GlobeSt.com: You're a national company, but since your office is here, do you have a perspective on the local market?

Butchenhart: The Philadelphia Metro area is performing reasonably well in comparison to other areas of the country. It's never been a big boom or bust market. I always compare Philadelphia to more of a bond than a stock. It's a steady performer, but if you're looking for big hits, you probably won't invest in Philadelphia.

But it's always been a reasonably diversified economy, and one of the things that's helped Philadelphia greatly is that it has a pretty decent concentration in medical and education. The area called University City--where Penn and Drexel [universities] are located--over had an increase in jobs over the past couple of years. Philadelphia has lost jobs like any other metro area, but the medical and education fields have mitigated that. It's really softened the blow.

Obviously there are pockets with issues. Suburban office has a fair amount of vacancies, but overall occupancy is pretty good, and Philly hasn't really fallen off the cliff.

GlobeSt.com: Throughout the downturn NorthMarq seemed pretty busy. Is there any specific reason for that?

Butchenhart: We've had a decline in activity like everyone else over the past two or three years. I would call the past few years a break-even operation. And that's probably better than a lot of other companies. The reason we were able to have a little plus is because we always incentivize our people to try to retain business. So in the replacement-debt business, they try to do it with people we have servicing relationships for, and we built up a big servicing portfolio that approaches close to $40 billion. That income certainly helps us cushion the times when there is a slowdown in origination activity.

And we have a relationship with both Freddie Mac as a seller-servicer and Fannie Mae through one of our affiliates. Because we have access to the multifamily market, we were able to do a reasonable amount of new originations in multifamily over the last two or three years. We did more multifamily last year than we had done in any year in our previous history.

GlobeSt.com: Are we seeing more capital finally start to come into the market?

Butchenhart: The debt capital is coming off the sidelines from the standpoint of servicers doing core, quality projects. I still think there is capital waiting for value added or higher returns. The bid-ask on that situation is still pretty wide. Someone looking for an 18% to 20% return is having trouble finding transactions that will meet those requirements. But anyone in the core business of buying or financing quality assets, those transactions are turning around.

GlobeSt.com: Do you see fundamentals improving?

Butchenhart: I see them gradually improving, but I think it's basically an "L" with a slow slip up. I don't think we're going to see a tremendous increase in fundamentals. Any valuation increase that you're hearing about has less to do with fundamentals and more with cap rate contraction.

It's tied in with job creation or the economy. You keep hearing that more jobs are being created--it's like a trickle--but if it continues to increase it would bode well for bolstering the fundamentals. Any increase in demand will filter back into existing properties. But at least it's feeling to me like we are at the bottom, and though the recovery is slow, there is a recovery.

GlobeSt.com: Are there any markets out there that are pretty strong?

Butchenhart: Everywhere we're involved, we're hearing back from the market that things are getting better. We just signed a large apartment deal in Phoenix through Freddie Mac. Texas had some problems, especially in Houston, but that seems to be coming back reasonably strong.

Our weakest area is still Florida, especially Southern Florida. It's still struggling. It's very overbuilt. There is also a job problem.

GlobeSt.com: What property type is hurting the most?

Butchenhart: The most consistent issue we see is suburban office. It's because of job creation issues and people scaling back and reducing space.

GlobeSt.com: What is your take on the Fannie and Freddie situation?

Butchenhart: The multifamily business of Freddie and Fannie is reasonably profitable and the portfolios are in pretty good shape. The losses come from their single-family portfolio. Does that mean the multifamily business gets spun off and handled differently? It's not a big part of the business, but it's a profitable operation, and it's got a good portfolio. So how does that factor? Given the fact that Fannie and Freddie continues to come to the trough for additional capital, it's going to get pushed up the agenda. So we could see a speeding up of the process in the evaluation of what gets done as far as Congress is concerned. Where does it end up? Who knows?