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For Immediate Release (10 pages) Wednesday, October 9, 2013

Media Relations: Sherry Quan (604) 647-5098 or (604) 726-0959 email: sherry.quan@avisonyoung.com

Editors/Reporters: Click here to view Avison Youngs Fall 2013 Canada, U.S. Commercial Real Estate Investment Review:
http://www.avisonyoung.com/sites/default/files/content-files/Research/Links/Fall13CanadaUSInvestmentOct9_13Final.pdf

Investment capital flows into Canada and U.S. commercial real estate markets, defying initial interest-rate hike
Avison Young releases Fall 2013 Canada, U.S. Commercial Real Estate Investment Review Toronto, ON Canada has exceeded pre-credit-crisis investment dollar volumes and pricing for most asset categories, while improving property market fundamentals continue to fuel investment activity in the U.S. There is no evidence that the recent rise in interest rates slowed activity on either side of the border in the first half of 2013. However, it will be interesting to watch the appetite of the biggest buyer group interest-rate-sensitive real estate investment trusts (REITs), and whether they will be taking a break from their insatiable buying spree. These are some of the key trends noted in Avison Youngs Fall 2013 Canada, U.S. Commercial Real Estate Investment Review, released today. The report covers commercial real estate investment conditions in 24 regions: Calgary, Edmonton, Montreal, Ottawa, Toronto, Vancouver, Atlanta, Boston, Chicago, Dallas, Denver, Houston, Las Vegas, Los Angeles, New Jersey, New York, Orange County, Pittsburgh, Raleigh-Durham, San Diego County, San Francisco, San Mateo, South Florida and Washington, DC. Canada and the U.S. are on track to meet or exceed 2012s volume of sales as Canadian REITs and pension funds continue to target strategic U.S. markets, comments Mark E. Rose, Chair and CEO of Avison Young. Robust demand and available capital for quality assets is evident on both sides of the border. Whereas Canada continues to be stable, if not at peak pricing, the U.S. seeks to improve if the politics of sequestration, government shutdowns and debt-ceiling limits do not prolong the recovery. Interest rates will remain the wild card as U.S. tapering of bond purchases and the inevitability of inflation will impact both countries.

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Canadas stable economic environment and enviable commercial real estate market saw strong investments in the first half of 2013 across all asset types in comparison with the first half of 2012 when office sales dominated. Look for Canadian REITs to be more discriminating in their acquisition choices in Canada in response to interest rates. Nevertheless, pension funds, life insurance companies and private equity players are poised to fill the void, should REITs take a step back, he says. In the U.S., expect the economy to continue its modest growth through the balance of 2013, as constraints on construction overall and an uptick in occupier demand have led to improved market conditions in many metro areas. Rising interest rates have failed to halt investor appetites for stabilized core properties, and office and multi-residential sales comprised 80% of the volume thus far, adds Rose. According to the report, healthy market fundamentals continue to drive investment activity in Canada. Slightly more than $14.4 billion (CAD) worth of commercial real estate assets (office, industrial, retail, multi-residential and land, greater than $1 million) changed hands in the first half of 2013 up $1 billion, or 8%, compared with the first half of 2012. Four of the six major Canadian markets saw an increase in commercial sales volume in the range of 4% to 46%, while two markets witnessed a decrease of between 20% and 29%. Though transactions are being consummated across the country and the full brunt of the initial interest rate hike earlier this year has not shown up in the first-half figures, the full effect may very well reveal itself in the year-end tally, notes Bill Argeropoulos, Vice-President and Director of Research (Canada) for Avison Young. However, there are indications that one of the most active buyers since the downturn, the REITs, have tempered their appetite for commercial real estate over the past year. This is clearly evident in two of Canadas biggest investment markets Toronto and Calgary. Year-over-year REIT investment volumes are off by 34% and 60% in Toronto and Calgary, respectively. Argeropoulos continues: The second half of 2013 should prove to be interesting. A year ago, we expected Vancouver, Calgary, Toronto and Ottawa to either match or exceed their previous annual investment totals. We were pleasantly surprised that every market, with the exception of Edmonton (by a narrow margin), surpassed their 2011 results. Given the first-half 2013 performance, only Toronto and Edmonton are on pace to match or exceed their 2012 tally. Perhaps, we will be pleasantly surprised one year from now. Canada Nationally, industrial properties were the most actively traded asset class in the first half of 2013, outpacing the office sector with 24% of total first-half investment dollar volume. In all, $3.5 billion worth of industrial product sold the greatest year-over-year increase at 92%. Industrial sales increased in every market. While Ottawa saw the most notable improvement (+351%), Toronto recorded the largest industrial dollar volume $1.9 billion (53% of the national total). Highlights in this sector included REIT portfolio acquisitions in Toronto, where GE Canada Real Estate Equity (GE) sold $341 million worth of industrial buildings to PIRET; and Montreal, where Tecton Industries sold a portfolio of buildings to Cominar REIT for $151 million. Office, 2012s most actively traded asset class, saw sales of $3.2 billion (22% share) down 37% from an impressive $5.1 billion in the first half of 2012 falling everywhere except Montreal (+77%) and most sharply in Vancouver (-70%). Toronto was the most active office market, as sales reached $1.8 billion, but even this figure represented a decrease from the 2012 first-half
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performance of nearly $2.7 billion. Notable office transactions across the country included the sale of a $542-million Toronto portfolio by GE to Greystone Managed Investments and Slate Properties; Canada Pension Plan Investment Board (CPPIB)s purchase of 1 Queen Street East and 20 Richmond Street East in Torontos financial core for $220 million from Ontario Pension Board; and Calgarys sale of the Jacobs Engineering building from KanAm Group to Epic Realty Partners for $171 million. Land was in demand (especially in Western Canada) with first-half 2013 sales of $3.1 billion, comprising a 22% share up $925 million (42%) compared with the same period in 2012. Calgary was the hottest land market as sales jumped 249% to $902 million, 30% of the Canadian total. Of the top five transactions in terms of dollar value, two including the topranking deal were land sales amounting to 44% of the total land sales activity in Calgary. Runners-up were Edmonton, at $460 million, and Vancouver, at $456 million, while in the eastern markets (Toronto, Ottawa and Montreal) land sales accounted for $861 million, only 10% of total investment dollar volume in those markets. The flow of foreign retailers continuing to establish a presence on the Canadian landscape, along with a steady consumer appetite, pumped more investment dollars into the retail sector. Retail transactions across Canada increased a modest 3% above 2012 to $2.3 billion (16% share). The eastern markets (Toronto, Ottawa and Montreal) were busiest, combining for $1.6 billion worth of retail trades two-thirds of the national total. Toronto garnered $1.3 billion (55% of national total) matching the sales volume for all of 2012. REITs and pension funds continued to swap assets and were involved in a number of sizable deals at both ends of the country. In the Greater Toronto Area, RioCan REIT purchased Oakville Place from Primaris Retail REIT (Primaris) for $259 million; Oxford Properties Group sold a 50% interest in Upper Canada Mall to CPPIB for almost $252 million; while in the Edmonton area, H&R REIT sold a 50% interest in Sherwood Park Mall to Primaris for $180 million the largest asset sale in Edmonton in the first half of 2013. Multi-residential rounded out the five sectors. Low vacancy rates, steady incomes and favourable mortgage rates lifted sales of multi-residential property 12% compared with 2012 to $2.2 billion (16% share). While Edmonton and Montreal witnessed annual sales growth of 184% and 124%, respectively, Toronto led all markets in total dollar volume with $986 million (44% of national total). Though it did not make the top five sales list, the sale of Maple Leaf Quay for nearly $151 million ($300,000 per door) at the heart of Torontos waterfront is evidence of investors strong interest in multi-residential assets. Although capitalization rates (cap rates) are lower on average than one year ago, further interest rate hikes may moderate or even signal the end of cap-rate compression for some property types. Cap rates are lowest for multi-residential investments, and once again, Vancouver yields the lowest cap rates in every asset category except retail (tied with Toronto). Financing acquisitions on a go-forward basis, however, will be tricky. Canadian debt markets were very active in the first half of 2013, despite a couple of the larger institutional participants withdrawing as a result of meeting their allocations. The second half of the year will be tempered by the U.S. Federal Reserves actions on reducing mark et stimulus. Expect higher all-in interest rates driven by deteriorating bond prices in anticipation of the Feds reduction of market stimulus. Lenders will be very conscious of funding deadlines in what we see as a potentially rising interest-rate environment, explains Avison Youngs Norman Arychuk, Mortgage Broker, Capital Markets Group, in Toronto.

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Toronto, Canadas largest city and commercial real estate market, remains the investment market of choice, recording $6.5 billion in sales (a 45% share of the national total) up 15% compared with the first half of 2012, and beating the 8% national year-over-year growth in sales. Office and industrial were top of mind capturing 56% of the total investment volume, while firsthalf sales of retail properties already equal the sales volume for all of 2012. Though we havent had a blockbuster deal along the lines of Scotia Plaza this year, 2013 has been a busy year thus far. Notwithstanding the uncertainty surrounding interest rates, some REITs will continue to look for assets; however, they will be more discerning as to the quality of the assets they will pursue. Even though we are seeing a shift from the REIT community, this has been more than compensated for by others, including pension funds and their advisors, life companies and private investors. As such, we envisage pricing to remain relatively stable, observes Robin White, Avison Young Principal and Executive Vice-President, Capital Markets Group, in Toronto. Demand for commercial real estate in Vancouver attained near-record levels in the first half of 2013 with almost $2 billion invested. While dollar volume tapered off compared with the same period in 2012 (a record-setting $2.4 billion), deal velocity was one of the strongest recorded in the past decade. Avison Young Principal Michael Gill in Vancouver notes: "Despite the fact that the largesse of the REITs is currently absent from the BC commercial property market, there remains plenty of capital in the hands of the pension funds and life insurance companies seeking investment properties with strong fundamentals. Those investors who decide to wait to buy on the premise that capitalization rates may rise due to the absence of the REITs will be sadly mistaken, as capitalization rates are expected to remain stable. What the market really needs are more sellers who recognize that it is still a very opportune time to sell due to the large pool of available capital and very low mortgage rates." Calgarys commercial real estate investment market once again witnessed significant investment activity in the first half of 2013. Total dollar volume increased by 4% compared with first-half 2012 levels, amounting to almost $2.2 billion (15% share). Though the growth in sales was modest, the key driver was land sales, which totalled $902 million (+249%). The conditions present in today's marketplace make for an ideal and opportune time for buyers to be active on the acquisition front. Cap rates continue to show resistance to threats of increase for best-in-class assets across all property types, and interest rates remain favourable. With some of the worlds largest companies located here, and rental rates expected to stay strong for the foreseeable future, Calgary is a great place to invest in, adds Avison Young Principal Todd Throndson in Calgary. Investment volume in Edmonton for the first half of 2013 was up almost $350 million compared with the first half of 2012, reaching $1.6 billion (11% share). These numbers are indicative of the cyclical trend that has gripped the market during the last three years, with larger investment totals occurring in the first and fourth quarters and dropping off during the second and third. "As the year continues, we feel that investment volume will remain moderate with product in tight supply. Pricing will remain strong, particularly in class A assets, as pent-up demand and strong balance sheets from pension funds and life insurance companies continue to drive capitalization rates further down. With the temporary downward turn in the capital markets, we anticipate less REIT activity, resulting in likely price declines in class B and C product also
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compounded by todays more expensive debt climate," explains John Ross, Managing Director of the Edmonton office. Montreal had an exceptional first half with sales volume of nearly $1.6 billion (11% share), representing an increase of nearly $497 million (+46%) compared with the same period in 2012 led by the multi-residential and industrial sectors, capturing 62% of the total investment volume. This is the second-largest first-half dollar volume experienced during the last five years. With previously announced and ongoing transactions in the second half of the year, it is more than likely that 2013 total sales volume will surpass the 2012 mark and may very well exceed the record volume of $3.5 billion seen in 2008, notes Avison Young Principal Tom Godber in Montreal. The nations capital, Ottawa, continues to be a safe haven for pension fund advisors, REITs, financial institutions and other institutional investors looking for stable long-term yields. Investors assets of choice continue to be office buildings although the industrial market is ahead of 2012 levels as it remains popular with institutional and private local investors. Ottawa was the only market not to crack the $1-billion-dollar mark in the first half of 2013 as sales declined 29% to $618 million (4% share). According to Avison Young Principal Michael Church in Ottawa: A slowing office market has not tempered enthusiasm for well-positioned assets with covenant leases in place, despite lower investment volumes compared with one year ago. Retail development continues to be strong. Interest rates continue to drive the Ottawa investment market, with multiple bids on the very limited product that does come to market a trend expected to continue through to the end of 2013. United States In Avison Youngs U.S. markets, commercial real estate sales rose during the first half of 2013 compared with the first half of 2012 primarily on the strength of multi-residential asset dispositions. Sales volumes for office, industrial, retail and multi-residential properties reached $77.5 billion (USD) by mid-year 2013, compared with $60.3 billion for the same period in 2012, a 28% increase. International capital still favors the U.S., and year-to-date, Canadian buyers lead foreign investment by far. As with 2012, the market remains bifurcated with core, well-placed properties maintaining their values relative to their markets, comments Earl Webb, Avison Youngs President, U.S. Operations This year, however, yields are so compressed in core properties that core buyers once again expanded their acquisitions outside the top 10 target cities. Furthermore, the pricing of value-add properties is a qualitative discussion dependent on the individual asset and its submarket fundamentals. As well, the effect on investors of the debt ceiling/budget battle raging in Congress remains uncertain. Three standout markets comprised 47% of all U.S. sales volume: New York ($14.6 billion / +59% / 19% share), Los Angeles ($11.3 billion / +54% / 15% share), and Washington, DC ($10.8 billion / +107% / 14% share). Other markets that registered notable year-over-year changes in volume included Las Vegas (+73%), Orange County (+66%), Atlanta (+63%) and San Mateo (+56%).

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Through the first half of 2013, investment sales volume in New York City has far surpassed the pace set during 2012. The increase in private equity, coupled with the appeal to foreign investors, should drive a continued upswing of activity for the remainder of 2013, resulting in the highest level of sales volume since 2007. With the overall interest-rate environment continuing to be favorable for real estate, we anticipate that the Manhattan commercial market will remain strong with continued momentum, even if there is a potential uptick in interest rates in the second half, observes Avison Young Principal Jon Epstein in New York. We fully anticipate that market activity will see its typical incr ease in the third and fourth quarters of 2013; however, its too early to determine whether that uptick will be sustained into 2014. For Metropolitan Washington, for example, much will depend on the outcome of any pending government shutdowns and the debt-ceiling resolution, adds Avison Young Principal Chip Ryan in Washington, DC. Multi-residential and office sales comprised 79% of all sales volume by mid-year 2013. Multiresidential sales showed the most marked improvement, jumping to $31.9 billion in the first six months of 2013 (+88%) from $16.9 billion for the same period in 2012. All Avison Young markets, with the exception of four (Boston, -22%; San Francisco, -21%; San Diego County, -3%; Raleigh-Durham, no change), recorded gains in multi-residential sales volume. The greatest gains were in San Mateo, which increased to $611 million from $56 million in volume (+990%), and Washington, DC, increasing to $7.6 billion from $1.7 billion (+355%). Sales of multi-residential properties led first-half 2013 transaction volume in nine Avison Young markets: Dallas, Denver, Las Vegas, Los Angeles, Orange County, Raleigh-Durham, San Diego County, San Mateo and Washington, DC. In the South Atlantic Region, development of new multi-residential product will slowly push vacancy rates upward after achieving a forecasted sub-5% vacancy at the end of 2013 a 12year low, notes Avison Young Principal Matt Tritschler in Atlanta. New completions have escalated to pre-recession levels in 2012 and 2013 with a growing pipeline for new-product delivery into the next two years that could begin to increase vacancy levels. Overall office sales volume rose during the past year, reflecting strengthening market fundamentals in many U.S. cities, climbing to $29 billion in the first six months of 2013 (+37%) from $21.2 billion in the first half of 2012. Not surprisingly, New York ($9 billion / +76%), Los Angeles ($3.4 billion / +96%) and Washington, DC ($2.2 billion / -7%) led asset sales in this category as well. Atlanta, with overall office sales of $1.8 billion (+515%), and Orange County, with office sales volume of $1.6 billion (+208%), represented the greatest year-over-year increases. Investment activity is significantly up in Downtown Los Angeles and on the Westside specifically Playa Vista and Santa Monica, the self-proclaimed Silicon Beach, says Avison Young Principal Dan Vittone in Irvine. Canadian investors have been at the forefront of recent acquisitions, including Brookfield in Los Angeles and Manulife in Long Beach. Office sales activity in Orange County, however, has been tempered as most of the opportunistic deals were done in the last couple of years. With slow leasing velocity in Orange County, however, many investors have not seen enough rental and value appreciation to warrant an exit. Office was the leading property type for 2013 sales volume in Atlanta, Boston, Chicago, Houston, New York and San Francisco.

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According to Avison Young Principal Darrell Betts in Houston: Texas continues to be one of the most sought-after markets for national and international investors. The combined areas of Houston, Dallas, Austin and San Antonio have a population of 18.5 million, and that figure is projected to nearly double by 2040 to more than 30 million, securing the states appeal for many years to come. We are reaching record-level sale prices for class AA/core product, but there are still opportunities in the class A-/B and C asset classes with significant growth in projected rental rates. Look for Texas to continue to attract investors for all asset classes and properties types. In Chicago, foreign investment has increased significantly as investors look to chase yield that cannot be found in the coastal markets. The city has experienced a tremendous amount of sales activity in 2013, mostly in core and core-plus office space, states Avison Young Principal Suzanne Martinez in Chicago. This year should end strongly with almost 4 million square feet (msf) of downtown office space under contract and another 6.2 msf currently being marketed. The onslaught of historically suburban tenants moving to downtown Chicago for space continues to fuel the leasing activity. I anticipate that more value-add or class B assets, ripe for redevelopment and repositioning, will come to market. First-half 2013 sales of retail properties declined by 35% to $9.4 billion from $14.4 billion in the first half of 2012 with only five Avison Young markets in the U.S. reporting any uptick in volume (Raleigh-Durham, +191%; Las Vegas, +100%; Atlanta, +92%; Pittsburgh, +75%; New York, +3%). In the first half of 2013, Pittsburgh and South Florida recorded more sales in retail properties than in any other property type. Lastly, industrial sales volume in the first half of 2013 declined slightly compared with the same period in 2012, slipping 7% to $7.2 billion from $7.7 billion. While Los Angeles recorded the greatest volume with $1.2 billion in sales, New Jersey reported the greatest positive change with $909 million of sales (+138%) and was the only Avison Young market where industrial sales outpaced the volume for all other property types in the first six months of 2013. Cap rates in the U.S. moved lower in 2013 for all asset classes (except multi-residential) and averaged 6.8% compared with 7% one year ago. Multi-residential cap rates are the lowest (although they are experiencing upward pressure) on average for all of Avison Youngs U.S. markets. Of note, cap rates for office product fell significantly in Dallas (-160 bps), New Jersey (-140 bps), Orange County (-140 bps) and San Diego County (-110 bps). As 2013 heads into the last quarter of the year, the Southeast continues to see improved commercial real estate sectors, increasing manufacturing activity and a recovering job market, says Tritschler in Atlanta. The Southeast Purchasing Managers Index (PMI) topped 50 for the eighth month in a row in August, showing an expanding manufacturing sector. Total employment in the six states that make up the Sixth Federal Reserve District Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee has risen significantly (5.1%) during the recovery after dropping by 8.5% during the Great Recession. Look for further improvement between mid-year and year-end 2013, with overall sales volume likely to exceed 2012 levels. Office sales should be led by gateway and energy-driven markets with improving fundamentals, and multi-residential sales may begin to cool due to the increased development occurring in some markets.

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Editors/Reporters:
Please turn to the following pages of the report for fall 2013 market highlights of the local investment markets. For further info/comment, please contact the Avison Young Principals/Managing Directors listed below. Thank you.
pp. 1-3 Canada & U.S.: Bill Argeropoulos, VP & Director of Research (Canada), 416.673.4029 or cell: 416.906.3072 bill.argeropoulos@avisonyoung.com Margaret Donkerbrook, VP, U.S. Research, 202.644.8677 margaret.donkerbrook@avisonyoung.com Canada p. 10 Calgary: Todd Throndson, Principal, 403.232.4343 todd.throndson@avisonyoung.com p. 11 Edmonton: John Ross, Managing Director, 780.429.7564 john.ross@avisonyoung.com p. 12 Montreal: Tom Godber, Principal, 514.905.5440 tom.godber@avisonyoung.com p. 13 Ottawa: Michael Church, Principal, 613.567.6634 michael.church@avisonyoung.com p. 14 Toronto: Robin White, Principal, 416.673.4009 robin.white@avisonyoung.com Norm Arychuk, Mortgage Broker, 416.673.4006 norman.arychuk@avisonyoung.com p. 15 Vancouver: Michael Gill, Principal, 604.647.5067 michael.gill@avisonyoung.com United States p. 16 Atlanta: Matt Tritschler, Principal, 404.865.3670 matt.tritschler@avisonyoung.com p. 17 Boston: Rich Kimball, Principal, 617.758.8271 rick.kimball@avisonyoung.com p. 18 Chicago: Suzanne Martinez, Principal, 312.957.7617 suzanne.martinez@avisonyoung.com p. 19 Dallas Greg Langston, Principal, 214.269.3115 greg.langston@avisonyoung.com p. 20 Denver: Alec Wynne, Principal, 720.508.8112 alec.wynne@avisonyoung.com p. 21 Houston: Darrell Betts, Principal, 713.993.7704 darrell.betts@avisonyoung.com p. 22 Las Vegas Joseph Kupiec, Principal, 702.472.7979 joseph.kupiec@avisonyoung.com

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p. 23 Los Angeles Dan Vittone, Principal, 949.757.1570 dan.vittone@avisonyoung.com p. 24 New Jersey Jeff Heller, Principal, 973.753.1100 jeff.heller@avisonyoung.com p. 25 New York Jon Epstein Principal, 212.729.1381 jon.epstein@avisonyoung.com p. 26 Orange County Dan Vittone, Principal, 949.757.1570 dan.vittone@avisonyoung.com p. 27 Pittsburgh George (Duke) Kingsley, Principal, 412.944.2131 duke.kingsley@avisonyoung.com p. 28 Raleigh-Durham John Linderman, Principal, 919.420.1559 john.pinjuv@avisonyoung.com P.29 San Diego County Dan Vittone, Principal, 949.757.1570 dan.vittone@avisonyoung.com P.30 San Francisco Nick Slonek, Principal, 415.322.5051 nick.slonek@avisonyoung.com P.31 San Mateo Randy Keller, Principal, 650.425.6425 randy.keller@avisonyoung.com p. 32 South Florida: Pike Rowley, Principal, 954.938.1807 pike.rowley@avisonyoung.com p. 33 Washington, DC: Chip Ryan, Principal, 202.644.8694 chip.ryan@avisonyoung.com

Avison Young is the worlds fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 1,300 real estate professionals in 53 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties. -endFor further information/comment/photos: Sherry Quan, National Director of Communications & Media Relations, Avison Young: 604.647.5098; cell: 604.726.0959 sherry.quan@avisonyoung.com Bill Argeropoulos, Vice-President and Director of Research (Canada), Avison Young: 416.673.4029; cell 416.906.3072 bill.argeropoulos@avisonyoung.com Margaret Donkerbrook, Vice-President, U.S. Research, Avison Young: 202.644.8677 margaret.donkerbrook@avisonyoung.com
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Mark Rose, Chair and CEO, Avison Young: 416.673.4028 Earl Webb, President, U.S. Operations, Avison Young: 312.957.7610 www.avisonyoung.com Avison Young was a winner of Canadas Best Managed Companies program in 2011 and requalified in 2012 to maintain its status as a Best Managed company. Follow Avison Young on Twitter: For industry news, press releases and market reports: www.twitter.com/avisonyoung For Avison Young listings and deals: www.twitter.com/AYListingsDeals Follow Avison Young Bloggers: http://blog.avisonyoung.com Follow Avison Young on LinkedIn: http://www.linkedin.com/company/avison-young-commercial-real-estate

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