$6-billion acquisition Songdo City, acquired the firm

RENY: What led you to align with FTI? How did this fit in with SMG's growth plans?

Schonbraun: We've been giving our future a lot of thought. We've grown a firm organically that has become the largest dedicated real estate consulting firm in the country. As we've continued to grow, our clients also have grown, and are now all over the country and the world. It became clearer to us that to grow our platform and provide better service to our clients—public real estate companies, hedge funds, opportunity funds and, increasingly, sovereign funds—we would be best served by aligning ourselves with an organization that really had a national and international footprint.

As we reviewed strategically where we wanted to be, FTI's name kept popping up. They're the largest publicly held consulting firm in the country, a $4-billion company. Where our clients are companies that own, operate and trade in real estate, FTI's main clients are in the corporate world. Their main services include restructuring, workouts, bankruptcies and many other business advisory services. However, they did not have a dedicated real estate group.

We saw this as an opportunity for three reasons. One, to be able to reach nationally and globally was terrific; two, we had great synergy with FTI in the way we thought about business and growth; and three, the opportunity to provide real estate services to FTI's corporate clients and fund clients, and to help those clients strategically deal with real estate, was also a great thing. SMG has become the real estate division and arm of FTI, and we'll be heading up that real estate group while also maintaining our own identity and our own persona. It's a win-win-win for us, and a great way of expanding our platform.

RENY: What are some of the ways this partnership will play out?

Schonbraun: A good example is that FTI provides a tremendous amount of consulting work and strategy work to financial institutions. The banking industry is struggling itself right now. Banks are looking for earnings; they're looking for greater liquidity and ways to achieve stability. Real estate, to us, is one of the great ways for financial institutions to do that. Most financial institutions, through their divisional offices or processing centers or branch offices, own a meaningful amount of real estate. Typically, that real estate is not earning income for these banks on an ongoing basis. It really is an illiquid asset that's sitting on their balance sheet. We have a great deal of experience helping financial institutions understand their real estate and what the opportunities are. But banks are not in the real estate business; typically they don't need to accumulate real estate themselves.

So we think we can do a great job for financial institutions that are not our core clientele and help them strategize on how to use the real estate in a much better way. They can take what real estate value is there, redeploy the capital in their own business and wind up in a sale or sale-leaseback which we could help them execute, because our clients are probably the ultimate buyers of that real estate.

RENY: What were SMG's plans for global growth before the alliance, and how will the alliance help facilitate what you would have found it a challenge to do on your own?

Schonbraun: We're a service company, so our clients take us where they go. And they've gone international over the past years. We've gone international with them. We're working on two or three exciting projects in China right now, we're working on a massive project in Korea with Gale and we've worked on several projects in Mexico. We've been very active in Western Europe and more recently have gotten involved in Eastern Europe.

As you start to get involved internationally, it's very helpful to have some local knowledge and have local people on the ground. On our Chinese projects, we have hired some Americans of Chinese background who speak Mandarin and sent them overseas on assignment. Now, working with FTI, which is on the ground in major cities all over the world, we'll have local offices ourselves in all of these world capitals. That will go a long way toward helping us provide better results for our clients operating in these environments. Internationally, the FTI combination is a huge benefit for us.

Instant Insights /

Online EXCLUSIVE: Schonbraun Sees Alliance as "Win-Win-Win"

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