$6-billion acquisitionSongdo City,acquired the firm

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

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Schonbraun: We've been giving our future a lot ofthought. We've grown a firm organically that has become the largestdedicated real estate consulting firm in the country. As we'vecontinued to grow, our clients also have grown, and are now allover the country and the world. It became clearer to us that togrow our platform and provide better service to our clients—publicreal estate companies, hedge funds, opportunity funds and,increasingly, sovereign funds—we would be best served by aligningourselves with an organization that really had a national andinternational footprint.

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As we reviewed strategically where we wanted to be, FTI's namekept popping up. They're the largest publicly held consulting firmin the country, a $4-billion company. Where our clients arecompanies that own, operate and trade in real estate, FTI's mainclients are in the corporate world. Their main services includerestructuring, workouts, bankruptcies and many other businessadvisory services. However, they did not have a dedicated realestate group.

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

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

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

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

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

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

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

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.