JONES LANG LASALLE INC (JLL) FY 2022 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains certain forward-looking statements generally identified by the words: anticipates, believes, estimates, expects, forecasts, plans, intends and other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, achievements, plans, and objectives to be materially different from any future results, performance, achievements, plans, and objectives expressed or implied by such forward-looking statements. See the Cautionary Note Regarding Forward-Looking Statements after Part IV, Item 15. Exhibits and Financial Statement Schedules.

We present our Management's Discussion and Analysis in the following sections:

(1)    A summary of our critical accounting policies and estimates;

(2)    Certain items affecting the comparability of results;

(3)    Certain market and other risks we face;

(4)    The results of our operations, first on a consolidated basis and then for each of our business segments; and

(5)    Liquidity and capital resources.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

An understanding of our accounting policies is necessary for a complete analysis of our results, financial position, liquidity and trends. The preparation of our financial statements requires management to make certain critical accounting estimates and judgments that impact (i) the stated amount of assets and liabilities, (ii) disclosure of contingent assets and liabilities as of the date of the financial statements and (iii) the reported amounts of revenue and expenses during the reporting periods. These accounting estimates are based on management's judgment. We consider them to be critical because of their significance to the financial statements and the possibility future events may differ from current judgments, or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness. Although actual amounts may differ from such estimated amounts, we believe such differences are not likely to be material. For additional detail regarding our critical accounting policies and estimates discussed below, see Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in Item 8.

Revenue Recognition

We earn revenue from the following services (segments are bolded).

•Markets Advisory

◦Leasing

◦Property Management

◦Advisory, Consulting and Other

•Capital Markets

◦Investment Sales, Debt/Equity Advisory and Other

◦Loan Servicing

◦Valuation Advisory

•Work Dynamics

◦Workplace Management

◦Project Management

◦Portfolio Services and Other

•JLL Technologies

•LaSalle

Our services are generally earned and billed in the form of transaction commissions, advisory and management fees, and incentive fees. Some of the contractual terms related to the services we provide, and thus the revenue we recognize, can be complex and so requires us to make judgments about our performance obligations and the timing and extent of revenue to recognize. In addition, a significant portion of our revenue represents the reimbursement of costs we incur on behalf of clients.

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Goodwill and Other Intangible Assets

Consistent with the services nature of the businesses we have acquired, the largest asset on the Consolidated Balance Sheets is goodwill. We do not amortize goodwill; instead, we evaluate goodwill for impairment at least annually, or as events or changes in circumstances indicate the carrying value may be impaired. In conjunction with our new organizational structure described more fully in Note 3, Business Segments, of the Notes to Consolidated Financial Statements, included in Item 8, we reassessed our reporting units as of January 1, 2022, and reassigned goodwill to reflect our new segment structure using a relative fair value allocation approach.

In addition, we may record intangible assets as a result of acquisitions, which are primarily composed of customer relationships, management contracts and customer backlog, and are amortized on a straight-line basis over their estimated useful lives. We generally use the income approach to determine fair value, which requires management to make significant estimates and assumptions. These estimates and assumptions primarily include discount rates, terminal growth rates, forecasts of revenue, operating income and capital expenditures. The discount rates reflect the risk factors, from the perspective of a market participant, associated with forecasts of cash flows. In addition, we establish an intangible upon closing on the sale of a mortgage loan we originated, concurrent with the retention of its servicing rights and amortize the intangible over the estimated period net servicing income is projected to be received.

Although we believe our intangible asset estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair value of the identified intangible assets acquired. Judgment is also required in determining the useful life of a finite-lived intangible asset. We evaluate our identified intangibles for impairment at least annually, or as events or changes in circumstances indicate the carrying value may be impaired.

Investments

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

First, we invest in certain real estate ventures that primarily own and operate commercial real estate, historically through co-investments in funds that LaSalle establishes in the ordinary course of business for its clients. These investments include non-controlling ownership interests generally ranging from less than 1% to 10% of the respective ventures. We account for these investments at fair value or under the equity method of accounting.

Second, JLL Technologies invests in proptech funds and early to mid-stage companies to improve our strategic position within the real estate technology landscape, including investments through the JLL Spark Global Ventures Funds. Generally, we account for these investments at fair value.

Where applicable, we estimate fair value of our investments using the net asset value ("NAV") per share (or its equivalent) our investees provide. Critical inputs to NAV estimates include valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates. In circumstances where the NAV provided by the investee has a reporting date different than ours or when the NAV is not calculated consistent with U.S. GAAP measurement principles, we adjust the NAV accordingly.

For JLL Technologies investments in proptech companies, we primarily estimate the fair value based on the per-share pricing. Subsequent funding rounds or changes in the companies' business strategy/outlook are indicators of a change in fair value.

For all investments reported at fair value, our investment is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date. We reflect these fair value adjustments as gains or losses on the Consolidated Statements of Comprehensive Income within Equity earnings.

Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the expected future tax consequences attributable to (i) differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and (ii) operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in

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which we expect those temporary differences to be recovered or settled. We recognize into income the effect on deferred tax assets and liabilities of a change in tax rates in the period including the enactment date.

Because of the global and cross-border nature of our business, our corporate tax position is complex. We generally provide for taxes in each tax jurisdiction in which we operate based on local tax regulations and rules. Such taxes are provided on pre-tax earnings and include the provision for taxes on substantively all differences between financial statement amounts and amounts used in tax returns, excluding certain non-deductible items and permanent differences.

Our global effective tax rate is sensitive to the complexity of our operations as well as to changes in the mix of our geographic profitability. Local statutory tax rates range from 0% to 38.1% in the countries in which we have significant operations. We evaluate our estimated effective tax rate on a quarterly basis to reflect forecast changes in our geographic mix of income and legislative actions on statutory tax rates.

We provide for the effects of income taxes on interim financial statements based on our estimate of the effective tax rate for the full year. Our effective tax rate was 20.2%, 21.6% and 20.2% for the year ended December 31, 2022, 2021, and 2020, respectively.

Very low tax rate jurisdictions (those with effective national and local combined tax rates of 25% or lower) providing the most significant contributions to our effective tax rate include: Hong Kong (16.5%), Singapore (17%), and the United Kingdom (19%).

Based on our historical experience and future business plans, we do not expect to repatriate our foreign source earnings to the U.S. As of December 31, 2022, we have therefore not provided for withholding tax, dividend distribution tax, capital gains taxes, or other taxes which could arise upon such distribution. We believe our policy of permanently reinvesting earnings of foreign subsidiaries does not significantly impact our liquidity.

We have established valuation allowances against deferred tax assets where expected future taxable income does not support their realization on a more-likely-than-not basis. We formally assess the likelihood of being able to utilize current tax losses in the future on a country-by-country basis, commensurate with the determination of each quarter’s income tax provision. We establish or increase valuation allowances upon specific indications the carrying value of a tax asset may not be recoverable. Alternatively, we reduce valuation allowances upon (i) specific indications the carrying value of the related tax asset is more-likely-than-not recoverable or (ii) the implementation of tax planning strategies which allow an asset we previously determined to be not realizable to be viewed as realizable.

The table below summarizes certain information regarding the gross deferred tax assets and valuation allowance.

The increase in gross deferred tax assets in 2022 was primarily the result of an increase in the U.K. net operating loss and interest deduction carryovers. The decrease in valuation reserves was primarily the result of U.S capital loss carryover utilization.

We evaluate our segment operating performance before tax, and do not consider it meaningful to allocate tax by segment. Estimations and judgments relevant to the determination of tax expense, assets, and liabilities require analysis of the tax environment and the future profitability, for tax purposes, of local statutory legal entities rather than business segments. Our statutory legal entity structure generally does not mirror the way we organize, manage, and report our business operations. For example, the same legal entity may include Capital Markets, Work Dynamics and Markets Advisory businesses in a particular country.

As of December 31, 2022, the amount of unrecognized tax benefits was $75.1 million. We believe it is reasonably possible that matters for which we have recorded $46.2 million of unrecognized tax benefits as of December 31, 2022, will be resolved during 2023. The recognition of tax benefits, and other changes to the amounts of our unrecognized tax benefits, may occur as the result of ongoing operations, the outcomes of audits or other examinations by tax authorities, or the passing of statutes of limitations. We do not expect changes to our unrecognized tax benefits to have a significant impact on net

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income, the financial position, or the cash flows of JLL. We do not believe we have material tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

NEW ACCOUNTING STANDARDS

Refer to Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements, included in Item 8.

ITEMS AFFECTING COMPARABILITY

Macroeconomic Conditions

Our results of operations and the variability of these results are significantly influenced by (i) macroeconomic trends, (ii) the geopolitical environment, (iii) the global and regional real estate markets and (iv) the financial and credit markets. These macroeconomic and other conditions have had, and we expect will continue to have, a significant impact on the variability of our results of operations. In 2020 and early 2021, macroeconomic conditions influenced by the COVID-19 pandemic more notably impacted our operations compared with the current year.

Acquisitions and Dispositions

The timing of acquisitions may impact the comparability of our results on a year-over-year basis. Our results include incremental revenues and expenses following the completion date of an acquisition. Relating to dispositions, comparable results will include the revenues and expenses of recent dispositions and results may also include gains (losses) on the disposition. In addition, there is generally an initial adverse impact on net income from an acquisition as a result of pre-acquisition due diligence expenditures, transaction/deal costs and post-acquisition integration costs, such as fees from third-party advisors engaged to assist with onboarding and process alignment, retention and severance expense, early lease termination costs, and other integration expenses. For dispositions, we may also incur such incremental costs during the disposition process and these costs could have an adverse impact on net income.

Equity Earnings and Incentive Fees

Equity earnings may vary substantially from period to period for a variety of reasons, including as a result of (i) valuation increases (decreases) on investments reported at fair value, (ii) gains (losses) on asset dispositions and (iii) impairment charges. The timing of recognition of these items may impact comparability between quarters, in any one year, or compared to a prior year.

LaSalle, our investment management business, is in part compensated through incentive fees where performance of underlying funds' investments exceeds agreed-to return hurdles. Depending upon performance, disposition activity and the contractual timing of measurement periods with clients, these fees can be significant and may vary substantially from period to period.

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

Foreign Currency

We conduct business using a variety of currencies, but we report our results in U.S. dollars. As a result, the volatility of currencies against the U.S. dollar may positively or negatively impact our results. This volatility can make it more difficult to perform period-to-period comparisons of the reported U.S. dollar results of operations because such results may indicate a rate of growth or decline that might not have been consistent with the real underlying rate of growth or decline in the local operations. Consequently, we provide information about the impact of foreign currencies in the period-to-period comparisons of the reported results of operations in our discussion and analysis of financial condition in the Results of Operations section below.

Transaction-Based Revenue

Transaction-based fees, which are impacted by the size and timing of our clients' transactions, from real estate investment banking, capital markets activities and other services within our segments, increase the variability of the revenue we earn. The timing and the magnitude of these fees can vary significantly from year to year and quarter to quarter, and from region to region.

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MARKET RISKS

Market Risk

The principal market risks we face due to the risk of loss arising from adverse changes in market rates and prices are:

•Interest rates on our unsecured credit facility (the "Facility"); and

•Foreign exchange risks.

In the normal course of business, we manage these risks through a variety of strategies, including hedging transactions using various derivative financial instruments such as foreign currency forward contracts. We enter into derivative instruments that are short-term in duration with high credit-quality counterparties and diversify our positions across such counterparties in order to reduce our exposure to credit losses. We do not enter into derivative transactions for trading or speculative purposes.

Interest Rates

We centrally manage our debt, considering investment opportunities and risks, tax consequences, and overall financing strategies. Our overall interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. We are primarily exposed to interest rate risk on our Facility, which had a borrowing capacity of $3.35 billion as of December 31, 2022. The Facility consists of revolving credit available for working capital, investments, capital expenditures and acquisitions. We had $1,213.8 million of outstanding borrowings under the Facility as of December 31, 2022. The Facility bears a variable rate of interest that fluctuates based on market rates.

Our €350.0 million face value of Euro Notes is split between €175.0 million due in June 2027 and €175.0 million due in June 2029, bearing interest at an annual rate of 1.96% and 2.21%, respectively. The issuance of the Euro Notes at fixed interest rates has helped to limit our exposure to future movements in interest rates.

We assess interest rate sensitivity to estimate the potential effect of rising interest rates on our variable rate debt. If interest rates were 50 basis points higher during 2022, Interest expense, net of interest income, would have been $6.7 million higher.

Foreign Exchange

Foreign exchange risk is the risk we will incur economic losses due to adverse changes in foreign currency exchange rates. Our revenue from outside of the U.S. approximated 41% and 42% of our total revenue for 2022 and 2021, respectively, as outlined in the table below. Operating in international markets means we are exposed to movements in foreign exchange rates, most significantly the British pound and the euro.

We mitigate our foreign currency exchange risk principally by (i) establishing local operations in the markets we serve and (ii) invoicing customers in the same currency as the source of the costs. The impact of translating expenses incurred in foreign currencies into U.S. dollars reduces the impact of translating revenue earned in foreign currencies into U.S. dollars. In addition, British pound and Singapore dollar expenses incurred as a result of our regional headquarters being located in London and Singapore, respectively, act as ongoing partial operational hedges against our translation exposures to those currencies.

We enter into forward foreign currency exchange contracts to manage currency risks associated with intercompany loan balances. Generally, the maturity of these contracts is less than 60 days. As of December 31, 2022, we had forward exchange contracts in effect with a gross notional value of $1.81 billion ($1.02 billion on a net basis). This corresponding net carrying gain is generally offset by a carrying loss in associated intercompany loans.

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Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar in relation to currencies we are exposed to may positively or negatively impact our reported results. The following table sets forth the revenue derived from our most significant currencies.

Had British pound-to-U.S. dollar exchange rates been 10% higher throughout the course of 2022, we estimate our reported operating income would have increased by $10.1 million. Had euro-to-U.S. dollar exchange rates been 10% higher throughout the course of 2022, we estimate our reported operating income would have increased by $6.1 million. These hypothetical calculations estimate the impact of translating results into U.S. dollars and do not include an estimate of the impact a 10% increase in the U.S. dollar against other currencies would have on our foreign operations.

Seasonality

Historically, we have reported a relatively smaller revenue and profit in the first quarter with both measures increasing during each of the following three quarters. This is a result of a general focus in the real estate industry on completing or documenting transactions by calendar year end and the fact that certain expenses are constant throughout the year. Our seasonality excludes the recognition of investment-generated performance fees and realized and unrealized investment equity earnings and losses. Specifically, we recognize incentives fees when assets are sold or as a result of valuation increases in the portfolio, the timing of which may not be predictable or recurring. In addition, investment equity gains and losses are primarily dependent on underlying valuations, and the direction and magnitude of changes to such valuations are not predictable. Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis. Other factors may affect seasonality. For example, in 2020 and 2021, macroeconomic conditions influenced by the COVID-19 pandemic impacted the historical seasonality of our revenue and profits. In the second half of 2022, we experienced disruption to our historical seasonality trends due to rising interest rates and widespread economic uncertainty.

Inflation

Our operating expenses fluctuate with our revenue and general economic conditions, including inflation. The impacts of inflation, including wage inflation, have become more noticeable in our 2022 results when compared to prior years.

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RESULTS OF OPERATIONS

In conjunction with our change in reporting segments, effective January 1, 2022, comparable period information has been recast to conform with current presentation.

Definitions

•Assets under management data for LaSalle is reported on a one-quarter lag.

•"n.m.": not meaningful, represented by a percentage change of greater than 1,000% favorable or unfavorable.

•"MENA": Middle East and North Africa. "Greater China": China, Hong Kong, Macau and Taiwan.

Year Ended December 31, 2022 compared with Year Ended December 31, 2021

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Non-GAAP Financial Measures

Management uses certain non-GAAP financial measures to develop budgets and forecasts, measure and reward performance against those budgets and forecasts, and enhance comparability to prior periods. These measures are believed to be useful to investors and other external stakeholders as supplemental measures of core operating performance and include the following.

(i)Fee revenue and Fee-based operating expenses;

(ii)Adjusted EBITDA attributable to common shareholders ("Adjusted EBITDA") and Adjusted EBITDA margin; and

(iii)Percentage changes against prior periods, presented on a local currency basis.

However, non-GAAP financial measures should not be considered alternatives to measures determined in accordance with U.S. GAAP. Any measure that eliminates components of a company’s capital structure, cost of operations or investments, or other results has limitations as a performance measure. In light of these limitations, management also considers U.S. GAAP financial measures and does not rely solely on non-GAAP financial measures. Because our non-GAAP financial measures are not calculated in accordance with U.S. GAAP, they may not be comparable to similarly titled measures used by other companies.

Adjustments to U.S. GAAP Financial Measures Used to Calculate non-GAAP Financial Measures

Gross contract costs represent certain costs associated with client-dedicated employees and third-party vendors and subcontractors and are directly or indirectly reimbursed through the fees we receive. These costs are presented on a gross basis in Operating expenses with the equal amount of corresponding fees in Revenue. Excluding gross contract costs from both Fee revenue and Fee-based operating expenses more accurately reflects how we manage our expense base and operating margins and also enables a more consistent performance assessment across a portfolio of contracts with varying payment terms and structures.

Net non-cash MSR and mortgage banking derivative activity consists of the balances presented within Revenue composed of (i) derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity and (ii) gains recognized from the retention of MSR upon origination and sale of mortgage loans, offset by (iii) amortization of MSR intangible assets over the period that net servicing income is projected to be received. Non-cash derivative gains/losses resulting from mortgage banking loan commitment and warehousing activity are calculated as the estimated fair value of loan commitments and subsequent changes thereof, primarily represented by the estimated net cash flows associated with future servicing rights. MSR gains and corresponding MSR intangible assets are calculated as the present value of estimated net cash flows over the estimated mortgage servicing periods. The above activity is reported entirely within Revenue of the Capital Markets segment. Excluding net non-cash MSR and mortgage banking derivative activity reflects how we manage and evaluate performance because the excluded activity is non-cash in nature.

Restructuring and acquisition charges primarily consist of (i) severance and employment-related charges, including those related to external service providers, incurred in conjunction with a structural business shift, which can be represented by a notable change in headcount, change in leadership or transformation of business processes, (ii) acquisition, transaction and integration-related charges, including non-cash fair value adjustments to assets and liabilities recorded in purchase accounting such as earn-out liabilities and intangible assets and (iii) lease exit charges. Such activity is excluded as the amounts are generally either non-cash in nature or the anticipated benefits from the expenditures would not likely be fully realized until future periods. Restructuring and acquisition charges are excluded from segment operating results and therefore not a line item in the segments’ reconciliation to Adjusted EBITDA.

Gain/loss on disposition reflects the gain or loss recognized on the sale or disposition of businesses. Given the low frequency of business disposals by the company historically, the gain or loss directly associated with such activity is excluded as it is not considered indicative of core operating performance. In 2022, the $7.5 million net loss from the second quarter included $10.5 million of loss related to the disposition of our Russia business, partially offset by a $3.0 million gain related to a disposition within JLL Technologies. In 2021, $12.0 million of the activity related to a business disposition within JLL Technologies and $0.4 million related to a sold business within Markets Advisory. In 2020, the $4.8 million gain related to the sale of a property management business in Markets Advisory.

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Interest on Employee Loans, Net reflects interest accrued on employee loans less the amount of accrued interest forgiven. Certain employees (predominantly in our Leasing and Capital Markets businesses) receive cash payments structured as loans, with interest. Employees earn forgiveness of the loan based on performance, generally calculated as a percentage of revenue production, annually. Such forgiven amounts are reflected in Compensation and benefits expense. Given the interest accrued on these employee loans and subsequent forgiveness are non-cash and the amounts perfectly offset over the life of the loan, the activity is not indicative of core operating performance and is excluded from non-GAAP measures.

Reconciliation of Non-GAAP Financial Measures

Below are the reconciliations of (i) Revenue to fee revenue and (ii) Operating expenses to fee-based operating expenses.

Below is (i) a reconciliation of Net income attributable to common shareholders to EBITDA and Adjusted EBITDA, (ii) the Net income margin attributable to common shareholders (measured on Revenue), and (iii) the Adjusted EBITDA margin (measured on fee-revenue and presented on a local currency basis).

(1) This adjustment excludes the noncontrolling interest portion of amortization of acquisition-related intangibles which is not attributable to common shareholders.

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In discussing our operating results, we report Adjusted EBITDA margins and refer to percentage changes in local currency, unless otherwise noted. Amounts presented on a local currency basis are calculated by translating the current period results of our foreign operations to U.S. dollars using the foreign currency exchange rates from the comparative period. We believe this methodology provides a framework for assessing performance and operations excluding the effect of foreign currency fluctuations.

The following table reflects the reconciliation to local currency amounts for consolidated (i) Revenue, (ii) Fee revenue, (iii) Operating income and (iv) Adjusted EBITDA.

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Revenue

Revenue and fee revenue increased 11% and 7%, respectively compared with 2021, as outstanding performance in the first half of 2022 across JLL more than offset headwinds experienced in the second half of the year. These results reflect double-digit growth in Work Dynamics each quarter of 2022 as well as strong contributions during the first half of 2022 from Leasing, within Markets Advisory, and Capital Markets. More specifically, resilient annuity-based businesses delivered solid fee revenue growth as Workplace Management, within Work Dynamics, grew 18%; Property Management, within Markets Advisory, grew 9%; and LaSalle advisory fees grew 17%. In contrast, transaction-based businesses, notably Investment Sales and Debt Advisory within Capital Markets as well as Leasing within Markets Advisory, experienced challenges from uncertainty in interest rates and degrading economic sentiment, beginning in the third quarter and continuing through the close of 2022.

LaSalle's decrease in revenue, compared with 2021, was driven by lower incentive fees, which more than offset the double-digit advisory fee growth. Dry powder for future deployment remains strong as LaSalle continues to raise capital and redemption requests have not been significant.

The following highlights the proportion of consolidated top-line growth on a local currency basis, compared with 2021, by business line segment ($ in millions). Refer to segment operating results for further detail.

Operating Expenses

Operating expenses increased 13% to $20.0 billion in 2022 while fee-based operating expenses were $7.4 billion in 2022, up 10% from prior year. The higher expenses were primarily attributable to Markets Advisory, which represented 38% of the increase in fee-based operating expenses on a local currency basis, Work Dynamics represented 31%, Capital Markets represented 14%, JLL Technologies 12% and LaSalle 1%. Refer to segment operating results for additional detail.

In addition to the segment drivers, a net increase in Restructuring and acquisition charges in 2022 contributed to higher operating expenses in 2022 versus 2021; refer to the following table and commentary below for additional detail.

The increase in severance and other employment-related charges, compared with 2021, reflected notable cost mitigation actions taken across the globe in late 2022.

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Interest Expense

Interest expense, net of interest income, for 2022 was $75.2 million, compared to $40.1 million in 2021. The change was driven by a higher effective interest rate on our credit facilities and a year-over-year increase in the average outstanding borrowings. The average outstanding borrowings under our credit facilities increased to $1,399.1 million, with an average effective interest rate of 2.9%, in 2022, from $432.0 million, with an average effective interest rate of 0.9%, during 2021.

Equity Earnings

Equity earnings were $51.0 million in 2022, down from $209.4 million in 2021.

Net valuation increases related to JLL Technologies' investments drove $46.6 million of equity earnings this year, compared with $140.7 million in 2021. Refer to the JLL Technologies segment discussion for additional detail.

LaSalle equity earnings were down $62.3 million. Refer to the LaSalle segment discussion for additional detail.

Income Taxes

The provision for income taxes was $200.8 million and $264.3 million for the years ended December 31, 2022 and 2021, respectively, representing effective tax rates ("ETR") of 20.2% and 21.6%, respectively. Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 8, Income Taxes, of the Notes to Consolidated Financial Statements, included in Item 8, for a further discussion of our effective tax rate.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders was $654.5 million for the year, or $13.27 per diluted common share, compared with $961.6 million for 2021, or $18.47 per diluted common share. Adjusted EBITDA decreased 14% from the prior year to $1,247.3 million in 2022. Net income margin attributable to common shareholders was 3.1% in 2022, down from 5.0% in the prior year. Adjusted EBITDA margin, calculated on a fee revenue basis, was 15.0% in both USD and local currency for 2022, compared with 18.7% in 2021. The margin contraction was primarily attributable to (i) the $158.4 million decrease in equity earnings, which comprised over 50% of the margin decline, (ii) higher fixed compensation expense, reflecting increased headcount and wage inflation over the trailing twelve months, and (iii) incremental T&E and marketing expenses, and (iv) additional investments in technology. In addition, the consolidated margin, and all segment margins, reflected comparatively lower annual incentive compensation accruals this year due to business performance.

Segment Operating Results

Effective January 1, 2022, we manage and report our operations as five business segments: Markets Advisory, Capital Markets, Work Dynamics, JLL Technologies, and LaSalle.

Markets Advisory offers a wide range of real estate services, including agency leasing and tenant representation, property management, and advisory and consulting services. Our Capital Markets service offerings include investment sales, equity and debt advisory, loan servicing, and valuations. Our Work Dynamics business provides a broad suite of integrated services to occupiers of real estate, including facility and project management, as well as portfolio and other services. We consider "Property Management" to be services provided to non-occupying property investors and "Workplace Management" to be services provided to owner-occupiers. Our JLL Technologies segment offers software products, solutions and services, while LaSalle provides investment management services on a global basis to institutional investors and high-net-worth individuals.

For segment reporting, (i) gross contract costs and (ii) net non-cash MSR and mortgage banking derivative activity are both excluded from revenue in determining Fee revenue. Gross contract costs are excluded from operating expenses in determining Fee-based operating expenses. In addition, our measure of segment results also excludes Restructuring and acquisition charges.

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Markets Advisory

The increases in Markets Advisory revenue and fee revenue were primarily due to Leasing, where growth over a record 2021 reflected an outstanding first half of 2022 which more than offset economic challenges impacting transaction-based revenue during the second half of the year. Leasing performance was driven by an increase in average deal size across all major asset classes, particularly in office and industrial. This driver was partially offset by the impact of tight supply, notably in the industrial sector, which had lower transaction volume in 2022. Geographically, the year-over-year increase was led by the U.S. (which contributed 71% of the growth in Leasing fee revenue on a local currency basis), Canada (11%) and Germany (9%), partially offset by Greater China, which continued to experience significant pandemic-related restrictions. The uptick in Property Management fee revenue was largely attributable to the U.S. and Canada, primarily from organic contributions.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were driven primarily by revenue-related expense growth and higher fixed compensation expense, including the impact of additional headcount and wage inflation over the trailing twelve months. In addition, expense growth was also attributable to increased T&E and marketing expenses and additional investments in technology.

Adjusted EBITDA margin for the year, calculated on a fee revenue basis, was 15.7% in USD (16.0% in local currency) in 2022, compared with 17.1% in 2021. The margin contraction was primarily due to the expense drivers noted above, partially offset by higher revenue.

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Capital Markets

On a local currency basis, higher revenues from Loan Servicing and Valuation Advisory were offset by lower Investment Sales and Debt Advisory fees, as rising interest rates and economic uncertainty adversely impacted market transaction volumes and elongated the deal-cycle time. This driver was particularly impactful on the second half of 2022, where favorable trends from the first half of 2022 reversed in the third and fourth quarters. Globally, fourth-quarter market volumes for investment sales were down 58% in USD (56% in local currency) and full-year global market volumes fell 19% in USD (15% in local currency) according to JLL Research. The top-line increase in Loan Servicing reflected growth of the servicing portfolio in 2022, particularly from loans originated under the Fannie Mae DUS program.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were driven primarily by (i) an increase in T&E, marketing and additional technology-related expenses, (ii) incremental fixed compensation, due to headcount growth and wage inflation over the trailing twelve months, and (iii) higher commission expense, attributable to changes in the variable compensation structures in the U.S. (partially offset by reductions to annual incentive compensation expense). In addition, 2021 included a $13.8 million non-cash reduction (benefit) to loan loss credit reserves, versus $2.0 million of net increases (expense) to the reserves this year.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 18.3% in USD (18.2% in local currency) in 2022, compared with 21.6% in 2021. The margin contraction was primarily due to the expense drivers noted above.

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Work Dynamics

The Work Dynamics revenue and fee revenue increases, compared with 2021, were driven by double-digit growth in Workplace Management and Project Management, which were broad-based across geographies. New client wins and the expansion of existing global mandates drove the growth in Workplace Management, most notably in the United States. Project Management experienced continued momentum from the return-to-office movement that, together with fewer pandemic-driven restrictions, contributed to higher project demand this year.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were largely attributable to (i) additional investments in technology, (ii) incremental T&E and marketing expenses, and (iii) higher fixed compensation expense to support business growth, including additional headcount and wage inflation over the trailing twelve months.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 12.3% in USD (11.6% in local currency) in 2022, compared with 10.8% in 2021. The margin expansion was attributable to the fee revenue growth described above, the impact of cost management strategies executed throughout the year, and the net impact of the expense drivers noted above.

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JLL Technologies

(1) Included in Compensation and benefits expenses for JLL Technologies is carried interest expense related to qualifying equity earnings of the segment. For the years ended December 31, 2022 and 2021, carried interest expense was $16.6 million and $12.6 million, respectively.

JLL Technologies top-line growth included $32.3 million from acquisitions closed in late 2021. Organic fee revenue increased 23% for the year, driven by new customers as well as growth from existing customers in software and solutions offerings.

Equity earnings in 2021 were primarily attributable to valuation increases to JLL Technologies' investments in early to mid-stage proptech companies as well as proptech funds, primarily reflecting subsequent financing rounds at increased per-share values. Lower equity earnings in 2022 were due to more modest valuation increases, compared with 2021, coupled with more notable impairments/valuation declines.

The increases in segment operating expenses and segment fee-based operating expenses in 2022 were largely driven by (i) incremental compensation related to businesses acquired in late 2021 and (ii) the ramp up of operations for current and future growth, including T&E and marketing expenses as well as additional headcount and wage inflation over the trailing twelve months.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was negative 25.4% in USD (negative 26.1% in local currency) in 2022, compared with 38.9% in 2021.The change in equity earnings, net of carried interest, drove more than 75% of the net margin contraction. The remaining margin decline was primarily attributable to the expense drivers noted above, partially offset by higher fee revenue.

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LaSalle

Continued momentum in advisory fees more than offset lower incentive fees to drive slight top-line growth for LaSalle on a local currency basis. The advisory fee growth in 2022 was concentrated in core open-end funds, driven by strong capital raising and increases in the fair value of assets under management (“AUM”) over the trailing twelve months. Lower incentive fees for the year reflected muted transaction activity given economic uncertainty and lower valuation gains in a U.S. fund, following an exceptional 2021.

The current year's equity earnings included valuation declines in the co-investment portfolio during latter 2022 coupled with $13.7 million of equity losses due to negative share price movement for a co-investment in a LaSalle-managed publicly-traded REIT in Japan. Prior-year equity earnings were substantially driven by valuation increases on underlying real estate investments within LaSalle's co-investment portfolio, as estimated fair values recovered from pandemic-era lows in 2020.

The decreases in segment operating expenses and segment fee-based operating expenses, compared with 2021, were primarily driven by lower incentive compensation related to the decline in incentive fees, partially offset by incremental T&E expense and higher fixed compensation expense, including wage inflation over the trailing twelve months.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 21.6% in USD (21.4% in local currency) for 2022, compared with 36.1% in 2021. The decline in margin was substantially driven by lower equity earnings and incentive fees. These drivers were partially offset by higher advisory fees and continued scale of the advisory fee platform.

As of December 31, 2022, LaSalle had $79.1 billion of AUM, an increase of 3% in USD (15% in local currency) from $76.6 billion as of December 31, 2021. The net increase in AUM during the year resulted from (i) $12.2 billion of acquisitions and (ii) $7.2 billion of net valuation increases, partially offset by (iii) $9.2 billion of foreign currency decreases and (iv) $7.7 billion of dispositions and withdrawals.

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

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Reconciliation of Non-GAAP Financial Measures

Below are the reconciliations of (i) Revenue to fee revenue and (ii) Operating expenses to fee-based operating expenses.

Below is (i) a reconciliation of Net income attributable to common shareholders to EBITDA and Adjusted EBITDA, (ii) the Net income margin attributable to common shareholders (measured on Revenue), and (iii) the Adjusted EBITDA margin (measured on fee-revenue and presented on a local currency basis).

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The following table reflects the reconciliation to local currency amounts for consolidated (i) Revenue, (ii) Fee revenue, (iii) Operating income and (iv) Adjusted EBITDA.

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Revenue

Revenue increased 15% to $19.4 billion in 2021 and fee revenue increased 31% to $8.0 billion, compared with 2020, reflecting broad-based growth across all segments. Markets Advisory led the top-line growth with revenue and fee revenue increases of 30% and 38%, respectively, driven by Leasing. Capital Markets also experienced significant year-over-year growth, achieving revenue and fee revenue increases of 47% and 50%, respectively. New wins and expansions of existing client mandates in 2021 within Workplace Management drove the 6% revenue increase in Work Dynamics. LaSalle's 17% revenue growth, compared with 2020, was driven by higher incentive and advisory fees.

The following charts highlight the proportion of consolidated top-line growth on a local currency basis, compared with 2020, by segment ($ in millions). Refer to segment operating results for further detail.

Our consolidated revenue increased 17% in U.S. dollars and 15% on a local currency basis, compared with 2020, while consolidated fee revenue increased 32% in U.S. dollars and 31% on a local currency basis, compared with 2020. The spread between U.S. dollars and local currency was driven by a weakening of the U.S. dollar against most currencies, especially the British pound, euro, Australian dollar, Canadian dollar and Chinese yuan.

Operating Expenses

In 2021, consolidated operating expenses increased 12% to $18.3 billion. Consolidated fee-based operating expenses were $7.0 billion in 2021, a 25% increase from prior year. The higher expenses were primarily attributable to Markets Advisory and Capital Markets, which drove 49% and 39%, respectively, of the total increase in fee-based operating expenses on a local currency basis. Refer to segment operating results for additional detail.

The overall expense increase is net of lower Restructuring and acquisition charges; refer to the following table and commentary for additional detail.

Charges associated with the acquisition and integration of HFF, Inc. ("HFF") primarily included expenses from retention awards granted to employees upon acquisition as well as other integration expenses, such as early lease termination costs.

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

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Interest Expense

Interest expense, net of interest income, for 2021 was $40.1 million, down from $52.8 million in 2020. The decrease was driven by a lower effective interest rate on our Facility and a year-over-year reduction in the average outstanding borrowings. The average outstanding borrowings under our Facility decreased to $432.0 million, with an average effective interest rate of 0.94% in 2021, from $865.1 million, with an average effective interest rate of 1.60% during 2020.

Equity Earnings

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

Valuation increases related to JLL Technologies' investments resulted in $140.7 million of equity earnings in 2021, compared with $5.7 million in 2020, reflecting continued progress in the strategy to invest in early-stage proptech companies; refer to the JLL Technologies segment discussion for additional detail.

LaSalle recognized $62.7 million of equity earnings in 2021, compared with $12.5 million of equity losses in the prior year. Refer to the LaSalle segment discussion for additional detail.

Income Taxes

The provision for income taxes was $264.3 million and $106.9 million for the years ended December 31, 2021 and 2020, respectively, representing effective tax rates ("ETR") of 21.6% and 20.2%, respectively. Refer to the Income Tax discussion in the Summary of Critical Accounting Policies and Estimates and Note 8, Income Taxes, of the Notes to Consolidated Financial Statements, included in Item 8, for a further discussion of our effective tax rate.

Net Income and Adjusted EBITDA

Net income attributable to common shareholders was $961.6 million for 2021, or $18.47 per diluted common share, compared with $402.5 million for 2020, or $7.70 per diluted common share. Adjusted EBITDA increased 73% from the prior year to $1,496.5 million in 2021. Net income margin attributable to common shareholders was 5.0% in 2021 up from 2.4% in the prior year. Adjusted EBITDA margin, calculated on a fee revenue basis, was 18.7% in USD for 2021 (18.8% in local currency), compared with 14.2% last year. The 450 basis point margin expansion was primarily driven by the significant increase in revenue, particularly from higher margin transaction-based service lines, as well as higher equity earnings, as noted above. These drivers were partially offset by the expected reduction of certain non-permanent cost savings from 2020 and incremental investments in people and technology.

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Segment Operating Results

For segment reporting, (i) gross contract costs and (ii) net non-cash MSR and mortgage banking derivative activity are both excluded from revenue in determining Fee revenue. Gross contract costs are excluded from operating expenses in determining Fee-based operating expenses. In addition, our measure of segment results also excludes Restructuring and acquisition charges.

Markets Advisory

Markets Advisory revenue and fee revenue increases were led by Leasing, driven by higher transaction volumes and an increase in average deal size, especially in the U.S., with strong performance across all sectors, highlighted by office and industrial. Notably, organic Leasing fee revenue exceeded 2019. Advisory, Consulting and Other largely recovered from pandemic-impacted activity in 2020, especially in Greater China and MENA.

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

In 2020, substantially all of the $13.7 million equity earnings were attributable to gains by consolidated variable interest entities in which the company held no equity interest; therefore, these gains had no net impact to Adjusted EBITDA.

Adjusted EBITDA margin for the year, calculated on a fee revenue basis, was 17.1% in USD and local currency in 2021, compared with 14.7% in 2020. The margin expansion was driven by transaction-based revenue growth, partially offset by the above-noted expense drivers.

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Capital Markets

Top-line growth in Capital Markets was led by Investment Sales and Debt Advisory as global market volumes reached a record high in 2021, according to JLL Research. The increases were broad-based across geographies and asset classes, most notably residential, office and industrial. The increase in Valuation Advisory was led by organic growth, highlighted by the U.S., Australia and the U.K. Strong growth in Loan Servicing was driven by an increase in the servicing portfolio, particularly from originations under the Fannie Mae DUS program (approximately half of the increase) as well as incremental prepayment fees.

The increases in segment operating expenses and segment fee-based operating expenses, compared with the prior year, were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from 2020 (including the benefit from pandemic-related government relief programs) and incremental investments in people and technology. In addition, we recognized a $13.8 million non-cash reduction to our loan loss credit reserves related to our multi-housing business in 2021, compared with a $21.6 million non-cash increase to the credit reserves recognized in 2020.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 21.6% in USD (and 21.5% local currency) in 2021, compared with 15.0% in 2020. The margin expansion was primarily driven by transaction-based revenue growth and the year-over-year impact of changes to the loan loss credit reserves, partially offset by the additional expense drivers discussed above.

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Work Dynamics

Over half of the revenue and fee revenue growth for Work Dynamics was driven by Workplace Management, led by new client wins and the expansion of existing mandates, especially in the United States. Portfolio Services and Other growth was largely from higher consulting and transaction management services, influenced by client leasing activity during 2021, compared with more significant impacts from COVID during the prior year.

The increases in segment operating expenses and segment fee-based operating expenses, compared with last year, were primarily due to higher revenue-related expenses, the expected reduction of certain non-permanent cost savings from 2020 (including the benefit from pandemic-related government relief programs), incremental investments in people and technology, and higher self-insurance expenses, specifically medical and dental, which were lower than historical experience in 2020.

Adjusted EBITDA margin, calculated on a fee-revenue basis, was 10.8% in USD (11.1% in local currency) for 2021, compared with 14.3% in 2020. The margin contraction was attributable to the expense drivers noted above, which more than offset the revenue growth.

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JLL Technologies

JLL Technologies top-line growth included $3.3 million of incremental fee revenue from acquisitions closed in late 2021. Organic fee revenue increased 11%, driven by new customers as well as growth from existing customers in software and solutions offerings.

The higher equity earnings in 2021 were attributable to valuation increases for several of our investments in proptech funds and early to mid-stage proptech companies, primarily reflecting subsequent financing rounds at increased per-share values.

The increases in segment operating expenses and segment fee-based operating expenses were driven by revenue-related expense growth as well as incremental investments in people and technology to support future growth.

Adjusted EBITDA margin for the year, calculated on a fee-revenue basis, was 38.9% in USD (39.5% in local currency), compared with negative 27.6% in 2020. The margin expansion was driven by higher earnings, partially offset by the above-noted expense drivers.

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LaSalle

LaSalle advisory fee growth was led by core open-end funds, a result of capital raising and valuation increases in AUM, as well as a newly-launched fund in Asia Pacific. The increase in incentive fees reflected the strong fund performance in the U.S. and real estate dispositions on behalf of clients in Asia Pacific and continental Europe.

Equity earnings in 2021 were primarily attributable to increases in the estimated fair value of underlying real estate investments within LaSalle's co-investment portfolio across asset classes and geographies. In the prior year, equity losses were largely driven by the pandemic's impact on real estate prices, which drove lower estimated fair values within the portfolio.

The increases in 2021 segment operating expenses and segment fee-based operating expenses, compared with 2020, were primarily driven by compensation expense related to the higher incentive fees, deferred variable compensation expenses associated with the run-off of a previous compensation program, and incremental investments in people and technology.

Adjusted EBITDA margin, calculated on a fee revenue basis, was 36.1% in USD (36.3% in local currency) for 2021, compared with 19.8% in 2020. The significant margin expansion was largely driven by higher equity earnings and incentive fees, partially offset by the expense drivers noted above.

As of December 31, 2021, LaSalle had $76.6 billion of AUM, an increase of 11% in USD and local currency from $68.9 billion as of December 31, 2020. The net increase in AUM during the year resulted from (i) $7.6 billion of net valuation increases, (ii) $7.3 billion of acquisitions and (iii) $0.2 billion of foreign currency increases, partially offset by (iv) $7.4 billion of dispositions and withdrawals.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operating Activities

Operating activities provided $199.9 million of cash in 2022, compared with $972.4 million provided in 2021. The decrease in cash provided was primarily due to (i) higher commission payments in 2022, reflecting greater payments in early 2022 for commissions earned from the strong performance in the prior-year fourth quarter as well as incremental commissions this year, attributable to the full-year Leasing growth and changes to the Capital Markets incentive compensation structure, (ii) higher annual incentive compensation payments, typically paid in the first quarter, compared with 2021, (iii) lower cash provided by earnings, and (iv) an incremental $59.0 million of cash paid for taxes. These drivers were partially offset by lower prepaid and other expenses, including the net conversion of contract assets.

Cash Flows from Investing Activities

We used $243.1 million of cash for investing activities during 2022, compared with $805.8 million used in 2021. The decrease in cash used was primarily driven by lower business acquisitions volume in the current year and the year-over-year change in net investment activity related to less than wholly-owned entities. We discuss key drivers, along with other investing activities, individually below in further detail.

Cash Flows from Financing Activities

Financing activities used $13.1 million of cash during 2022, compared with $143.8 million used during 2021. The increase in net borrowings from our Facility ($1,075.0 million of net borrowings in 2022 versus $150.0 million of net borrowings in 2021) were used to (i) fund the higher annual incentive compensation payments made in the first quarter discussed above, (ii) return an incremental $257.9 million to shareholders via our share repurchase program, and (iii) redeem our 2022 senior notes, as further described below. In addition, the cash outflow relating to noncontrolling interest distributions in 2022 included a $142.3 million gain by a consolidated variable interest entity in which the company held no equity interest that was also distributed during the year. The offset to this is included in cash from investing activities, specifically investment activity by less than wholly-owned entities.

Debt

On August 31, 2022, we amended our Facility to increase the borrowing capacity from $2.75 billion to $3.35 billion. Our Facility matures on April 14, 2026 and bears a variable rate of interest. As of December 31, 2022, we had outstanding borrowings under the Facility of $1,213.8 million, compared with $138.2 million outstanding as of December 31, 2021.

We had Short-term borrowings (including financing lease obligations, overdrawn bank accounts and local overdraft facilities) of $164.2 million as of December 31, 2022, compared with $147.9 million as of December 31, 2021. In addition, we had the capacity to borrow up to an additional $52.3 million under local overdraft facilities as of December 31, 2022.

As of December 31, 2022, we had €350.0 million of Euro Notes, evenly divided between maturities of June 2027 (with a fixed interest rate of 1.96%) and June 2029 (with a fixed interest rate of 2.21%). During 2022, we used proceeds from our Facility to redeem all of our outstanding 4.4% Senior Notes due November 2022. The redemption price for the notes was equal to the $275.0 million principal amount plus accrued and unpaid interest on the Notes.

We will continue to use the Facility for working capital needs (including payment of accrued incentive compensation), co-investment activities, share repurchases, capital expenditures and acquisitions.

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

Investment Activity

As of December 31, 2022, we had a carrying value of $873.8 million in Investments, primarily related to investments by JLL Technologies in early to mid-stage proptech companies and proptech funds as well as LaSalle co-investments. In 2022 and 2021, funding of investments exceeded returns of capital by $142.9 million and $107.1 million, respectively. We expect continued investments by JLL Technologies as well as strategic co-investment opportunities with our investment management clients globally as co-investment remains an important foundation to the continued growth of LaSalle's business.

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We have unfunded capital commitments to investment vehicles and direct investments totaling a maximum of $349.1 million as of December 31, 2022.

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

Share Repurchase and Dividend Programs

In February 2022, our Board of Directors authorized an additional $1.5 billion for the repurchase of our common stock in the open market and privately negotiated transactions. The number of shares repurchased and cash paid for repurchases is noted in table below.

As of December 31, 2022, $1,155.6 million remained authorized for repurchases under our share repurchase program.

Capital Expenditures

Capital expenditures, excluding those made by a consolidated VIE in which we held no equity interest, were $205.8 million and $175.9 million in 2022 and 2021, respectively. Expenditures in both years were primarily related to office leasehold improvements, hardware and purchased/developed software.

Investment Asset Activity of Consolidated Less Than Wholly-Owned Entities

Net capital additions made by consolidated VIEs in which we held no equity interest were net proceeds of $134.8 million in 2022, compared with net acquisitions of $70.9 million in 2021, primarily to acquire (and dispose of) real estate.

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

Business Acquisitions

In 2022, we paid $23.8 million for business acquisitions. This included $5.7 million of payments relating to acquisitions that closed in 2022 and $18.1 million for deferred business acquisition and earn-out obligations related to acquisitions completed in prior years, which are primarily reflected in cash flows from financing activities.

Terms for our acquisitions have typically included cash paid at closing with provisions for additional consideration and earn-out payments subject to certain contract provisions and performance. Deferred business acquisition obligations totaled $26.2 million and $28.1 million on the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively. These obligations represent the current discounted values of payments to sellers of businesses for which our acquisition has closed as of the balance sheet dates and for which the only remaining condition on those payments is the passage of time. As of December 31, 2022, we had the potential to make earn-out payments on 17 acquisitions subject to the achievement of certain performance conditions, representing $73.3 million accrued for potential earn-out payments, of a potential maximum of $114.6 million (undiscounted). These earn-outs will come due at various times over the next five years, assuming the achievement of the applicable performance conditions.

We will continue to consider acquisitions we believe will strengthen our market position, increase our profitability and supplement our organic growth.

Refer to Note 4, Business Combinations, Goodwill and Other Intangible Assets, of the Notes to the Consolidated Financial Statements, included in Item 8, for further information on business acquisitions.

Repatriation of Foreign Earnings

Based on our historical experience and future business plans, we do not expect to repatriate our foreign source earnings to the U.S. We believe our policy of permanently reinvesting earnings of foreign subsidiaries does not significantly impact our liquidity. As of December 31, 2022 and 2021, we had total cash and cash equivalents of $519.3 million and $593.7 million, respectively, of which $400.8 million and $487.9 million, respectively, was held by our foreign subsidiaries.

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Restricted Net Assets

We face regulatory restrictions in certain countries that limit or prevent the transfer of funds to other countries or the exchange of the local currency to other currencies, however, we generally face no such restrictions with regard to the use or application of funds for ordinary course business activities within such countries. The total assets of these countries in aggregate totaled approximately 4% of our total assets as of both December 31, 2022 and 2021.

Leases

Our lease obligations primarily consist of operating leases of office space in various buildings for our own use as well as operating leases for equipment. The total minimum rentals to be received in the future as sublessor under noncancelable operating subleases as of December 31, 2022 was $37.3 million.

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

Deferred Compensation

Deferred compensation obligations are inclusive of amounts attributable to service conditions satisfied as of December 31, 2022, as well as service conditions expected to be satisfied in future periods. The deferred compensation plans include a provision for deferred compensation plans, predominantly in the U.S., that allow employees to defer portions of their compensation. We recognize an asset for the amount that could be realized under these insurance contracts at the balance sheet date, and the deferred compensation obligation is adjusted to reflect the changes in the fair value of the amount owed to the employees. The timing of payments to employees is, in part, dependent on their employment with JLL and, therefore, cannot be determined with precision.

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

Defined Benefit Plans

The defined benefit plan obligations represent estimates of the expected benefits to be paid out by our defined benefit plans. We will fund these obligations from the assets held by these plans. If the assets these plans hold are not sufficient to fund these payments, JLL will fund the remaining obligations. We have historically funded pension costs as actuarially determined and as applicable laws and regulations require. We expect to contribute $7.8 million to our defined benefit pension plans in 2023. As payments to recipients are based on their retirement date, age and other factors, we cannot determine the timing of such payments with precision.

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