.4 million, and we expect this should be a good guide for the fourth quarter.
As anticipated, the Weingarten merger was a deleveraging event.
As of September 30, net debt to EBITDA on a look-through basis, including pro-rata share of joint venture debt and preferred stock outstanding was seven times.
This metric only includes two months of EBITDA from the Weingarten merger, but all of the debt assumed.
On a pro forma basis, including a full quarter of EBITDA from Weingarten, look through net debt-to-EBITDA would be 6.3 times, representing the lowest level since we began tracking this metric.
Our liquidity position also remains very strong.
We ended the third quarter with over $450 million of cash and full availability on our $2 billion revolving credit facility.
In addition, during the third quarter, the value of our Albertsons marketable security investment climbed to more than $1.2 billion after increasing by $457 million, which is included in net income but not FFO for the quarter.
We continue to evaluate our opportunities to begin the Albertsons monetization process.
As we look ahead during 2022, we will have a variety of potential uses for the capital from the redemption of our preferred stock issuances that become callable, bonds that mature in October and November of 2022, and accretive investment opportunities.
As our overall business continues to recover from the effects of the pandemic and as we begin to benefit from the successful merger and integration of the Weingarten portfolio, we are raising our full-year 2021 NAREIT FFO per share guidance range to $1.36 to $1.37, which includes $0.10 per diluted share of merger-related costs and the inclusion of the Weingarten portfolio for five months.
This compares to previous NAREIT FFO per share guidance of $1.29 to $1.33, which did not include any impact from the Weingarten merger except $0.01 related to merger costs.
As I touched upon, our third quarter FFO includes a total of $0.03 per share related to items that were more onetime in nature and which were not budgeted for as recurring items.
This includes $0.02 per diluted share from improvements in credit loss and another $0.01 from contributions from joint ventures and lease termination fees.
We will provide initial 2022 guidance on our next earnings call.
 Assistant:

Chosen response:
q3 ffo per share $0.32.
qtrly ffo of $0.32 per diluted share, including merger related costs of $47 million.
sees 2021 nareit ffo of $1.36 to $1.37.
qtrly nareit funds from operations $0.32 per diluted share.
same-property noi, including redevelopments, increased 12.1% for q3 of 2021.


Prompt:
Human: We've revised our full-year 2021 estimate for DCF and EBITDA substantially upward.
Steve, Kim, and David will explain the underpinnings of that change.
We also increased our dividend to an annualized rate of $1.08 per share as we promised when we released our original outlook for 2021 back in December.
In my judgment, this increase is an indicator of the significant parts of our corporate financial policy.
First, it shows we are intent on returning value to our shareholders.
Second, it demonstrates the consistent strength of our cash flow.
To put this in perspective, this is the fourth consecutive annual increase in our dividend since 2017, when we were paying an annual dividend of $0.50 per share.
And we have accomplished that while maintaining a real focus on our balance sheet, having reduced our debt from its peak of almost $43 billion in 2015 to $30.7 billion today, a decrease of over $12 billion, quite an improvement.
Now we're doing all this while continuing to pursue opportunities with our natural gas assets to firm up deliverability and supply to our customers, opportunities that were highlighted by the recent winter storm in Texas, and also while examining opportunities in the energy transition effort.
At Kinder Morgan, we remain guided by what we believe is a sound corporate philosophy, fund our capital needs internally, maintain a healthy balance sheet, and return excess cash to our shareholders through dividend increases and opportunistic share repurchases.
We think this is a recipe for long-term financial success for KMI and its shareholders.
I'll focus on our performance during Winter Storm Uri, which is what drove our financial results in the quarter.
So starting with the performance during the February winter storm.
We were prepared, and that preparation served us well.
Our previous investments in our assets, particularly on our gas storage assets, were a huge help.
We were on maximum withdrawal for days at several of our fields.
Also helpful were our investments in backup generators at key compressor stations on our system.
Another real key for us was our team.
Our operations team deployed in advance to keep our facilities running and quickly repair them if they went down.
We deployed additional generators and tested our generators before the storm got here.
Our people were at locations that are normally automated, and they were there in the bitter cold, and undoubtedly, many of them have their own families at home without power and water.
Our team went to key compressor stations, storage facilities, and delivery points to keep gas flowing, including a key delivery point to the city of Austin.
Our people kept us going.
Our investments and especially our team winterized us against a terrible storm.
We also purchased additional gas, some at very high prevailing prices, to serve power plants and gas utilities.
The result of all this was that we enabled our wholesale customers to serve needs that would have otherwise gone unmet, mitigating the tragedy that too many Texans endured.
We performed well operationally and commercially across our entire gas network, but our financial performance was especially strong in our Texas intrastate pipeline and storage network.
And as I'll mention in a minute, in our CO2 business for reasons I'll explain.
A key difference between our Texas intrastate system and our interstate gas pipeline systems is that we have a purchase and sale business in Texas, supported by high deliverability storage assets.
In contrast, our interstate pipelines are nearly exclusively selling unbundled transportation and storage services.
We do that in Texas, too, but we also have a purchase and sale business.
That business is generally done with reference to an index price.
For example, we sell gas at the Houston Ship Channel index plus something and buy at Houston Ship Channel minus something.
In normal circumstances, we're effectively getting a transport margin on our purchases and sales and using our proprietary storage to extract margin from price differences across time periods.
When prices are in a normal range, this is a very stable business.
And we view our Texas intrastates as roughly 80% or so take-or-pay.
In February, supply and demand conditions caused prices to go up by more than 100x and back down by the same order of magnitude over the course of a week.
Market volatility like we experienced that week reveals the value of reliable pipeline and storage assets and a reliable operations team.
It reveals the value of having gas in storage and previous purchase arrangements in place.
It also reveals the value of preparation in such circumstances in which supply and demand conditions causing prices to go up by more than 100 times, we were able to perform well financially, as well as operationally.
Many of our additional sales, whether as a result of higher takes under our existing contracts or incremental sales that we were able to do during that week, took place at prevailing market prices.
which during that week at the Houston Ship Channel, range from $180 MMBtu to $400 versus $3 earlier in the same month.
What does this mean for our business longer term?
We transact with sophisticated customers who have choices.
One of those choices is to purchase firm services from us on a long-term basis, and many of them do.
While we view the events in our financial results as largely nonrecurring, we are already pursuing more long-term firm capacity sales and some associated capital investments that will help our customers to be even better positioned for future extreme weather and create incremental value for Kinder Morgan.
There is substantial interest in our services following the storm, which should help us in our base business and in new origination.
The results could be long-term, additional, and more consistent earnings and investment without the extraordinary and rare gain that we experienced in the first quarter.
The big lesson that should be taken away is that an appropriate amount of contracting for firm deliverability should be in everyone's portfolio.
And February's event reveals the value of storage and firm transport capacity.
And we would hope that any changes made in the market structure would adequately compensate and incent parties to do so.
I mentioned our CO2 business also.
This is a bit of a different effect.
That's our biggest power consuming business in the state of Texas.
Our power contract with our provider enables us to shed load and be compensated at the prevailing power prices.
When they started to see where power prices were headed, Jesse Arenivas and his team started looking at shedding load.
So we shut down oil production and shed the load back into the market, where it could be allocated to higher priority human needs.
The contract work, as designed and particularly with prices as high as $9,000 a megawatt hour, we earned a substantial financial benefit, while letting those megawatts be made available to serve human needs.
Also notable, for the longer term, Jesse and his team were able to restore production quickly and fully following the storm.
That's a great accomplishment.
They had some practice when oil prices went drastically down last year, and we've gotten better at it since then.
Our flexibility is greater.
This is great flexibility that we've now built into a part of our business that consumes about 340 megawatts in the state of Texas.
So good flexibility to have in the power market in the state of Texas.
So we're very proud of our whole team's performance, but we have lessons to learn too.
And we'll use those lessons to get even better at severe weather performance for us and for our customers.
So what will we do with the proceeds?
Initially, of course, it's a reduction to our net debt.
But as we repeated many times, our financial principles remain the same.
First, maintain a strong balance sheet.
Second, we maintain our capital discipline through our return criteria, a good track record of execution, and by self-funding our investments.
And as I mentioned, we may see some incremental investment opportunities as a result of the storm.
We don't expect those to be significant for 2021.
Finally, we are returning value to our shareholders with a dividend increase that Rich mentioned.
It's a well-covered dividend.
And our approach to share repurchases remains exactly the same.
We'll be selective, not programmatic.
We'll base our decisions on the returns versus the alternative uses for the cash that we generate, including projects or assets.
So strong balance sheet, capital and cost discipline, returning value to shareholders.
Those are our principles.
We put together a team with financial, commercial, and engineering talent to focus on analyzing and quantifying opportunities for additional assets and service offerings tailored to the ongoing energy transition, including things like renewable natural gas and carbon capture and sequestration.
This group reports to Jesse Arenivas, who continues as president of our CO2 business and is headed by Anthony Ashley, who previously served as treasurer and vice president of investor relations.
While still in our early days for this effort, they've already identified and are working on a number of specific opportunities.
Also, as I said last time, our business units continue to focus on the energy transition opportunities that fit in with their operations, such as midstream services for renewable diesel and including our -- using our gas transportation and storage services to support renewable power.
We are also marketing our low methane emissions performance as responsibly produced and transported natural gas.
That's a good synergy between our ESG performance, our low methane emissions, and our commercial opportunities.
We participated in our first one of these transactions with Colorado Springs Utilities, which they announced in the first quarter.
And we're working on another as we speak.
We believe the winners in our sector will have strong balance sheets, low-cost operations that are reliable, safe, and environmentally sound, and the ability to get things done in difficult circumstances.
We're proud of our team and our culture.
And as always, we'll be prepared to meet the challenges and opportunities to come.
First, I'm going to go through the business fundamentals for the quarter, and then I'll talk at a very high level about our full-year forecast.
Starting with the natural gas fundamentals.
Transport volumes were down about 3% or approximately 1.1 million dekatherms per day versus the first quarter of '20.
And that was driven primarily by declines in Rockies production, increase in transportation alternatives, and lower production out of the Permian, those two things impacting our volumes on EPNG and contract expiration on our joint venture pipe coming out of the Fayetteville.
These declines were partially offset by higher volumes, which were driven by increased deliveries to LNG export facilities, winter weather in the northeast, and the PHP in service.
Physical deliveries to LNG facilities off of our pipeline averaged approximately 4.7 million dekatherms per day.
That's greater than a 25% increase versus the first quarter of 2020.
LNG volumes were down from the approximately 5 million dekatherms per day in the fourth quarter of '20.
And that was due to the impact of Winter Storm Uri and some coastal fog in February.
During the storm, total LNG exports dropped to under 2 million dekatherms per day.
In the first quarter, Kinder Morgan pipes moved approximately 47% of the volume going to LNG export facilities.
Exports to Mexico on our pipes were up about 3% when compared to the first quarter of '20.
Our share of Mexico deliveries in the first quarter ran about 55%.
Deliveries to power plants, they were down due to higher natural gas prices.
Deliveries to LDCs were up due to colder weather.
One, on our natural gas gathering volumes, they were down about 25% in the quarter compared to the first quarter of '20.
But for gathering volumes, I think the more informative comparison is the sequential quarter.
So compared to the fourth-quarter volumes, first-quarter volumes were down about 11%.
Approximately two-thirds of that 11% reduction are related to KinderHawk, which is our gathering asset in the Haynesville.
But given that there are 45 rigs deployed in that basin, we expect that our volumes will increase sequentially each quarter for the balance of the year, although it will be a little bit slower than what we've budgeted.
Eagle Ford volumes were also down versus the fourth quarter, and we expect that those will be down versus our budget.
The Eagle Ford remains a very tough market, given the oversupply of takeaway options.
On the positive side, we expect volumes in the Bakken and Altamont to be on plan or better for the year.
In our products pipeline segment, refined products volumes were down about 10% for the quarter versus the first quarter of 2020.
And that's just the result of the continued pandemic impact.
Gasoline volumes were up 6% versus the first quarter of '20.
That's an improvement from the fourth quarter when they were off about 10% versus the fourth quarter of 2019.
Jet volumes remain weak off about 29%, but that's a big improvement from the fourth quarter when they were off 47% versus the fourth quarter of '20.
And diesel volumes were up 6%, and that's relatively flat to the percentage in the fourth quarter.
Total volumes moving through our pipes did improve each month during the quarter.
March volumes were up slightly versus 2020, and they were down about 6% versus 2019.
Currently, we're forecasting refined products to be down versus our plan, and I'll go through that a little bit later in my comments.
Crude and condensate volumes were down about 28% in the quarter versus the first quarter of 2020.
Sequentially, they were up 2%.
Our terminals business fundamentals have been impacted by two events: the winter storm and the continued impact of the pandemic.
The winter storm was short lived, with the impact limited to the first quarter.
The pandemic is lingering, and it continues to impact our petroleum product volumes as well as demand for our Jones Act tankers.
However, as we've mentioned in prior quarters, the impact of reduced petroleum product demand on our tankage is more muted than in our product pipeline, given the fixed take-or-pay contracts for tank capacity.
Our liquids utilization percentage, which reflects the tanks that we have under contract remains high at 95%.
If you exclude tanks out of service for required inspection, utilization is about 98%.
On the tankers, we have a number of ships that have contract expirations this year, and the market is relatively weak, given the weakness in refined product volumes.
The reduction in crude oil production and the tightening WTI Brent spread also impacts this market, but to a much lesser extent, given a smaller percentage of the fleet engaged in that service.
We expect this market to improve with the recovery in petroleum product demand.
But that may take in for later this year because charter activity tends to lag underlying supply and demand fundamentals.
Now the CO2 segment was up in the quarter due to our decision to curtail production and deliver power back to the grid that Steve mentioned.
Excluding the storm impact, oil production was down approximately 15%.
CO2 sales volumes were down 26%.
Our net realized oil price was down about $3.50 per barrel.
However, compared to our budget, we're currently anticipating the oil volumes, CO2 volumes and net realized oil price will exceed budget for the year.
Now let me give you a very high-level update on our full-year forecast.
As we said in the release, we're currently projecting full-year DCF of $5.1 billion to $5.3 billion versus our budget of $4.45 billion.
We estimate that the Uri impact, and this is across all of our segments, was roughly worst-season hand grenades $1 billion, leaving a variance, again, very roughly, of $200 million to $350 million versus our budget.
I know $200 million doesn't add up perfectly, but that's because these are very large rounded numbers.
Let me start with the $200 million variance.
We estimate that sustaining capex will be approximately $75 million higher than our budget due to the decision to replace some pipe in rural South Texas as opposed to continuing to spend money running inspection tools and repairing the pipe.
We were also able to obtain the pipe at very attractive pricing.
What I'll classify as pandemic-related impacts is roughly $80 million, and that includes weaker petroleum products volumes and lower renewal rates on Jones Act tankers.
Those two items explain about 75% of the variance, but there are a lot of other moving parts.
A couple of the other larger items include lower gathering volumes, primarily in the Eagle Ford, and the impact on DCF of a Ruby impairment.
Those two items are roughly offset by positive performance in the CO2 segment, from higher CO2 and oil volumes and price.
Finally, the sale of our 12.5% interest on NGPL creates a negative variance versus our budget.
The difference in that low and the high end of the guidance range primarily relates to assumptions on petroleum products volumes, Jones Act tanker renewals, natural gas GMP volumes, and the resolution of certain Uri contractual disputes.
I think it's obvious, but just in case, the lower end of the guidance range assumes a more conservative outcome on these items.
For example, The high end of the guidance range assumes petroleum products volume 3% below plan for the balance of the year versus the low end of the guidance assumes they're about 5% below plan for the balance of the year.
So for the first quarter of 2021, as Rich mentioned, we are declaring a dividend of $0.27 per share, which is 3% up from last quarter.
Now looking at the financial performance for the first quarter of this year versus the first quarter of last year, we generated revenues of $5.2 billion, up $2.1 billion.
We had partial offsets in our -- a partial offset in our cost of sales with an increase of $1.3 billion there.
So our gross margin was up $759 million, mostly driven by our strong performance during the winter storm.
Our O&M costs declined as a result of the CO2 segment power load shed that Steve walked through.
And that's the main item in the $106 million favorable O&M amount.
In the first quarter of 2020, we also took impairments in our CO2 segment of $950 million, which explains most of the $975 million favorable in the item -- the line item called gain and loss on divestitures and impairments.
This past quarter, we wrote off the value of our Ruby subordinated note, which was a reduction of $117 million in the earnings from equity investments.
And that was driven by greater uncertainty regarding the recoverability of that note receivable.
We also reflected a $206 million gain on the sale of a partial interest in NGPL, and that appears in the other net line item.
So overall, we generated net income of $0.62 per share, which is very favorable versus the $0.14 loss in the first quarter of 2020.
On an adjusted earnings per share basis, and then that's where we show earnings per share before certain items, we generated $0.60 per share versus $0.24 per share a year ago.
Moving to our segment EBDA and distributable cash flow performance.
Our natural gas segment was up $915 million for the quarter, mostly explained by favorable intrastate margins as well as increased revenue on our Tennessee Gas Pipeline, both as a result of the February winter storm performance.
We also had favorable contributions from PHP, which was placed in service at the beginning of the year.
And these are all partially offset by lower contributions from our FEP pipeline resulting from the 2020 contract rollovers.
Product segment was down $10 million, driven by lower refined product volumes on SFPP, lower crude oil volumes on KMCC, and lower recontracting rates at HH, partially offset by greater contributions from our transmix business.
Our terminal segment was down $30 million.
And that's really refined product volumes due to continued pandemic-related demand impacts, as well as winter storm-related demand impacts.
As has been mentioned, our Jones Act tanker contributions were also down lower due to the lower fleet utilization resulting from the pandemic-related market weakness.
Storm-related refinery outages also drove decreased contributions from our pet coke facilities.
And these were all somewhat offset by our expansion project contributions.
Our CO2 segment was up $116 million this quarter versus a year ago.
Again, due to the shedding load to deliver power to the grid.
And partially offset by lower -- and that was partially offset by lower crude and CO2 volumes versus Q1 2020 and lower realized crude prices versus Q1 2020.
Our G&A at corporate and corporate charges were higher by $8 million.
And there we had lower capitalized overhead expenses, partially offset by our organizational efficiency savings.
JV depreciation, we had less JV DD&A from our Ruby investment there.
And that's after Ruby recognized an entity-level asset impairment in the quarter resulting in lower depreciation.
That brings us to adjusted EBITDA, which was $966 million, or 52% higher than Q1 2020.
Moving down below EBITDA.
Interest expense was favorable by $52 million.
They're lower LIBOR rates benefiting our interest rate swaps drove nice favorability as well as a lower debt balance and lower rates on our long-term debt.
For the quarter, sustaining capital was favorable by $34 million, and that was driven by lower terminals and natural gas segment capex.
But all of that is timing, and we expect to spend more sustaining capital for the full year versus 2020.
In other, we had some lower pension cash contributions versus a year ago.
This year, we have a little bit more back-end loaded cash contributions to our pension plan versus more equally spread quarterly contributions last year.
So our total DCF was $2.329 billion and was up $1.068 billion, or 85%.
And our DCF per share was $1.02, up $0.47 from last year's $0.55 per share.
Moving on to the balance sheet.
We ended the quarter with net debt to adjusted EBITDA of 3.9 times, down nicely from the 4.6 times at year-end.
And we currently project to end 2021 at 3.9 times to 4.0 times, and that's consistent with the ranges that Kim walked through.
And that's largely a result of the largely nonrecurring winter storm benefits contributing to our EBITDA, but it also is a result of lower-than-budgeted debt balance due to the greater than budgeted cash flow.
Our longer-term leverage target of 4.5 times has not changed.
We also have a very favorable liquidity position.
We ended the quarter with almost $1.4 billion of cash on hand and only have $500 million of consolidated debt maturing for the rest of the year.
So our net debt, which includes our cash on hand, ended the quarter at $30.7 billion, down $1.348 billion for the year -- from the year.
And now, our net debt has declined by $12.1 billion or almost 30% since Q1 of 2015, as Rich mentioned, but is worth reiterating.
So our quarter change to reconcile the change in debt of $1.35 billion for the quarter.
We generated $2.329 billion in DCF.
We paid dividends of $600 million.
We made $200 million of contributions to our growth projects as well as to JVs.
We received $413 million from the NGPL sale, and we had $600 million of -- approximately $600 million of working capital uses, primarily interest expense payments, AR increases, and a rate case settlement on SFPP.
That explains the majority of the net debt change and completes our first-quarter financial review.
 Assistant:

Chosen response:
kinder morgan q1 earnings per share $0.62.
reases dividend 3 percent and raises 2021 guidance.
q1 earnings per share $0.62.
approved a cash dividend of $0.27 per share for q1.
bulk of improvement in q1 net income and dcf is due to strong performance of natural gas pipelines segment.
in q1, system deliverability and resiliency was also enhanced by investments in expansion projects and asset maintenance in texas.
qtrly adjusted earnings per share $0.60.
kmi also now expects to end 2021 with a net debt-to-adjusted ebitda ratio in a range of 3.9 to 4.0.
as of march 31, 2021, had over $3.9 billion of borrowing capacity under $4 billion credit facility, over $1.3 billion in cash, equivalents.
kinder morgan - believe borrowing capacity, current cash on hand, and cash from operations are more than adequate to manage cash requirements, through 2021.