EX-4.5





 Exhibit 4.5 
  

 
 



 
 Condensed Combined Financial Statements 

of Granite Real Estate Investment Trust 
 and Granite REIT
Inc. 
 For the three and nine months ended September 30, 2020 and 2019 












 Condensed Combined Balance Sheets 

(Canadian dollars in thousands) 
 (Unaudited) 

 

													
	As at	 	Note	 	    	September 30,
2020	 	  	December 31,
2019	 
	 ASSETS
	 				    				  			
				
	 Non-current assets:
	 				    				  			
	 Investment properties
	 	 	4	 	    	$	5,338,887	 	  	$	4,457,899	 
	 Construction funds in escrow
	 	 	6	 	    	 	8,797		  	 	16,767	
	 Deferred tax assets
	 				    	 	4,063		  	 	4,057	
	 Fixed assets, net
	 				    	 	3,029		  	 	2,119	
	 Other assets
	 	 	6	 	    	 	4,671		  	 	1,273	
		 				    	 	5,359,447		  	 	4,482,115	
				
	 Current assets:
	 				    				  			
	 Other receivable
	 	 	7		    	 	—	 	  	 	11,650	
	 Accounts receivable
	 				    	 	7,783		  	 	7,812	
	 Income taxes receivable
	 				    	 	479		  	 	315	
	 Prepaid expenses and other
	 				    	 	4,939		  	 	3,387	
	 Cash and cash equivalents
	 	 	15(d)	 	    	 	539,677		  	 	298,677	
	 Total assets
	 	 	 	 	    	$	5,912,325	 	  	$	4,803,956	 
				
	 LIABILITIES AND EQUITY
	 				    				  			
				
	 Non-current liabilities:
	 				    				  			
	 Unsecured debt, net
	 	 	8(a)	 	    	$	1,441,449	 	  	$	1,186,994	 
	 Cross currency interest rate swaps
	 	 	8(b)	 	    	 	75,484		  	 	30,365	
	 Long-term portion of lease obligations
	 	 	9	 	    	 	33,167		  	 	32,426	
	 Deferred tax liabilities
	 	 	 	 	    	 	367,464		  	 	320,972	
		 				    	 	1,917,564		  	 	1,570,757	
				
	 Current liabilities:
	 				    				  			
	 Unsecured debt, net
	 	 	8(a)	 	    	 	249,814		  	 	—	 
	 Cross currency interest rate swaps
	 	 	8(b)	 	    	 	17,626		  	 	—	 
	 Deferred revenue
	 	 	10	 	    	 	8,016		  	 	5,804	
	 Accounts payable and accrued liabilities
	 	 	10	 	    	 	64,943		  	 	50,183	
	 Distributions payable
	 	 	11	 	    	 	13,999		  	 	13,081	
	 Short-term portion of lease obligations
	 	 	9	 	    	 	827		  	 	619	
	 Income taxes payable
	 	 	 	 	    	 	17,107		  	 	15,402	
	 Total liabilities
	 	 	 	 	    	 	2,289,896		  	 	1,655,846	
				
	 Equity:
	 				    				  			
	 Stapled unitholders’ equity
	 	 	12	 	    	 	3,620,343		  	 	3,146,143	
	 Non-controlling
interests
	 	 	 	 	    	 	2,086		  	 	1,967	
	 Total equity
	 	 	 	 	    	 	3,622,429		  	 	3,148,110	
	 Total liabilities and equity
	 	 	 	 	    	$	5,912,325	 	  	$	4,803,956	 

 Commitments and contingencies (note 18) 

See accompanying notes 

  
 2    Granite REIT 2020 Third
Quarter Report 













 Condensed Combined Statements of Net Income 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	 	  	 	 	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 
	  	 	Note	 	 	2020	 	  	2019	 	  	2020	 	  	2019	 
	 Rental revenue
	 	 	13(a)	 	 	$	87,900		  	$	68,817	 	  	$	246,958	 	  	$	199,292	 
	 Lease termination and
close-out fees
	 	 	 	 	 	 	—	 	  	 	—	 	  	 	—	 	  	 	855	
	 Revenue
	 				 	 	87,900		  	 	68,817		  	 	246,958		  	 	200,147	
	 Property operating costs
	 	 	13(b)	 	 	 	11,417		  	 	8,677		  	 	31,428		  	 	25,711	
	 Net operating income
	 				 	 	76,483		  	 	60,140		  	 	215,530		  	 	174,436	
						
	 General and administrative expenses
	 	 	13(c)	 	 	 	9,572		  	 	6,902		  	 	24,285		  	 	23,412	
	 Depreciation and amortization
	 				 	 	286		  	 	243		  	 	794		  	 	676	
	 Interest income
	 				 	 	(535	) 	  	 	(2,288	) 	  	 	(1,810	) 	  	 	(7,892	) 
	 Interest expense and other financing costs
	 	 	13(d)	 	 	 	10,587		  	 	7,553		  	 	24,995		  	 	22,906	
	 Foreign exchange (gains) losses, net
	 				 	 	(247	) 	  	 	423		  	 	(2,989	) 	  	 	1,189	
	 Fair value gains on investment properties, net
	 	 	4	 	 	 	(62,045	) 	  	 	(78,226	) 	  	 	(132,586	) 	  	 	(197,876	) 
	 Fair value (gains) losses on financial instruments, net
	 	 	13(e)	 	 	 	(1,048	) 	  	 	(1,946	) 	  	 	4,737		  	 	(190	) 
	 Loss on sale of investment properties
	 	 	5	 	 	 	164		  	 	652		  	 	164		  	 	2,035	
	 Income before income taxes
	 				 	 	119,749		  	 	126,827	 	  	 	297,940	 	  	 	330,176	 
	 Income tax expense
	 	 	14	 	 	 	14,513		  	 	12,199		  	 	35,650	 	  	 	38,543	 
	 Net income
	 	 	 	 	 	$	105,236		  	$	114,628		  	$	262,290		  	$	291,633	
						
	 Net income attributable to:
	 				 				  				  				  			
	 Stapled unitholders
	 				 	$	105,199		  	$	114,528	 	  	$	262,152	 	  	$	291,451	 
	 Non-controlling
interests
	 	 	 	 	 	 	37		  	 	100		  	 	138		  	 	182	 
	 	 	 	 	 	 	$	105,236		  	$	114,628		  	$	262,290		  	$	291,633	

 See accompanying notes 

  
 Granite REIT 2020 Third Quarter
Report    3 













 Condensed Combined Statements of Comprehensive Income 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	 	  	 	 	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 
	  	 	Note	 	 	2020	 	 	2019	 	 	2020	 	 	2019	 
	 Net income
	 				 	$	105,236		 	$	114,628		 	$	262,290		 	$	291,633	
						
	 Other comprehensive (loss) income:
	 				 				 				 				 			
	 Foreign currency translation adjustment(1)
	 				 	 	(24,631	) 	 	 	(22,824	) 	 	 	139,517		 	 	(144,663	) 
	 Unrealized (loss) gain on net investment hedges, includes income
taxes of nil(1)
	 	 	8	(b) 	 	 	(15,930	) 	 	 	31,382	 	 	 	(60,276	) 	 	 	82,666	 
	 Total other comprehensive (loss) income
	 	 	 	 	 	 	(40,561	) 	 	 	8,558	 	 	 	79,241	 	 	 	(61,997	) 
	 Comprehensive income
	 	 	 	 	 	$	64,675	 	 	$	123,186	 	 	$	341,531	 	 	$	229,636	 
	  
 (1)   Items that may be reclassified subsequently to net income if a foreign subsidiary is disposed of or hedges are terminated or no longer assessed as effective.

 
	 
     
 

	 Comprehensive income attributable to:
	 				 				 				 				 			
						
	 Stapled unitholders
	 				 	$	64,641	 	 	$	123,141	 	 	$	341,376	 	 	$	229,559	 
	 Non-controlling
interests
	 	 	 	 	 	 	34		 	 	45		 	 	155		 	 	77	
	 	 	 	 	 	 	$	64,675	 	 	$	123,186	 	 	$	341,531	 	 	$	229,636	 

 See accompanying notes 

  
 4    Granite REIT 2020 Third
Quarter Report 













 Condensed Combined Statements of Unitholders’ Equity 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																																	
	Nine Months Ended September 30, 2020	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 
	  	 	Number
of units
(000s)	 	 	Stapled
units	 	 	Contributed
surplus	 	 	Retained
earnings	 	 	Accumulated
other
comprehensive
income	 	 	Stapled
unitholders’
equity	 	 	Non-
controlling
interests	 	 	Equity	 
	 As at January 1, 2020
	 	 	54,052		 	$	2,608,050	 	 	$	54,654	 	 	$	367,249	 	 	$	116,190	 	 	$	3,146,143	 	 	$	1,967	 	 	$	3,148,110	 
	 Net income
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	262,152		 	 	—	 	 	 	262,152		 	 	138		 	 	262,290	
	 Other comprehensive income
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	79,224		 	 	79,224		 	 	17		 	 	79,241	
	 Stapled unit offering, net of issuance costs (note 12(c))
	 	 	4,255		 	 	276,918		 	 	—	 	 	 	—	 	 	 	—	 	 	 	276,918		 	 	—	 	 	 	276,918	
	 Distributions (note 11)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(121,054	) 	 	 	—	 	 	 	(121,054	) 	 	 	(130	) 	 	 	(121,184	) 
	 Contributions from non-controlling interests
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	94		 	 	94	
	 Units issued under the stapled unit plan (note 12(a))
	 	 	31		 	 	1,977		 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,977		 	 	—	 	 	 	1,977	
	 Units repurchased for cancellation (note 12(b))
	 	 	(491	) 	 	 	(23,689	) 	 	 	(1,328	) 	 	 	—	 	 	 	—	 	 	 	(25,017	) 	 	 	—	 	 	 	(25,017	) 
	 As at September 30, 2020
	 	 	57,847		 	$	2,863,256	 	 	$	53,326	 	 	$	508,347	 	 	$	195,414	 	 	$	3,620,343	 	 	$	2,086	 	 	$	3,622,429	 

  

																																	
	Nine Months Ended September 30, 2019	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 
	  	 	Number
of units
(000s)	 	 	Stapled
units	 	 	Contributed
surplus	 	 	Retained
earnings	 	 	Accumulated
other
comprehensive
income	 	 	Stapled
unitholders’
equity	 	 	Non-
controlling
interests	 	 	Equity	 
	 As at January 1, 2019
	 	 	45,685		 	$	2,063,778	 	 	$	95,787	 	 	$	124,501	 	 	$	211,452	 	 	$	2,495,518	 	 	$	1,467	 	 	$	2,496,985	 
	 Net income
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	291,451		 	 	—	 	 	 	291,451		 	 	182		 	 	291,633	
	 Other comprehensive loss
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(61,892	) 	 	 	(61,892	) 	 	 	(105	) 	 	 	(61,997	) 
	 Stapled unit offering, net of issuance costs (note 12(c))
	 	 	3,749		 	 	220,378		 	 	—	 	 	 	—	 	 	 	—	 	 	 	220,378		 	 	—	 	 	 	220,378	
	 Distributions (note 11)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(101,062	) 	 	 	—	 	 	 	(101,062	) 	 	 	(150	) 	 	 	(101,212	) 
	 Special distribution paid in units and immediately consolidated (note 11)
	 	 	—	 	 	 	41,128		 	 	(41,128	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	 Units issued under the stapled unit plan (note 12(a))
	 	 	20		 	 	1,207		 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,207		 	 	—	 	 	 	1,207	
	 Units repurchased for cancellation (note 12(b))
	 	 	(1	) 	 	 	(35	) 	 	 	(5	) 	 	 	—	 	 	 	—	 	 	 	(40	) 	 	 	—	 	 	 	(40	) 
	 As at September 30, 2019
	 	 	49,453		 	$	2,326,456	 	 	$	54,654	 	 	$	314,890	 	 	$	149,560	 	 	$	2,845,560	 	 	$	1,394	 	 	$	2,846,954	 

 See accompanying notes 

  
 Granite REIT 2020 Third Quarter
Report    5 













 Condensed Combined Statements of Cash Flows 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	  	  	 	 	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 
	  	  	Note	 	 	2020	 	 	2019	 	 	2020	 	 	2019	 
	 OPERATING ACTIVITIES
	  				 				 				 				 			
						
	 Net income
	  				 	$	105,236		 	$	114,628		 	$	262,290	 	 	$	291,633	
	 Items not involving operating cash flows
	  	 	15(a)	 	 	 	(48,497	) 	 	 	(66,750	) 	 	 	(91,827	) 	 	 	(156,014	) 
	 Leasing commissions paid
	  				 	 	(2,535	) 	 	 	(598	) 	 	 	(2,535	) 	 	 	(822	) 
	 Tenant allowances paid
	  				 	 	(349	) 	 	 	—	 	 	 	(590	) 	 	 	(204	) 
	 Current income tax expense
	  	 	14(a)	 	 	 	2,159		 	 	1,776		 	 	5,535		 	 	5,373	
	 Income taxes paid
	  				 	 	(4,789	) 	 	 	(2,014	) 	 	 	(4,766	) 	 	 	(5,697	) 
	 Interest expense
	  				 	 	10,094		 	 	7,217		 	 	23,678		 	 	21,819	
	 Interest paid
	  				 	 	(5,597	) 	 	 	(6,174	) 	 	 	(17,901	) 	 	 	(20,261	) 
	 Changes in working capital balances
	  	 	15(b)	 	 	 	10,388		 	 	(5,289	) 	 	 	12,016		 	 	(2,497	) 
	 Cash provided by operating activities
	  	 	 	 	 	 	66,110		 	 	42,796		 	 	185,900		 	 	133,330	
						
	 INVESTING ACTIVITIES
	  				 				 				 				 			
						
	 Investment properties:
	  				 				 				 				 			
	 Property acquisitions
	  	 	3	 	 	 	(114,713	) 	 	 	(51,570	) 	 	 	(565,346	) 	 	 	(469,254	) 
	 Working capital acquired on acquisitions
	  				 	 	(7,252	) 	 	 	—	 	 	 	(7,252	) 	 	 	—	 
	 Proceeds from disposals, net
	  	 	4, 5	 	 	 	35,468		 	 	12,610		 	 	35,468		 	 	38,238	
	 Capital expenditures
	  				 				 				 				 			
	 — Maintenance or improvements
	  				 	 	(1,431	) 	 	 	(847	) 	 	 	(4,749	) 	 	 	(2,632	) 
	 — Developments or expansions
	  				 	 	(7,830	) 	 	 	(7,203	) 	 	 	(33,433	) 	 	 	(11,884	) 
	 — Costs to complete acquired property
	  	 	4		 	 	(2,012	) 	 	 	—	 	 	 	(8,603	) 	 	 	—	 
	 Construction funds in escrow
	  	 	6		 	 	2,012		 	 	—	 	 	 	8,603		 	 	—	 
	 Mortgage receivable proceeds
	  	 	5	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	16,845	
	 Acquisition deposits
	  				 	 	—	 	 	 	(1,325	) 	 	 	—	 	 	 	(1,325	) 
	 Fixed asset additions
	  	 	 	 	 	 	(314	) 	 	 	(44	) 	 	 	(1,048	) 	 	 	(132	) 
	 Cash used in investing activities
	  	 	 	 	 	 	(96,072	) 	 	 	(48,379	) 	 	 	(576,360	) 	 	 	(430,144	) 
						
	 FINANCING ACTIVITIES
	  				 				 				 				 			
						
	 Monthly distributions paid
	  				 	 	(41,994	) 	 	 	(34,564	) 	 	 	(120,134	) 	 	 	(100,187	) 
	 Special distribution paid
	  	 	11		 	 	—	 	 	 	—	 	 	 	—	 	 	 	(13,710	) 
	 Proceeds from unsecured debentures, net of financing costs
	  	 	8(a)	 	 	 	(999	) 	 	 	—	 	 	 	496,895		 	 	—	 
	 Repayment of lease obligations
	  	 	9		 	 	(198	) 	 	 	(656	) 	 	 	(642	) 	 	 	(1,508	) 
	 Financing costs paid
	  				 	 	—	 	 	 	—	 	 	 	(30	) 	 	 	(25	) 
	 Distributions to non-controlling interests
	  				 	 	—	 	 	 	—	 	 	 	(130	) 	 	 	(150	) 
	 Proceeds from stapled unit offerings, net of issuance costs
	  	 	12(c)	 	 	 	(593	) 	 	 	—	 	 	 	276,918		 	 	220,378	
	 Repurchase of stapled units
	  	 	12(b)	 	 	 	—	 	 	 	(3	) 	 	 	(25,017	) 	 	 	(40	) 
	 Cash (used in) provided by financing activities
	  	 	 	 	 	 	(43,784	) 	 	 	(35,223	) 	 	 	627,860		 	 	104,758	
	 Effect of exchange rate changes on cash and cash
equivalents
	  	 	 	 	 	 	(3,825	) 	 	 	(642	) 	 	 	3,600		 	 	(10,776	) 
	 Net (decrease) increase in cash and cash equivalents during the period
	  				 	 	(77,571	) 	 	 	(41,448	) 	 	 	241,000		 	 	(202,832	) 
	 Cash and cash equivalents, beginning of period
	  	 	 	 	 	 	617,248		 	 	496,862		 	 	298,677		 	 	658,246	
	 Cash and cash equivalents, end of period
	  	 	 	 	 	$	539,677	 	 	$	455,414	 	 	$	539,677	 	 	$	455,414	 

 See accompanying notes 

  
 6    Granite REIT 2020 Third
Quarter Report 













 Notes to Condensed Combined Financial Statements 

(All amounts in thousands of Canadian dollars unless otherwise noted) 

(Unaudited) 
  

	
	 1.  NATURE AND
DESCRIPTION OF THE TRUST


 Effective January 3, 2013, Granite Real Estate Inc. (“Granite Co.”) completed its conversion from a
corporate structure to a stapled unit real estate investment trust (“REIT”) structure. All of the common shares of Granite Co. were exchanged, on a one-for-one
basis, for stapled units, each of which consists of one unit of Granite Real Estate Investment Trust (“Granite REIT”) and one common share of Granite REIT Inc. (“Granite GP”). Granite REIT is an unincorporated, open-ended,
limited purpose trust established under and governed by the laws of the province of Ontario and created pursuant to a Declaration of Trust dated September 28, 2012 and as subsequently amended on January 3, 2013 and December 20, 2017.
Granite GP was incorporated on September 28, 2012 under the Business Corporations Act (British Columbia). Granite REIT, Granite GP and their subsidiaries (together “Granite” or the “Trust”) are carrying on the
business previously conducted by Granite Co. 
 The stapled units trade on the Toronto Stock Exchange and on the New York Stock Exchange. The principal
office of Granite REIT is 77 King Street West, Suite 4010, P.O. Box 159, Toronto-Dominion Centre, Toronto, Ontario, M5K 1H1, Canada. The registered office of Granite GP is Suite 2600, Three Bentall Centre, 595 Burrard Street, P.O. Box 49314,
Vancouver, British Columbia, V7X 1L3, Canada. 
 The Trust is a Canadian-based REIT engaged in the acquisition, development, ownership and management
of logistics, warehouse and industrial properties in North America and Europe. 
 These condensed combined financial statements were approved by the
Board of Trustees of Granite REIT and Board of Directors of Granite GP on November 4, 2020. 
  

	
	 2.  SIGNIFICANT
ACCOUNTING POLICIES


  

	(a)	 Basis of Presentation and Statement of Compliance 



The condensed combined financial statements for the three and nine month periods ended September 30, 2020 have been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). These interim condensed combined financial statements do not include all the
information and disclosures required in the annual financial statements, which were prepared in accordance with International Financial Reporting Standards (“IFRS”), and should be read in conjunction with the Trust’s annual financial
statements as at and for the year ended December 31, 2019. 
  

	(b)	 Combined Financial Statements and Basis of Consolidation 



As a result of the REIT conversion described in note 1, the Trust does not have a single parent; however, each unit of Granite REIT and each share of
Granite GP trade as a single stapled unit and accordingly, Granite REIT and Granite GP have identical ownership. Therefore, these financial statements have been prepared on a combined basis whereby the assets, liabilities and results of Granite GP
and Granite REIT have been combined. The combined financial statements include the subsidiaries of Granite GP and Granite REIT. Subsidiaries are fully consolidated by Granite GP or Granite REIT from the date of acquisition, being the date on which
control is obtained. The subsidiaries continue to be consolidated until the date that such control ceases. Control exists 

  
 Granite REIT 2020 Third Quarter
Report    7 













 
when Granite GP or Granite REIT have power, exposure or rights to variable returns and the ability to use their power over the entity to affect the amount of returns it generates. 

All intercompany balances, income and expenses and unrealized gains and losses resulting from intercompany transactions are eliminated. 

 

	(c)	 Accounting Policies 



The condensed combined financial statements have been prepared using the same accounting policies as were used for the Trust’s annual combined
financial statements and the notes thereto for the year ended December 31, 2019. 
  

	(d)	 Future Accounting Policy Changes 



As at September 30, 2020, there are no new accounting standards issued but not yet applicable to the condensed combined financial statements except
for the following: 
 Agenda Decision — IFRS 16, Leases 

In December 2019, the IFRS Interpretations Committee issued a final agenda decision in regards to the determination of the lease term for cancellable or
renewable leases under IFRS 16, Leases (the “Decision”) and whether the useful life of any non-removable leasehold improvements is limited to the lease term of the related lease. As of
September 30, 2020, the Trust completed the impact assessment and determined that there is no material impact from the adoption of this interpretation on its combined financial statements. 

 

	(e)	 COVID-19 Pandemic 



During the nine month period ended September 30, 2020, the coronavirus disease (“COVID-19”)
pandemic has resulted in governments across Granite’s operating markets enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social
distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity and capital markets have also experienced significant volatility and weakness during this time. Governments across the globe have
reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. Granite is continuing to monitor the impact of the COVID-19 pandemic on its business, liquidity and results
of operations. 
 During the three and nine month periods ended September 30, 2020, there has not been any significant impact on Granite’s
operations, assets or liabilities as a result of COVID-19. Granite has received 100% of rents due in the third quarter of 2020 and 99.9% of October rents. Granite has not recognized any provisions for
uncollected rent at this time as it expects any outstanding rent to be received. Granite reviewed its future cash flow projections and the valuation of its properties considering the impacts of the COVID-19
pandemic during the nine month period ended September 30, 2020 and Granite does not expect, at this time, that COVID-19 will have a significant impact to the fair value of its investment property
portfolio. In addition, there have not been any significant fair value losses on investment properties recorded in the three and nine month periods ended September 30, 2020. 

Granite continues to review its future cash flow projections and the valuation of its investment properties in light of the COVID-19 pandemic. The carrying value of Granite’s investment properties reflects its best estimate for the highest and best use as at September 30, 2020 (note 4). The duration of the COVID-19 pandemic, and the potential for further waves of new infections in the markets where Granite operates that could lead to the reinstatement of emergency measures, cannot be predicted. As such, the length and
full scope of the economic 

  
 8    Granite REIT 2020 Third
Quarter Report 













 
impact of COVID-19 and other consequential changes it will have on Granite’s business and operations in the long-term cannot be forecasted with
certainty at this time. Certain aspects of Granite’s business and operations that could potentially be impacted include rental income, occupancy, capital expenditures, future demand for space and market rents, all of which ultimately impact the
underlying valuation of investment properties. 
  

	
	
3.  ACQUISITIONS


 During the nine month periods ended September 30, 2020 and 2019, property acquisitions consisted of the following:

 Acquisitions During The Nine Months Ended September 30, 2020 
  

																					
	Property	 	Location	 	 	Date acquired	 	 	Property
purchase
price	 	 	Transaction
costs	 	 	Total
acquisition
cost	 
	 Property under development:
	 				 				 				 				 			
	 Aquamarijnweg 2(1)
	 	 
	Bleiswijk,
Netherlands	 
 	 	 	March 13, 2020	 	 	$	35,632	 	 	$	145	 	 	$	35,777	 
	 Income-producing properties:
	 				 				 				 				 			
	 Oude Graaf 15
	 	 	Weert, Netherlands	 	 	 	May 1, 2020	 	 	 	31,910		 	 	297		 	 	32,207	
	 De Kroonstraat 1
	 	 
	Tilburg,
Netherlands	 
 	 	 	July 1, 2020	 	 	 	71,716		 	 	646		 	 	72,362	
	 Francis Baconstraat 4
	 	 	Ede, Netherlands	 	 	 	July 1, 2020	 	 	 	21,403		 	 	243		 	 	21,646	
	 8995 Airport Road
	 	 	Brampton, ON	 	 	 	September 1, 2020	 	 	 	22,173		 	 	452		 	 	22,625	
	 555 Beck Crescent
	 	 	Ajax, ON	 	 	 	September 30, 2020	 	 	 	15,350		 	 	335		 	 	15,685	
						
	 Memphis portfolio (three properties):
	 				 				 				 				 			
	 4460 E. Holmes Road, 4995 Citation Drive and 8650 Commerce Drive
	 	 
	Memphis, TN,
and Southaven, MS	
 	 	 	June 18, 2020	 	 	 	111,590		 	 	491		 	 	112,081	
						
	 Midwest portfolio (five properties):
	 				 				 				 				 			
	 6201 Green Pointe Drive South, 8779 Le Saint Drive, 8754 Trade Port Drive and 445 Airtech Parkway
	 	 


	Groveport, OH,
Hamilton, OH,
West Chester, OH,
and Indianapolis, IN	 


 	 	 	June 18, 2020	 	 	 	177,647		 	 	785		 	 	178,432	
	 5415 Centerpoint Parkway
	 	 	Obetz, OH	 	 	 	July 8, 2020	 	 	 	45,092		 	 	252		 	 	45,344	
						
	 Mississauga portfolio (four properties):
	 				 				 				 				 			
	 5600, 5610, 5620 and 5630 Timberlea Boulevard
	 	 	Mississauga, ON	 	 	 	September 28, 2020	 	 	 	19,450		 	 	473		 	 	19,923	
						
	 Development land:
	 				 				 				 				 			
	 5005 Parker Henderson Road
	 	 	Fort Worth, TX	 	 	 	June 8, 2020	 	 	 	8,932		 	 	332		 	 	9,264	
	 	 	 	 	 	 	 	 	 	 	$	560,895	 	 	$	4,451	 	 	$	565,346	 

  

	(1)	 	 The development in Bleiswijk, Netherlands was completed during September 2020 and subsequently transferred to
income-producing properties. The property purchase price includes a tenant allowance of $6.8 million (€4.4 million) paid in September 2020 associated with the acquisition.




  
 Granite REIT 2020 Third Quarter
Report    9 













 Acquisitions During The Nine Months Ended September 30, 2019 

 
  

																					
	Property	 	Location	 	  	Date acquired	 	  	Property
purchase
price	 	  	Transaction
costs	 	  	Total
acquisition
cost	 
	 Income-producing properties:
	 				  				  				  				  			
	 201 Sunridge Boulevard
	 	 	Wilmer, TX	 	  	 	March 1, 2019	 	  	$	58,087	 	  	$	223	 	  	$	58,310	 
	 3501 North Lancaster Hutchins Road
	 	 	Lancaster, TX	 	  	 	March 1, 2019	 	  	 	106,120	 	  	 	222	 	  	 	106,342	 
	
2020 & 2095 Logistics Drive(1)
	 	 	Mississauga, ON	 	  	 	April 9, 2019	 	  	 	174,106		  	 	487		  	 	174,593	
	 1901 Beggrow Street
	 	 	Columbus, OH	 	  	 	May 23, 2019	 	  	 	71,607		  	 	267		  	 	71,874	
	 Heirweg 3
	 	 
	Born,
Netherlands	 
 	  	 	July 8, 2019	 	  	 	25,704		  	 	1,627		  	 	27,331	
	 1222 Commerce Parkway
	 	 	Horn Lake, MS	 	  	 	August 1, 2019	 	  	 	24,492		  	 	116		  	 	24,608	
		 				  				  				  				  			
	 Development land:
	 				  				  				  				  			
	 8320 Stedman Street
	 	 	Houston, TX	 	  	 	July 1, 2019	 	  	 	33,361		  	 	295		  	 	33,656	
	 	 	 	 	 	  	 	 	 	  	$	493,477	 	  	$	3,237	 	  	$	496,714	 

  

	(1)	 	 Includes right-of-use asset related to
ground lease of $20.5 million. 


 During the nine month period ended September 30, 2020, the transaction costs of
$4.5 million (2019 — $3.2 million), which included land transfer taxes and legal and advisory costs were first capitalized to the cost of the respective property and then subsequently expensed to net fair value gains on investment
properties on the condensed combined statements of net income as a result of measuring the properties at fair value. 
  

	
	 4.  INVESTMENT
PROPERTIES


  

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Income-producing properties
	  	$	5,270,271	 	  	$	4,377,623	 
	 Properties under development
	  	 	29,518		  	 	51,310	
	 Land held for development
	  	 	39,098		  	 	28,966	
	 	  	$	5,338,887	 	  	$	4,457,899	 


  
 10    Granite REIT 2020 Third
Quarter Report 













 Changes in investment properties are shown in the following table: 

 

																																	
	  	 	Nine Months Ended
September 30, 2020	 	 	  	 	 	  	 	 	Year Ended
December 31, 2019	 
	  	 	Income-
producing
properties	 	 	Properties
under
development	 	 	Land held
for
development	 	 	  	 	 	  	 	 	Income-
producing
properties	 	 	Properties
under
development	 	 	Land held
for
development	 
	 Balance, beginning of period
	 	$	4,377,623	 	 	$	51,310	 	 	$	28,966	 	 			 	 				 	$	3,415,786	 	 	$	17,009	 	 	$	3,984	 
	 Maintenance or improvements
	 	 	3,161		 	 	—	 	 	 	—	 	 			 	 				 	 	3,272		 	 	—	 	 	 	—	 
	 Leasing commissions
	 	 	2,535		 	 	—	 	 	 	—	 	 			 	 				 	 	1,079		 	 	—	 	 	 	—	 
	 Tenant allowances
	 	 	644		 	 	—	 	 	 	—	 	 			 	 				 	 	515		 	 	—	 	 	 	—	 
	 Developments or expansions
	 	 	58		 	 	36,427		 	 	270		 			 	 				 	 	3,641		 	 	27,250		 	 	—	 
	 Acquisitions (note 3)
	 	 	520,305		 	 	35,777		 	 	9,264		 			 	 				 	 	951,065		 	 	8,932		 	 	24,939	
	 Costs to complete acquired property (note 6)
	 	 	8,603		 	 	—	 	 	 	—	 	 			 	 				 	 	—	 	 	 	—	 	 	 	—	 
	 Disposals (note 5)
	 	 	(23,500	) 	 	 	—	 	 	 	—	 	 			 	 				 	 	—	 	 	 	—	 	 	 	—	 
	 Transfer to income-producing properties
	 	 	97,733		 	 	(97,733	) 	 	 	—	 	 			 	 				 	 	—	 	 	 	—	 	 	 	—	 
	 Classified as assets held for sale (note 5)
	 	 	—	 	 	 	—	 	 	 	—	 	 			 	 				 	 	(61,120	) 	 	 	—	 	 	 	—	 
	 Amortization of straight-line rent
	 	 	6,262		 	 	—	 	 	 	—	 	 			 	 				 	 	5,074		 	 	—	 	 	 	—	 
	 Amortization of tenant allowances
	 	 	(3,963	) 	 	 	—	 	 	 	—	 	 			 	 				 	 	(5,122	) 	 	 	—	 	 	 	—	 
	 Other changes
	 	 	(89	) 	 	 	—	 	 	 	—	 	 			 	 				 	 	189		 	 	—	 	 	 	—	 
	 Fair value gains (losses), net
	 	 	133,063		 	 	(145	) 	 	 	(332	) 	 			 	 				 	 	243,351		 	 	(135	) 	 	 	557	
	 Foreign currency translation, net
	 	 	147,836		 	 	3,882		 	 	930		 	 	 	 	 	 	 	 	 	 	(180,107	) 	 	 	(1,746	) 	 	 	(514	) 
	 Balance, end of period
	 	$	5,270,271	 	 	$	29,518		 	$	39,098		 	 	 	 	 	 	 	 	 	$	4,377,623	 	 	$	51,310		 	$	28,966	 

 The Trust determines the fair value of an income-producing property based upon, among other things, rental income from
current leases and assumptions about rental income from future leases reflecting market conditions and lease renewals at the applicable balance sheet dates, less future cash outflows in respect of such leases. Fair values are primarily determined by
discounting the expected future cash flows, generally over a term of 10 years, plus a terminal value based on the application of a capitalization rate to estimated year 11 cash flows. The fair values of properties under development are measured
using a discounted cash flow model, net of costs to complete, as of the balance sheet date. The Trust measures its investment properties using valuations prepared by management. The Trust does not measure its investment properties based on
valuations prepared by external appraisers but uses such external appraisals as data points, together with other external market information accumulated by management, in arriving at its own conclusions on values. Management uses valuation
assumptions such as discount rates, terminal capitalization rates and market rental rates applied in external appraisals or sourced from valuation experts; however, the Trust also uses its historical renewal experience with tenants, its direct
knowledge of the specialized nature of certain of Granite’s portfolio and tenant profile and its knowledge of the actual condition of the properties in making business judgments about lease renewal probabilities, renewal rents and capital
expenditures. There has been no change in the valuation methodology during the period. 
 Refer to note 2(e) for a discussion of the impact of the COVID-19 pandemic on the Trust’s business and operations, including the valuation of investment properties. 

  
 Granite REIT 2020 Third Quarter
Report    11 













 Included in investment properties is $25.5 million (December 31, 2019 — $18.9 million) of
net straight-line rent receivable arising from the recognition of rental revenue on a straight-line basis over the lease term. 
 Details about
contractual obligations to purchase, construct and develop properties can be found in the commitments and contingencies note (note 18). 
 Tenant
minimum rental commitments payable to Granite on non-cancellable operating leases as at September 30, 2020 are as follows: 
  

					
	 Year ended September 30,
	  	 	 	 
	 2021
	  	$	309,280	
	 2022
	  	 	304,458	
	 2023
	  	 	276,380	
	 2024
	  	 	208,062	
	 2025
	  	 	172,342	
	 2026 and thereafter
	  	 	840,113	
	 	  	$	2,110,635	

 Valuations are most sensitive to changes in discount rates and terminal capitalization rates. The key valuation metrics
for income-producing properties by country are set out below: 
  

																																	
	As at	 	September 30, 2020	 	 	  	 	 	  	 	 	December 31, 2019	 
	  	 	Weighted
average(1)	 	 	Maximum	 	 	Minimum	 	 	  	 	 	  	 	 	Weighted
average(1)	 	 	Maximum	 	 	Minimum	 
	 Canada
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	5.74%	 	 	 	6.25%	 	 	 	5.25%	 	 				 				 	 	5.90%	 	 	 	8.75%	 	 	 	5.25%	 
	 Terminal capitalization rate
	 	 	5.27%	 	 	 	5.75%	 	 	 	5.00%	 	 				 				 	 	5.55%	 	 	 	8.00%	 	 	 	5.00%	 
						 			
	 United States
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	6.36%	 	 	 	9.50%	 	 	 	5.00%	 	 				 				 	 	6.41%	 	 	 	9.50%	 	 	 	5.00%	 
	 Terminal capitalization rate
	 	 	5.82%	 	 	 	8.75%	 	 	 	4.75%	 	 				 				 	 	6.23%	 	 	 	8.75%	 	 	 	5.25%	 
						 			
	 Germany
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	7.01%	 	 	 	9.00%	 	 	 	5.50%	 	 				 				 	 	6.83%	 	 	 	8.25%	 	 	 	5.70%	 
	 Terminal capitalization rate
	 	 	5.94%	 	 	 	8.00%	 	 	 	4.50%	 	 				 				 	 	6.31%	 	 	 	8.75%	 	 	 	5.00%	 
						 			
	 Austria
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	8.50%	 	 	 	10.50%	 	 	 	8.00%	 	 				 				 	 	7.96%	 	 	 	10.00%	 	 	 	7.00%	 
	 Terminal capitalization rate
	 	 	7.29%	 	 	 	9.75%	 	 	 	6.75%	 	 				 				 	 	7.34%	 	 	 	9.75%	 	 	 	6.75%	 
						 			
	 Netherlands
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	5.15%	 	 	 	6.75%	 	 	 	4.00%	 	 				 				 	 	5.24%	 	 	 	6.00%	 	 	 	4.70%	 
	 Terminal capitalization rate
	 	 	5.41%	 	 	 	7.55%	 	 	 	3.75%	 	 				 				 	 	6.14%	 	 	 	7.55%	 	 	 	5.60%	 
						 			
	 Other
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	7.49%	 	 	 	9.50%	 	 	 	6.75%	 	 				 				 	 	8.25%	 	 	 	10.00%	 	 	 	7.25%	 
	 Terminal capitalization rate
	 	 	6.91%	 	 	 	10.00%	 	 	 	5.75%	 	 				 				 	 	8.20%	 	 	 	9.75%	 	 	 	6.25%	 
						 			
	 Total
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	6.54%	 	 	 	10.50%	 	 	 	4.00%	 	 				 				 	 	6.60%	 	 	 	10.00%	 	 	 	4.70%	 
	 Terminal capitalization rate
	 	 	5.93%	 	 	 	10.00%	 	 	 	3.75%	 	 	 	 	 	 	 	 	 	 	 	6.32%	 	 	 	9.75%	 	 	 	5.00%	 

  

	(1)	 	 Weighted based on income-producing property fair value. 



  
 12    Granite REIT 2020 Third
Quarter Report 














	
	 5.  ASSETS HELD FOR SALE
AND DISPOSITIONS


 During the nine month period ended September 30, 2020, Granite disposed of two properties located in Canada. The
disposed properties consist of the following: 
  

									
	Property	  	Location	  	Date disposed	  	Sale price	 
	 201 Patillo Road
	  	Tecumseh, ON	  	September 14, 2020	  	$	17,000	
	 2032 First Street Louth
	  	St. Catharines, ON	  	September 14, 2020	  	 	6,500	
	 	  	 	  	 	  	$	23,500	

 During the three and nine month periods ended September 30, 2020, Granite incurred $0.6 million (2019 —
$0.7 million) and $0.6 million (2019 — $2.0 million), respectively, of broker commissions and legal and advisory costs associated with the disposal or planned disposal of the assets held for sale which are included in the loss on sale of
investment properties on the condensed combined statements of net income. In connection with the disposal of a property in South Carolina in September 2018, on July 22, 2020, Granite settled the associated obligation in cash. Upon receipt of
the proceeds receivable (note 10) a resulting gain of $0.4 million was realized which is included in loss on sale of investment properties on the condensed combined statements of net income. 

During the nine month period ended September 30, 2019, Granite disposed of seven properties located in Canada and the United States for gross
proceeds totaling $56.9 million. The gross proceeds associated with four properties disposed of included a vendor take-back mortgage of $16.8 million (US$12.7 million) which was repaid on June 18, 2019. 

At September 30, 2020 and December 31, 2019, there were no investment properties classified as assets held for sale. 

 

	
	
6.  NON-CURRENT ASSETS


 Construction Funds In Escrow 

On November 19, 2019, Granite acquired a developed property located at 1301 Chalk Hill Road, Dallas, Texas which had outstanding construction work.
Consequently, $20.5 million (US$15.5 million) of the purchase price was placed in escrow to pay for the remaining construction costs. The funds are released from escrow as the construction is completed. As at September 30, 2020,
$8.8 million (US$6.6 million) remained in escrow (December 31, 2019 — $16.8 million (US$12.9 million)). As construction is completed, the construction costs are capitalized to the cost of the investment property. During the nine month
period ended September 30, 2020, $8.6 million (US$6.3 million) was released from escrow and capitalized to the property (note 4). 

  
 Granite REIT 2020 Third Quarter
Report    13 













 Other Assets 
  

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Deferred financing costs associated with the revolving credit facility
	  	$	677	 	  	$	885	 
	 Long-term receivables
	  	 	374		  	 	388	
	 2027 Cross Currency Interest Rate Swap (note 8(b))
	  	 	3,620		  	 	—	 
	 	  	$	4,671	 	  	$	1,273	 

  

	
	 7.  CURRENT
ASSETS


 Other Receivable 
 On
July 22, 2020, the full amount of the proceeds receivable of $12.1 million (US$9.0 million) associated with the disposal of a property in South Carolina in September 2018 was received. The estimated sale price for the property in 2018 was
determined using an income approach that assumed a forecast consumer price index inflation factor at the date of disposition. Accordingly, the proceeds receivable was subject to change and was dependent upon the actual consumer price index inflation
factor as at December 31, 2019. As at December 31, 2019, the proceeds receivable was $11.7 million (US$9.0 million). 
  

	
	 8.  UNSECURED DEBT AND
CROSS CURRENCY INTEREST RATE SWAPS


  

	(a)	 Unsecured Debentures and Term Loans, Net 



 

																					
	As at	 	  	 	 	September 30, 2020	 	 	December 31, 2019	 
	  	 	Maturity Date	 	 	Amortized
Cost(1)	 	 	Principal
issued and
outstanding	 	 	Amortized
Cost(1)	 	 	Principal
issued and
outstanding	 
	 2021 Debentures
	 	 	July 5, 2021	 	 	$	249,814		 	$	250,000		 	$	249,646		 	$	250,000	
	 2023 Debentures
	 	 	November 30, 2023	 	 	 	398,986		 	 	400,000		 	 	398,746		 	 	400,000	
	 2027 Debentures
	 	 	June 4, 2027	 	 	 	497,025		 	 	500,000		 	 	—	 	 	 	—	 
	 2024 Term Loan
	 	 	December 19, 2024	 	 	 	245,930		 	 	246,494		 	 	239,153		 	 	239,816	
	 2026 Term Loan
	 	 	December 11, 2026	 	 	 	299,508		 	 	300,000		 	 	299,449		 	 	300,000	
	 	 	 	 	 	 	$	1,691,263	 	 	$	1,696,494	 	 	$	1,186,994	 	 	$	1,189,816	 

  

	(1)	 	 The amounts outstanding are net of deferred financing costs and, in the case of the term loans, debt modification losses.
The deferred financing costs and debt modification losses are amortized using the effective interest method and are recorded in interest expense. 


  

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Unsecured Debentures and Term Loans, Net
	  				  			
	 Non-current
	  	$	1,441,449		  	$	1,186,994	
	 Current
	  	 	249,814		  	 	—	 
	 	  	$	1,691,263	 	  	$	1,186,994	 

 On June 4, 2020, Granite REIT Holdings Limited Partnership (“Granite LP”), a wholly-owned subsidiary of
Granite, issued at par $500.0 million aggregate principal amount of 3.062% Series 4 

  
 14    Granite REIT 2020 Third
Quarter Report 













 
senior debentures due June 4, 2027 (the “2027 Debentures”). Interest on the 2027 Debentures is payable semi-annually in arrears on June 4 and December 4 of each year.
Deferred financing costs of $3.1 million were incurred in connection with the issuance of the 2027 Debentures and are recorded as a reduction against the principal owing. 

The 2027 Debentures are redeemable, in whole or in part, at Granite’s option at any time and from time to time, at a price equal to accrued and
unpaid interest plus the greater of (a) 100% of the principal amount of the 2027 Debentures to be redeemed; and (b) the Canada Yield Price. The Canada Yield Price means, in respect of a 2027 Debenture, a price equal to which, if the 2027
Debenture were to be issued at such price on the redemption date, would provide a yield thereon from the redemption date to its maturity date equal to 65.0 basis points above the yield that a non-callable
Government of Canada bond, trading at par, would carry if issued on the redemption date with a maturity date of June 4, 2027. Granite also has the option to redeem the 2027 Debentures at par plus any accrued and unpaid interest within 30 days
of the maturity date of June 4, 2027. 
  

	(b)	 Cross Currency Interest Rate Swaps 



 

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Financial asset at fair value
	  				  			
	 2027 Cross Currency Interest Rate Swap (note 6)
	  	$	3,620		  	$	—	
	 Financial liabilities at fair value
	  				  			
	 2021 Cross Currency Interest Rate Swap
	  	$	17,626		  	$	3,630	
	 2023 Cross Currency Interest Rate Swap
	  	 	35,629		  	 	24,298	
	 2024 Cross Currency Interest Rate Swap
	  	 	14,755		  	 	1,202	
	 2026 Cross Currency Interest Rate Swap
	  	 	25,100		  	 	1,235	
	 	  	$	93,110		  	$	30,365	

  

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Financial liabilities at fair value
	  				  			
	 Non-current
	  	$	75,484		  	$	30,365	
	 Current
	  	 	17,626		  	 	—	 
	 	  	$	93,110		  	$	30,365	

 On July 3, 2014, the Trust entered into a cross currency interest rate swap (the “2021 Cross Currency Interest
Rate Swap”) to exchange the 3.788% semi-annual interest payments from the debentures that mature in 2021 (the “2021 Debentures”) for Euro denominated payments at a 2.68% fixed interest rate. In addition, under the terms of the swap,
the Trust will pay principal proceeds of €171.9 million in exchange for which it will receive $250.0 million on July 5, 2021. 

On December 20, 2016, the Trust entered into a cross currency interest rate swap (the “2023 Cross Currency Interest Rate Swap”) to
exchange the 3.873% semi-annual interest payments from the debentures that mature in 2023 (the “2023 Debentures”) for Euro denominated payments at a 2.43% fixed interest rate. In addition, under the terms of the swap, the Trust will pay
principal proceeds of €281.1 million in exchange for which it will receive $400.0 million on November 30, 2023. 

On September 24, 2019, in conjunction with a refinancing, the Trust entered into a new cross currency interest rate swap (the “2024 Cross
Currency Interest Rate Swap”) to exchange the 

  
 Granite REIT 2020 Third Quarter
Report    15 













 
LIBOR plus margin monthly interest payments from the term loan that matures in 2024 (the “2024 Term Loan”) for Euro denominated payments at a 0.522% fixed interest rate. In addition,
under the terms of the 2024 Cross Currency Interest Rate Swap, Granite will pay principal proceeds of €168.2 million in exchange for which it will receive US$185.0 million on
December 19, 2024. 
 On November 27, 2019, also in conjunction with a refinancing, the Trust entered into a new cross currency interest rate
swap (the “2026 Cross Currency Interest Rate Swap”) to exchange the CDOR plus margin monthly interest payments from the term loan that matures in 2026 (the “2026 Term Loan”) for Euro denominated payments at a 1.355% fixed
interest rate. In addition, under the terms of the swap, the Trust will pay principal proceeds of €205.5 million in exchange for which it will receive $300.0 million on
December 11, 2026. 
 On June 4, 2020, the Trust entered into a cross currency interest rate swap (the “2027 Cross Currency Interest
Rate Swap”) to exchange the $500.0 million proceeds and the 3.062% semi-annual interest payments from the 2027 Debentures for US$370.3 million and US dollar denominated interest payments at a 2.964% fixed interest rate. In addition,
under the terms of the swap, the Trust will pay principal proceeds of US$370.3 million in exchange for which it will receive $500.0 million on June 4, 2027. 

The cross currency interest rate swaps are designated as net investment hedges of the Trust’s investments in foreign operations. The effectiveness
of the hedges are assessed quarterly. Gains and losses associated with the effective portion of the hedges are recognized in other comprehensive income. For the three and nine month periods ended September 30, 2020, the Trust has assessed the
net investment hedge associated with each cross currency interest rate swap, except for a portion of the 2024 Cross Currency Interest Rate Swap, to be effective. With the refinancing of the 2024 Term Loan in 2019, the Trust has assessed only the
foreign exchange movements associated with the fair value change of the 2024 Cross Currency Interest Rate Swap to be effective. Accordingly, the change in fair value relating to foreign exchange movements on the 2024 Cross Currency Interest Rate
Swap and the fair value gains or losses on all other cross currency interest rate swaps are recorded in other comprehensive income. For the three and nine month periods ended September 30, 2020, since there is no effective hedge for the
interest and other movements associated with the fair value change of the 2024 Cross Currency Interest Rate Swap, a fair value gain of $1.4 million and a fair value loss of $5.7 million is recognized in fair value losses on financial
instruments, net (note 13(e)), respectively, in the condensed combined statements of net income. 
 The Trust has elected to record the differences
resulting from the lower interest rates associated with the cross currency interest rate swaps in the condensed combined statements of net income. 
  

	
	 9.  LEASE
OBLIGATIONS


 As at September 30, 2020, the Trust had leases for the use of office space, office and other equipment, and ground
leases for the land upon which four income-producing properties in Europe and Canada are situated. The Trust recognized these leases as right-of-use assets and recorded
related lease liability obligations. During the nine month period ended September 30, 2020, Granite recorded an additional right-of-use asset and related lease
obligation of $0.6 million for office space in the United States. 

  
 16    Granite REIT 2020 Third
Quarter Report 













 Future minimum lease payments relating to the right-of-use assets as at September 30, 2020 in aggregate for the next five years and thereafter are as follows: 
  

					
	 Remainder of 2020
	  	$	149	
	 2021
	  	 	862	
	 2022
	  	 	559	
	 2023
	  	 	275	
	 2024
	  	 	264	
	 2025 and thereafter
	  	 	31,885	
	 	  	$	33,994	 

 During the three and nine month periods ended September 30, 2020, the Trust recognized $0.4 million (2019
— $0.4 million) and $1.2 million (2019 — $0.9 million) of interest expense, respectively, related to lease obligations (note 13(d)). 
  

	
	 10. CURRENT
LIABILITIES


 Deferred Revenue 
 Deferred
revenue relates to prepaid and unearned revenue received from tenants and fluctuates with the timing of rental receipts. 
 Bank Indebtedness 

On February 1, 2018, the Trust entered into an unsecured revolving credit facility in the amount of $500.0 million that is available by way of
Canadian dollar, US dollar or Euro denominated loans or letters of credit and matures on February 1, 2023. The Trust has the option to extend the maturity date by one year to February 1, 2024 subject to the agreement of lenders in respect
of a minimum of 66 2/3% of the aggregate amount committed under the facility. The credit facility provides the Trust with the ability to increase the amount of the commitment by an additional aggregate principal amount of up to $100.0 million
with the consent of the participating lenders. As at September 30, 2020, the Trust had no amounts drawn (December 31, 2019 — nil) from the credit facility and $1.0 million (December 31, 2019 — $1.0 million) in letters of credit
issued against the facility. 
 Accounts Payable and Accrued Liabilities 
  

									
	As at	  	September 30,
2020	 	  	December 31,
2019	 
	 Accounts payable
	  	$	9,653	 	  	$	6,840	 
	 Tenant security deposits
	  	 	4,768		  	 	3,978	
	 Employee unit-based compensation
	  	 	6,241		  	 	5,586	
	 Trustee/director unit-based compensation
	  	 	4,786		  	 	3,301	
	 Accrued salaries, incentives and benefits
	  	 	4,374		  	 	5,416	
	 Accrued interest payable
	  	 	12,832		  	 	6,507	
	 Accrued construction payable
	  	 	7,223		  	 	5,933	
	 Accrued professional fees
	  	 	2,797		  	 	3,822	
	 Accrued property operating costs
	  	 	11,579		  	 	6,376	
	 Accrual associated with a property disposal (note 7)
	  	 	—	 	  	 	1,944	
	 Other accrued liabilities
	  	 	690		  	 	480	
	 	  	$	64,943	 	  	$	50,183	 


  
 Granite REIT 2020 Third Quarter
Report    17 













 In connection with the disposal of a property in South Carolina in September 2018, Granite retained an
obligation to make certain repairs to the building. Accordingly, a liability was recorded at the time the property was disposed of, as determined using a third-party report. On July 22, 2020 in conjunction with the receipt of the proceeds
receivable for this property disposal (note 7) Granite settled the obligation in cash. 
  

	
	 11. DISTRIBUTIONS TO STAPLED
UNITHOLDERS


 Total distributions declared to stapled unitholders in the three month period ended September 30, 2020 were
$42.0 million (2019 — $34.6 million) or 72.6 cents per stapled unit (2019 — 69.9 cents per stapled unit). Total distributions declared to stapled unitholders in the nine month period ended September 30, 2020 were
$121.1 million (2019 — $101.1 million) or $2.18 per stapled unit (2019 — $2.10 per stapled unit). Distributions payable at September 30, 2020 of $14.0 million, representing the September 2020 distribution, were paid on
October 15, 2020. Distributions payable at December 31, 2019 of $13.1 million were paid on January 15, 2020 and represented the December 2019 monthly distributions. 

On October 16, 2020, distributions of $14.0 million or 24.2 cents per stapled unit were declared and will be paid on November 16, 2020.

 Granite paid a special distribution on January 15, 2019 of $1.20 per stapled unit, which comprised of 30.0 cents per unit payable in cash of
$13.7 million and 90.0 cents per unit payable by the issuance of stapled units. Immediately following the issuance of the stapled units, the stapled units were consolidated such that each unitholder held the same number of stapled units after
the consolidation as each unitholder held prior to the special distribution. In January 2019, upon the issuance of the stapled units, the stapled units account increased and contributed surplus decreased by $41.1 million, respectively. 

 

	
	 12. STAPLED UNITHOLDERS’
EQUITY


  

	(a)	 Unit-Based Compensation 



Incentive Stock Option Plan 
 The Incentive Stock Option Plan
allows for the grant of stock options or stock appreciation rights to directors, officers, employees and consultants. As at September 30, 2020 and December 31, 2019, there were no options outstanding under this plan. 

  
 18    Granite REIT 2020 Third
Quarter Report 













 Director/Trustee Deferred Share Unit Plan 

The Trust has two Non-Employee Director Share-Based Compensation Plans (the “DSPs”) which provide for a
deferral of up to 100% of each non-employee director’s total annual remuneration, at specified levels elected by each director. A reconciliation of the changes in the notional deferred share units
(“DSUs”) outstanding is presented below: 
  

																					
	  	  	2020	 	  	  	 	  	2019	 
	  	  	Number
(000s)	 	  	Weighted Average
Grant Date
Fair Value	 	  	  	 	  	Number
(000s)	 	 	Weighted Average
Grant Date
Fair Value	 
	 DSUs outstanding, January 1
	  	 	50		  	$	48.01	 	  				  	 	44		 	$	46.01	 
	 Granted
	  	 	13		  	 	66.73		  				  	 	13		 	 	55.02	 
	 Settled
	  	 	—	 	  	 	—	 	  	 	 	 	  	 	(11	) 	 	 	51.57	
	 DSUs outstanding, September 30
	  	 	63		  	$	51.87	 	  	 	 	 	  	 	46		 	$	47.19	 

 Executive Deferred Stapled Unit Plan 

The Executive Deferred Stapled Unit Plan (the “Restricted Stapled Unit Plan”) of the Trust provides for the issuance of Restricted Share Units
(“RSUs”) and Performance Share Units (“PSUs”) and is designed to provide equity-based compensation in the form of stapled units to executives and other employees (the “Participants”). A reconciliation of the changes in
notional stapled units outstanding under the Restricted Stapled Unit Plan is presented below: 
  

																					
	  	 	2020	 	  	  	 	  	2019	 
	  	 	Number
(000s)	 	 	Weighted Average
Grant Date
Fair Value	 	  	  	 	  	Number
(000s)	 	 	Weighted Average
Grant Date
Fair Value	 
	 RSUs and PSUs outstanding, January 1
	 	 	145		 	$	55.93	 	  				  	 	117		 	$	50.34	 
	 New grants(1) 
	 	 	53		 	 	66.61		  				  	 	84		 	 	61.83	
	 Forfeited
	 	 	(1	) 	 	 	67.66		  				  	 	(1	) 	 	 	47.06	
	 Settled in cash
	 	 	(33	) 	 	 	55.70		  				  	 	(35	) 	 	 	52.91	
	 Settled in stapled units
	 	 	(31	) 	 	 	55.70		  	 	 	 	  	 	(20	) 	 	 	52.91	
	 RSUs and PSUs outstanding, September 30(1)
	 	 	133		 	$	60.18	 	  	 	 	 	  	 	145		 	$	56.83	 

  

	(1)	 	 New grants include 20,816 RSUs and 26,546 PSUs granted during the nine month period ended September 30, 2020 (2019
— 54,145 RSUs and 24,587 PSUs). Total restricted stapled units outstanding at September 30, 2020 include a total of 75,569 RSUs and 57,332 PSUs granted (2019 — 116,038 RSUs and 28,784 PSUs). 



The fair value of the outstanding RSUs was $3.6 million at September 30, 2020 and is based on the market price of the Trust’s stapled
unit. The fair value is adjusted for changes in the market price of the Trust’s stapled unit and recorded as a liability in the employee unit-based compensation payables (note 10). 

The fair value of the outstanding PSUs was $2.6 million at September 30, 2020 and is recorded as a liability in the employee unit-based
compensation payables (note 10). The fair value is calculated using the Monte-Carlo simulation model based on the assumptions below as well as a 

  
 Granite REIT 2020 Third Quarter
Report    19 













 
market adjustment factor based on the total unitholder return of the Trust’s stapled units relative to the S&P/TSX Capped REIT Index. 

 

					
	Grant Date	  	January 1, 2020, January 1, August 12, September 24, 2019 and
November 16, 2018	 
	 PSUs granted
	  	 	54,863	
	 Term to expiry
	  	 	2.2 years	 
	 Average volatility rate
	  	 	41.0%	 
	 Weighted average risk free interest rate
	  	 	0.2%	 

 The Trust’s unit-based compensation expense recognized in general and administrative expenses was: 

 

																	
	  	  	Three Months Ended
September 30,	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	    	2020	 	    	2019	 
	 DSPs for trustees/directors(1)
	  	$	855		    	$	386	 	    	$	1,485	 	    	$	1,269	 
	 Restricted Stapled Unit Plan for executives and employees
	  	 	2,394		    	 	1,276		    	 	4,768		    	 	4,062	
	 Unit-based compensation expense
	  	$	3,249		    	$	1,662	 	    	$	6,253	 	    	$	5,331	 
	 Fair value remeasurement expense included in the above:
	  				    				    				    			
	 ● DSPs for trustees/directors 
	  	$	522		    	$	131	 	    	$	638	 	    	$	459	
	 ● Restricted
Stapled Unit Plan for executives and employees
	  	 	886		    	 	306		    	 	1,145		    	 	1,011	
	 Total fair value remeasurement expense
	  	$	1,408		    	$	437	 	    	$	1,783	 	    	$	1,470	

  

	(1)	 	 In respect of fees mandated and elected to be taken as DSUs. 



 

	(b)	 Normal Course Issuer Bid 



On May 19, 2020, Granite announced the acceptance by the Toronto Stock Exchange (“TSX”) of Granite’s Notice of Intention to Make a
Normal Course Issuer Bid (“NCIB”). Pursuant to the NCIB, Granite proposes to purchase through the facilities of the TSX and any alternative trading system in Canada, from time to time and if considered advisable, up to an aggregate of
5,344,576 of Granite’s issued and outstanding stapled units. The NCIB commenced on May 21, 2020 and will conclude on the earlier of the date on which purchases under the bid have been completed and May 20, 2021. Pursuant to the
policies of the TSX, daily purchases made by Granite through the TSX may not exceed 58,842 stapled units, subject to certain exceptions. Granite had entered into an automatic securities purchase plan with a broker in order to facilitate repurchases
of the stapled units under the NCIB during specified blackout periods. Pursuant to a previous notice of intention to conduct a NCIB, Granite received approval from the TSX to purchase stapled units for the period May 21, 2019 to May 20,
2020. 
 During the nine month period ended September 30, 2020, Granite repurchased 490,952 stapled units (2019 — 700 stapled units) at an
average stapled unit cost of $50.95 for total consideration of $25.0 million (2019 — less than $0.1 million). The difference between the repurchase price and the average cost of the stapled units of $1.3 million (2019 — less than
$0.1 million) was recorded to contributed surplus. 

  
 20    Granite REIT 2020 Third
Quarter Report 














	(c)	 Stapled Unit Offerings 



On June 2, 2020, Granite completed an offering of 4,255,000 stapled units at a price of $68.00 per unit for gross proceeds of $289.3 million,
including 555,000 stapled units issued pursuant to the exercise of the over-allotment option granted to the underwriters. Total costs related to the offering totaled $12.4 million and were recorded as a reduction to stapled unitholders’
equity. The net proceeds received by Granite after deducting the total costs related to the offering were $276.9 million. 
 On April 30,
2019, Granite completed an offering of 3,749,000 stapled units at a price of $61.50 per unit for gross proceeds of $230.6 million, including 489,000 stapled units issued pursuant to the exercise of the over-allotment option granted to the
underwriters. Total costs related to the offering totaled $10.2 million and were recorded as a reduction to stapled unitholders’ equity. The net proceeds received by Granite after deducting the total costs related to the offering were
$220.4 million. 
  

	(d)	 Accumulated Other Comprehensive Income 



Accumulated other comprehensive income consists of the following: 
  

									
	As at September 30,	  	2020	 	 	2019	 
	 Foreign currency translation gains on investments in subsidiaries, net of related hedging activities and non-controlling interests(1)
	  	$	292,320	 	 	$	183,019	 
	 Fair value losses on derivatives designated as net investment
hedges
	  	 	(96,906	) 	 	 	(33,459	) 
	 	  	$	195,414	 	 	$	149,560	 

  

	(1) 	 	 Includes foreign currency translation gains and losses from non-derivative
financial instruments designated as net investment hedges. 


  

	
	 13. RENTAL REVENUE, RECOVERIES,
COSTS AND EXPENSES


  

	(a)	 Rental revenue consists of: 



 

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Base rent
	  	$	75,086	 	    	$	60,850	 	 				    	$	214,769	 	    	$	176,201	 
	 Straight-line rent amortization
	  	 	3,337		    	 	1,061		 				    	 	6,262		    	 	3,749	
	 Tenant incentive amortization
	  	 	(1,377	) 	    	 	(1,261	) 	 				    	 	(3,963	) 	    	 	(3,857	) 
	 Property tax recoveries
	  	 	7,728		    	 	5,668		 				    	 	20,229		    	 	15,833	
	 Property insurance recoveries
	  	 	742		    	 	538		 				    	 	1,941		    	 	1,594	
	 Operating cost recoveries
	  	 	2,384		    	 	1,961		 	 	 	 	    	 	7,720		    	 	5,772	
	 	  	$	87,900		    	$	68,817		 	 	 	 	    	$	246,958	 	    	$	199,292	


  
 Granite REIT 2020 Third Quarter
Report    21 














	(b)	 Property operating costs consist of: 



 

																					
	  	  	Three Months Ended
September 30,	 	  	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	  	  	 	    	2020	 	    	2019	 
	 Non-recoverable from tenants:
	  				    				  				    				    			
	 Property taxes and utilities
	  	$	253		    	$	232		  				    	$	723		    	$	987	
	 Legal
	  	 	32		    	 	66		  				    	 	107		    	 	210	
	 Consulting
	  	 	29		    	 	38		  				    	 	29		    	 	74	
	 Environmental and appraisals
	  	 	22		    	 	—	 	  				    	 	259		    	 	370	
	 Repairs and maintenance
	  	 	210		    	 	165		  				    	 	538		    	 	572	
	 Other
	  	 	170		    	 	142		  	 	 	 	    	 	493		    	 	497	
	 	  	$	716		    	$	643	 	  	 	 	 	    	$	2,149	 	    	$	2,710	 
	 Recoverable from tenants:
	  				    				  				    				    			
	 Property taxes and utilities
	  	$	8,012		    	$	6,075	 	  				    	$	21,881		    	$	16,927	 
	 Property insurance
	  	 	781		    	 	589		  				    	 	2,177		    	 	1,743	
	 Repairs and maintenance
	  	 	1,122		    	 	826		  				    	 	2,591		    	 	2,005	
	 Property management fees
	  	 	734		    	 	507		  				    	 	1,964		    	 	1,420	
	 Other
	  	 	52		    	 	37		  	 	 	 	    	 	666		    	 	906	
	 	  	$	10,701		    	$	8,034	 	  	 	 	 	    	$	29,279	 	    	$	23,001	 
	 Property operating costs
	  	$	11,417		    	$	8,677		  	 	 	 	    	$	31,428		    	$	25,711	

  

	(c)	 General and administrative expenses consist of: 



 

																					
	  	  	Three Months Ended
September 30,	 	  	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	  	  	 	    	2020	 	    	2019	 
	 Salaries, incentives and benefits
	  	$	4,061		    	$	2,801	 	  				    	$	11,105	 	    	$	10,184	 
	 Audit, legal and consulting
	  	 	801		    	 	998		  				    	 	2,591		    	 	3,475	
	 Trustee/director fees including distributions, revaluations and expenses(1)
	  	 	895		    	 	475		  				    	 	1,635		    	 	1,534	
	 RSU and PSU compensation expense including distributions and revaluations(1)
	  	 	2,394		    	 	1,276		  				    	 	4,768		    	 	4,062	
	 Other public entity costs
	  	 	510		    	 	397		  				    	 	1,446		    	 	1,587	
	 Office rents including property taxes and common area maintenance costs
	  	 	111		    	 	99		  				    	 	309		    	 	280	
	 Capital tax
	  	 	290		    	 	120		  				    	 	630		    	 	242	
	 Information technology costs
	  	 	289		    	 	238		  				    	 	785		    	 	716	
	 Other
	  	 	221		    	 	498		  	 	 	 	    	 	1,016		    	 	1,332	
	 	  	$	9,572		    	$	6,902	 	  	 	 	 	    	$	24,285		    	$	23,412	 

  

	(1)	 	 For fair value remeasurement expense amounts see note 12(a). 



During the three and nine month periods ended September 30, 2020, Granite incurred less than $0.1 million and $0.1 million of expenses
relating to COVID-19, respectively. 

  
 22    Granite REIT 2020 Third
Quarter Report 














	(d)	 Interest expense and other financing costs consist of: 



 

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Interest and amortized issuance costs and modification losses relating to debentures and term loans
	  	$	9,798		    	$	6,671	 	 				    	$	22,677	 	    	$	20,472	 
	 Amortization of deferred financing costs and other interest expense and charges
	  	 	561		    	 	564		 				    	 	1,680		    	 	1,599	
	 Interest expense related to lease obligations (note 9)
	  	 	402		    	 	392		 	 	 	 	    	 	1,195		    	 	909	
		  	$	10,761		    	$	7,627		 				    	$	25,552		    	$	22,980	
	 Less: Capitalized interest
	  	 	(174	) 	    	 	(74	) 	 	 	 	 	    	 	(557	) 	    	 	(74	) 
	 	  	$	10,587		    	$	7,553		 	 	 	 	    	$	24,995		    	$	22,906	

  

	(e)	 Fair value (gains) losses on financial instruments, net, consist of: 



 

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Foreign exchange forward contracts, net (note 16(a))
	  	$	215	 	    	$	(1,866	) 	 				    	$	226	 	    	$	(110	) 
	 Foreign exchange collar contracts, net (note 16(a))
	  	 	185		    	 	—	 	 				    	 	(1,192	) 	    	 	—	 
	 Cross currency interest rate swap (note 8(b))
	  	 	(1,448	) 	    	 	(80	) 	 	 	 	 	    	 	5,703		    	 	(80	) 
	 	  	$	(1,048	) 	    	$	(1,946	) 	 	 	 	 	    	$	4,737	 	    	$	(190	) 

 For the three and nine month periods ended September 30, 2020, the Trust recorded a fair value gain of
$1.4 million and a fair value loss of $5.7 million, respectively, related to the fair value change of the 2024 Cross Currency Interest Rate Swap associated with interest and other movements which has not been designated in a hedging
relationship and is therefore recognized in the condensed combined statements of net income (note 8(b)). 
  

	
	 14. INCOME
TAXES


  

	(a)	 The major components of the income tax expense are: 



 

																					
	  	  	Three Months Ended
September 30,	 	  	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	  	  	 	    	2020	 	    	2019	 
	 Current income tax expense
	  	$	2,159	 	    	$	1,776	 	  				    	$	5,535		    	$	5,373	
	 Deferred income tax expense
	  	 	12,354		    	 	10,423		  	 	 	 	    	 	30,115		    	 	33,170	
	 Income tax expense
	  	$	14,513		    	$	12,199	 	  	 	 	 	    	$	35,650	 	    	$	38,543	 


  
 Granite REIT 2020 Third Quarter
Report    23 













 (b)    The effective income tax rate reported in the condensed combined statements
of net income varies from the Canadian statutory rate for the following reasons: 
  

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Income before income taxes
	  	$	119,749		    	$	126,827		 	 	 	 	    	$	297,940		    	$	330,176	
	 Expected income taxes at the Canadian statutory tax rate of 26.5% (2019 — 26.5%)
	  	$	31,733	 	    	$	33,609	 	 				    	$	78,954	 	    	$	87,496	
	 Income distributed and taxable to unitholders
	  	 	(14,937	) 	    	 	(18,623	) 	 				    	 	(40,251	) 	    	 	(43,172	) 
	 Net foreign rate differentials
	  	 	(2,887	) 	    	 	(2,163	) 	 				    	 	(6,336	) 	    	 	(6,227	) 
	 Net change in provisions for uncertain tax positions
	  	 	443		    	 	430		 				    	 	466		    	 	1,238	
	 Net permanent differences
	  	 	(21	) 	    	 	(813	) 	 				    	 	(70	) 	    	 	(643	) 
	 Withholding taxes and other
	  	 	182		    	 	(241	) 	 	 	 	 	    	 	2,887		    	 	(149	) 
	 Income tax expense
	  	$	14,513	 	    	$	12,199	 	 	 	 	 	    	$	35,650	 	    	$	38,543	 

  

	
	 15. DETAILS OF CASH
FLOWS


  

	(a)	 Items not involving operating cash flows are shown in the following table: 



 

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Straight-line rent amortization
	  	$	(3,337	) 	    	$	(1,061	) 	 				    	$	(6,262	) 	    	$	(3,749	) 
	 Tenant incentive amortization
	  	 	1,377		    	 	1,261		 				    	 	3,963		    	 	3,857	
	 Unit-based compensation expense (note 12(a))
	  	 	3,249		    	 	1,662		 				    	 	6,253		    	 	5,331	
	 Fair value gains on investment properties
	  	 	(62,045	) 	    	 	(78,226	) 	 				    	 	(132,586	) 	    	 	(197,876	) 
	 Depreciation and amortization
	  	 	286		    	 	243		 				    	 	794		    	 	676	
	 Fair value losses on financial instruments, net (note 13(e))
	  	 	(1,048	) 	    	 	(1,946	) 	 				    	 	4,737		    	 	(190	) 
	 Loss on sale of investment properties
	  	 	164		    	 	652		 				    	 	164		    	 	2,035	
	 Amortization of issuance costs and modification losses relating to debentures and term loans
	  	 	303		    	 	218		 				    	 	714		    	 	651	
	 Amortization of deferred financing costs
	  	 	78		    	 	78		 				    	 	234		    	 	234	
	 Deferred income taxes (note 14(a))
	  	 	12,354		    	 	10,423		 				    	 	30,115		    	 	33,170	
	 Other
	  	 	122		    	 	(54	) 	 	 	 	 	    	 	47		    	 	(153	) 
	 	  	$	(48,497	) 	    	$	(66,750	) 	 	 	 	 	    	$	(91,827	) 	    	$	(156,014	) 


  
 24    Granite REIT 2020 Third
Quarter Report 














	(b)	 Changes in working capital balances are shown in the following table: 



 

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	    	Nine Months Ended
September 30,	 
	  	  	2020	 	    	2019	 	 	  	 	    	2020	 	    	2019	 
	 Accounts receivable
	  	$	7,011	 	    	$	(1,767	) 	 				    	$	8,395	 	    	$	(1,544	) 
	 Prepaid expenses and other
	  	 	725		    	 	(2,227	) 	 				    	 	676		    	 	(1,842	) 
	 Accounts payable and accrued liabilities
	  	 	1,941		    	 	174		 				    	 	829		    	 	(672	) 
	 Deferred revenue
	  	 	711		    	 	(1,519	) 	 				    	 	2,116		    	 	1,516	
	 Restricted cash
	  	 	—	 	    	 	50		 	 	 	 	    	 	—	 	    	 	45	
	 	  	$	10,388	 	    	$	(5,289	) 	 	 	 	 	    	$	12,016	 	    	$	(2,497	) 

  

	(c)	 Non-cash investing and financing activities 



During the nine month period ended September 30, 2020, 31 thousand stapled units (2019 — 20 thousand stapled units) with a value of
$2.0 million (2019 — $1.2 million) were issued under the Restricted Stapled Unit Plan (note 12(a)) and are not recorded in the condensed combined statements of cash flows. In addition, the condensed combined statement of cash flows for the
nine month period ended September 30, 2019 does not include the right-of-use asset and lease obligation of $20.5 million, associated with the acquisition of
the leasehold interest in two Canadian properties (note 3) and the issuance and consolidation of stapled units associated with the special distribution in the amount of $41.1 million (note 11). 

 

	(d)	 Cash and cash equivalents consist of: 



 

									
	As at	  	September 30, 2020	 	  	December 31, 2019	 
	 Cash
	  	$	464,469	 	  	$	248,499	 
	 Short-term deposits
	  	 	75,208		  	 	50,178	
	 	  	$	539,677	 	  	$	298,677	 


  
 Granite REIT 2020 Third Quarter
Report    25 














	
	 16. FAIR VALUE AND RISK
MANAGEMENT


  

	(a)	 Fair Value of Financial Instruments 



The following table provides the measurement basis of financial assets and liabilities as at September 30, 2020 and December 31, 2019: 

 

																	
	As at	  	September 30, 2020	 	  	December 31, 2019	 
	  	  	Carrying
Value	 	  	Fair Value	 	  	Carrying
Value	 	 	Fair Value	 
	 Financial assets
	  				  				  				 			
	 Construction funds in escrow
	  	$	8,797	 	  	$	8,797	 	  	$	16,767	 	 	$	16,767	
	 Other assets
	  	 	374	(1) 	  	 	374		  	 	388	(1) 	 	 	388	
	 Other assets
	  	 	3,620	(2) 	  	 	3,620	 	  	 	—	 	 	 	—	 
	 Other receivable
	  	 	—	 	  	 	—	 	  	 	11,650	 	 	 	11,650	
	 Accounts receivable
	  	 	7,783	 	  	 	7,783		  	 	7,812	 	 	 	7,812	
	 Prepaid expenses and other
	  	 	1,192	(3) 	  	 	1,192		  	 	120	(3) 	 	 	120	
	 Cash and cash equivalents
	  	 	539,677	 	  	 	539,677		  	 	298,677	 	 	 	298,677	
	 	  	$	561,443	 	  	$	561,443	 	  	$	335,414	 	 	$	335,414	 
	 Financial liabilities
	  				  				  				 			
	 Unsecured debentures, net
	  	$	1,145,825	(4) 	  	$	1,225,285	 	  	$	648,392	 	 	$	669,090	 
	 Unsecured term loans, net
	  	 	545,438	 	  	 	545,438		  	 	538,602	 	 	 	538,602	
	 Cross currency interest rate swaps
	  	 	93,110	(5) 	  	 	93,110		  	 	30,365	 	 	 	30,365	
	 Accounts payable and accrued liabilities
	  	 	64,810	 	  	 	64,810		  	 	50,156	 	 	 	50,156	
	 Accounts payable and accrued liabilities
	  	 	133	(6) 	  	 	133		  	 	27	(6) 	 	 	27	
	 Distributions payable
	  	 	13,999	 	  	 	13,999		  	 	13,081	 	 	 	13,081	
	 	  	$	1,863,315	 	  	$	1,942,775	 	  	$	1,280,623	 	 	$	1,301,321	 

  

	(1) 	 	 Long-term receivables included in other assets (note 6). 



	(2) 	 	 The 2027 Cross Currency Interest Rate Swap included in other assets (note 6). 



	(3)	 	 Foreign exchange collars and forward contracts included in prepaid expenses. 



	(4) 	 	 Balance includes current and non-current portions (note 8(a)).




	(5) 	 	 Balance includes current and non-current portions (note 8(b)).  



	(6) 	 	 Foreign exchange forward contracts included in accounts payable and accrued liabilities. 



The fair values of the Trust’s construction funds in escrow, accounts receivable, cash and cash equivalents, accounts payable and accrued
liabilities and distributions payable approximate their carrying amounts due to the relatively short periods to maturity of these financial instruments. The fair value of the long-term receivable included in other assets approximates its carrying
amount as the receivable bears interest at rates comparable to current market rates. The fair value of the other receivable associated with proceeds from a 2018 property disposal approximates its carrying amount as the amount is revalued at each
reporting period. The fair values of the unsecured debentures are determined using quoted market prices. The fair values of the term loans approximate their carrying amounts as the term loans bear interest at rates comparable to the current market
rates. The fair values of the cross currency interest rate swaps and foreign exchange collars are determined using market inputs quoted by their counterparties. The fair value of the foreign exchange forward contracts approximate their carrying
values as the asset or liability is revalued at the reporting date. 

  
 26    Granite REIT 2020 Third
Quarter Report 













 The Trust periodically purchases foreign exchange collars and forward contracts to hedge specific
anticipated foreign currency transactions and to mitigate its foreign exchange exposure on its net cash flows. At September 30, 2020, the Trust held one outstanding foreign exchange forward contract (December 31, 2019 — seven contracts
outstanding). The foreign exchange forward contract represents one contract to sell €2.0 million and purchase US$2.2 million. For the three and nine month periods ended
September 30, 2020, the Trust recorded a net fair value loss of $0.2 million (2019 — net fair value gain of $1.9 million) and $0.2 million (2019 — net fair value gain of $0.1 million), respectively, related to outstanding
foreign exchange forward contracts (note 13(e)). At September 30, 2020, the Trust held 12 outstanding foreign exchange collar contracts (December 31, 2019 — nil) with a notional value of US$60.0 million and contracts the Trust to
sell US dollars and receive Canadian dollars if specific US dollar exchange rates relative to the Canadian dollar are met. The Trust also held nine outstanding foreign exchange collar contracts (December 31, 2019 — nil) with a notional value of
€18.0 million and contracts the Trust to sell Euros and receive Canadian dollars if specific Euro exchange rates relative to the Canadian dollar are met. For the three and nine month periods
ended September 30, 2020, the Trust recorded a net fair value loss of $0.2 million (2019 — nil) and a net fair value gain of $1.2 million (2019 — nil), related to the outstanding foreign exchange collar contracts (note
13(e)). The Trust did not employ hedge accounting for these financial instruments. 
  

	(b)	 Fair Value Hierarchy 



Fair value measurements are based on inputs of observable and unobservable market data that a market participant would use in pricing an asset or
liability. IFRS establishes a fair value hierarchy which is summarized below: 
  

	Level 1:	 Fair value determined using quoted prices in active markets for identical assets or liabilities.



  

	Level 2:	 Fair value determined using significant observable inputs, generally either quoted prices in active markets for
similar assets or liabilities or quoted prices in markets that are not active. 


  

	Level 3:	 Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows or similar
techniques. 



  
 Granite REIT 2020 Third Quarter
Report    27 













 The following tables represent information related to the Trust’s assets and liabilities measured
or disclosed at fair value on a recurring and non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall. 

 

													
	As at September 30, 2020	  	Level 1	 	 	Level 2	 	 	Level 3	 
	 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE
	  				 				 			
				
	 Assets measured at fair value
	  				 				 			
	 Investment properties
	  	$	—		 	$	—		 	$	5,338,887	
	 Cross currency interest rate swap included in other assets (note 6)
	  	 	—	 	 	 	3,620		 	 	—	 
	 Foreign exchange collars included in prepaid expenses and other
	  	 	—	 	 	 	1,192		 	 	—	 
				
	 Liabilities measured or disclosed at fair value
	  				 				 			
	 Unsecured debentures, net (note 8)
	  	 	1,225,285		 	 	—	 	 	 	—	 
	 Unsecured term loans, net (note 8)
	  	 	—	 	 	 	545,438		 	 	—	 
	 Cross currency interest rate swaps (note 8)
	  	 	—	 	 	 	93,110		 	 	—	 
	 Foreign exchange forward contracts included in accounts payable and
accrued liabilities
	  	 	—	 	 	 	133		 	 	—	 
	 Net (liabilities) assets measured or disclosed at fair
value
	  	$	(1,225,285	) 	 	$	(633,869	) 	 	$	5,338,887	 

  

													
	As at December 31, 2019	  	Level 1	 	 	Level 2	 	 	Level 3	 
	 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE
	  				 				 			
				
	 Assets measured at fair value
	  				 				 			
	 Investment properties
	  	$	—		 	$	—		 	$	4,457,899	
	 Short-term proceeds receivable associated with a property disposal included in accounts receivable (note
7)
	  	 	—	 	 	 	—	 	 	 	11,650	
	 Foreign exchange forward contracts included in prepaid expenses and other
	  	 	—	 	 	 	120		 	 	—	 
				
	 Liabilities measured or disclosed at fair value
	  				 				 			
	 Unsecured debentures, net (note 8)
	  	 	669,090		 	 	—	 	 	 	—	 
	 Unsecured term loans, net (note 8)
	  	 	—	 	 	 	538,602		 	 	—	 
	 Cross currency interest rate swaps (note 8)
	  	 	—	 	 	 	30,365		 	 	—	 
	 Foreign exchange forward contracts included in accounts payable and
accrued liabilities
	  	 	—	 	 	 	27		 	 	—	 
	 Net (liabilities) assets measured or disclosed at fair
value
	  	$	(669,090	) 	 	$	(568,874	) 	 	$	4,469,549	 

 For assets and liabilities that are measured at fair value on a recurring basis, the Trust determines whether transfers
between the levels of the fair value hierarchy have occurred by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the three and nine
month periods ended September 30, 2020 and the year ended December 31, 2019, there were no transfers between the levels. 

  
 28    Granite REIT 2020 Third
Quarter Report 














	(c)	 Risk Management 



Foreign exchange risk 
 As at
September 30, 2020, the Trust is exposed to foreign exchange risk primarily in respect of movements in the Euro and the US dollar. The Trust is structured such that its foreign operations are primarily conducted by entities with a functional
currency which is the same as the economic environment in which the operations take place. As a result, the net income impact of currency risk associated with financial instruments is limited as its financial assets and liabilities are generally
denominated in the functional currency of the subsidiary that holds the financial instrument. However, the Trust is exposed to foreign currency risk on its net investment in its foreign currency denominated operations and certain Trust level foreign
currency denominated assets and liabilities. At September 30, 2020, the Trust’s foreign currency denominated net assets are $4.2 billion primarily in US dollars and Euros. A 1% change in the US dollar and Euro exchange rates relative
to the Canadian dollar would result in a gain or loss of approximately $25.7 million and $15.3 million, respectively, to comprehensive income. 

  
 Granite REIT 2020 Third Quarter
Report    29 














	
	 17. COMBINED FINANCIAL
INFORMATION


 The condensed combined financial statements include the financial position and results of operations and cash flows of
each of Granite REIT and Granite GP. Below is a summary of the financial information for each entity along with the elimination entries and other adjustments that aggregate to the condensed combined financial statements: 

 

																	
	Balance Sheet	  	As at September 30, 2020	 
	  	  	Granite REIT	 	  	Granite GP	 	  	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 ASSETS
	  				  				  				 			
	 Non-current assets:
	  				  				  				 			
	 Investment properties
	  	$	5,338,887	 	  				  				 	$	5,338,887	 
	 Investment in Granite LP(1)
	  	 	—	 	  	 	24		  	 	(24	) 	 	 	—	 
	 Other non-current
assets
	  	 	20,560		  	 	 	 	  	 	 	 	 	 	20,560	
		  	 	5,359,447		  	 	24		  	 	(24	) 	 	 	5,359,447	
					
	 Current assets:
	  				  				  				 			
	 Other current assets
	  	 	13,186		  	 	15		  				 	 	13,201	
	 Intercompany receivable(2)
	  	 	—	 	  	 	12,491		  	 	(12,491	) 	 	 	—	 
	 Cash and cash equivalents
	  	 	539,438		  	 	239		  	 	 	 	 	 	539,677	
	 Total assets
	  	$	5,912,071	 	  	 	12,769		  	 	(12,515	) 	 	$	5,912,325	 
					
	 LIABILITIES AND EQUITY
	  				  				  				 			
	 Non-current liabilities:
	  				  				  				 			
	 Unsecured debt, net
	  	$	1,441,449	 	  				  				 	$	1,441,449	 
	
Other non-current liabilities
	  	 	476,115		  	 	 	 	  	 	 	 	 	 	476,115	
		  	 	1,917,564		  				  				 	 	1,917,564	
					
	 Current liabilities:
	  				  				  				 			
	 Unsecured debt, net
	  	 	249,814		  				  				 	 	249,814	
	 Intercompany payable(2)
	  	 	12,491		  				  	 	(12,491	) 	 	 	—	 
	 Other current liabilities
	  	 	109,773		  	 	12,745		  	 	 	 	 	 	122,518	
	 Total liabilities
	  	 	2,289,642		  	 	12,745		  	 	(12,491	) 	 	 	2,289,896	
					
	 Equity:
	  				  				  				 			
	 Stapled unitholders’ equity
	  	 	3,620,319		  	 	24		  				 	 	3,620,343	
	 Non-controlling
interests
	  	 	2,110		  	 	 	 	  	 	(24	) 	 	 	2,086	
	 Total liabilities and equity
	  	$	5,912,071	 	  	 	12,769		  	 	(12,515	) 	 	$	5,912,325	 

  

	(1)	 	 Granite REIT Holdings Limited Partnership (“Granite LP”) is 100% owned by Granite REIT and Granite GP.




	(2) 	 	 Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP.




  
 30    Granite REIT 2020 Third
Quarter Report 














																	
	Balance Sheet	 	As at December 31, 2019	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 ASSETS
	 				 				 				 			
	 Non-current assets:
	 				 				 				 			
	 Investment properties
	 	$	4,457,899	 	 				 				 	$	4,457,899	 
	 Investment in Granite LP(1)
	 	 	—	 	 	 	21		 	 	(21	) 	 	 	—	 
	 Other non-current
assets
	 	 	24,216		 	 	 	 	 	 	 	 	 	 	24,216	
		 	 	4,482,115		 	 	21		 	 	(21	) 	 	 	4,482,115	
					
	 Current assets:
	 				 				 				 			
	 Other current assets
	 	 	23,144		 	 	20		 				 	 	23,164	
	 Intercompany receivable(2)
	 	 	—	 	 	 	11,828		 	 	(11,828	) 	 	 	—	 
	 Cash and cash equivalents
	 	 	298,385		 	 	292		 	 	 	 	 	 	298,677	
	 Total assets
	 	$	4,803,644	 	 	 	12,161		 	 	(11,849	) 	 	$	4,803,956	 
					
	 LIABILITIES AND EQUITY
	 				 				 				 			
	 Non-current liabilities:
	 				 				 				 			
	 Unsecured debt, net
	 	$	1,186,994	 	 				 				 	$	1,186,994	 
	
Other non-current liabilities
	 	 	383,763		 	 	 	 	 	 	 	 	 	 	383,763	
		 	 	1,570,757		 				 				 	 	1,570,757	
					
	 Current liabilities:
	 				 				 				 			
	 Intercompany payable(2)
	 	 	11,828		 				 	 	(11,828	) 	 	 	—	 
	 Other current liabilities
	 	 	72,949		 	 	12,140		 	 	 	 	 	 	85,089	
	 Total liabilities
	 	 	1,655,534		 	 	12,140		 	 	(11,828	) 	 	 	1,655,846	
					
	 Equity:
	 				 				 				 			
	 Stapled unitholders’ equity
	 	 	3,146,122		 	 	21		 				 	 	3,146,143	
	 Non-controlling
interests
	 	 	1,988		 	 	 	 	 	 	(21	) 	 	 	1,967	
	 Total liabilities and equity
	 	$	4,803,644	 	 	 	12,161		 	 	(11,849	) 	 	$	4,803,956	 

  

	(1) 	 	 Granite LP is 100% owned by Granite REIT and Granite GP. 



	(2) 	 	 Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP.




  
 Granite REIT 2020 Third Quarter
Report    31 














																	
	Income Statement	 	Three Months Ended September 30, 2020	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	 	$	87,900	 	 				 				 	$	87,900	
					
	 General and administrative expenses
	 	 	9,572		 				 				 	 	9,572	
	 Interest expense and other financing costs, net
	 	 	10,587		 				 				 	 	10,587	
	 Other costs and expenses, net
	 	 	10,921		 				 				 	 	10,921	
	 Share of (income) loss of Granite LP
	 	 	—	 	 	 	(1	) 	 	 	1		 	 	—	 
	 Fair value gains on investment properties, net
	 	 	(62,045	) 	 				 				 	 	(62,045	) 
	 Fair value gains on financial instruments, net
	 	 	(1,048	) 	 				 				 	 	(1,048	) 
	 Loss on sale of investment properties
	 	 	164		 	 	 	 	 	 	 	 	 	 	164	
	 Income before income taxes
	 	 	119,749		 	 	1		 	 	(1	) 	 	 	119,749	
	 Income tax expense
	 	 	14,513		 	 	 	 	 	 	 	 	 	 	14,513	
	 Net income
	 	 	105,236		 	 	1		 	 	(1	) 	 	 	105,236	
	 Less net income attributable to
non-controlling interests
	 	 	38		 	 	 	 	 	 	(1	) 	 	 	37	
	 Net income attributable to stapled unitholders
	 	$	105,198	 	 	 	1		 	 	—	 	 	$	105,199	

  

																	
	Income Statement	 	Three Months Ended September 30, 2019	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	 	$	68,817	 	 				 				 	$	68,817	 
					
	 General and administrative expenses
	 	 	6,902		 				 				 	 	6,902	
	 Interest expense and other financing costs, net
	 	 	7,553		 				 				 	 	7,553	
	 Other costs and expenses, net
	 	 	7,055		 				 				 	 	7,055	
	 Share of (income) loss of Granite LP
	 	 	—	 	 	 	(1	) 	 	 	1		 	 	—	 
	 Fair value gains on investment properties, net
	 	 	(78,226	) 	 				 				 	 	(78,226	) 
	 Fair value gains on financial instruments, net
	 	 	(1,946	) 	 				 				 	 	(1,946	) 
	 Loss on sale of investment properties
	 	 	652		 	 	 	 	 	 	 	 	 	 	652	
	 Income before income taxes
	 	 	126,827		 	 	1		 	 	(1	) 	 	 	126,827	
	 Income tax expense
	 	 	12,199		 	 	 	 	 	 	 	 	 	 	12,199	
	 Net income
	 	 	114,628		 	 	1		 	 	(1	) 	 	 	114,628	
	 Less net income attributable to
non-controlling interests
	 	 	101		 	 	 	 	 	 	(1	) 	 	 	100	
	 Net income attributable to stapled unitholders
	 	$	114,527	 	 	 	1		 	 	—	 	 	$	114,528	 


  
 32    Granite REIT 2020 Third
Quarter Report 














																	
	Income Statement	 	Nine Months Ended September 30, 2020	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	 	$	246,958	 	 				 				 	$	246,958	 
					
	 General and administrative expenses
	 	 	24,285		 				 				 	 	24,285	
	 Interest expense and other financing costs
	 	 	24,995		 				 				 	 	24,995	
	 Other costs and expenses, net
	 	 	27,423		 				 				 	 	27,423	
	 Share of (income) loss of Granite LP
	 	 	—	 	 	 	(3	) 	 	 	3		 	 	—	 
	 Fair value gains on investment properties, net
	 	 	(132,586	) 	 				 				 	 	(132,586	) 
	 Fair value losses on financial instruments, net
	 	 	4,737		 				 				 	 	4,737	
	 Loss on sale of investment properties
	 	 	164		 	 	 	 	 	 	 	 	 	 	164	
	 Income before income taxes
	 	 	297,940		 	 	3		 	 	(3	) 	 	 	297,940	
	 Income tax expense
	 	 	35,650		 	 	 	 	 	 	 	 	 	 	35,650	
	 Net income
	 	 	262,290		 	 	3		 	 	(3	) 	 	 	262,290	
	 Less net income attributable to
non-controlling interests
	 	 	141		 	 	 	 	 	 	(3	) 	 	 	138	
	 Net income attributable to stapled unitholders
	 	$	262,149	 	 	 	3		 	 	—	 	 	$	262,152	 

  

																	
	Income Statement	 	Nine Months Ended September 30, 2019	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	 	$	200,147	 	 				 				 	$	200,147	 
					
	 General and administrative expenses
	 	 	23,412		 				 				 	 	23,412	
	 Interest expense and other financing costs
	 	 	22,906		 				 				 	 	22,906	
	 Other costs and expenses, net
	 	 	19,684		 				 				 	 	19,684	
	 Share of (income) loss of Granite LP
	 	 	—	 	 	 	(3	) 	 	 	3		 	 	—	 
	 Fair value gains on investment properties, net
	 	 	(197,876	) 	 				 				 	 	(197,876	) 
	 Fair value gains on financial instruments, net
	 	 	(190	) 	 				 				 	 	(190	) 
	 Loss on sale of investment properties
	 	 	2,035		 	 	 	 	 	 	 	 	 	 	2,035	
	 Income before income taxes
	 	 	330,176		 	 	3		 	 	(3	) 	 	 	330,176	
	 Income tax expense
	 	 	38,543		 	 	 	 	 	 	 	 	 	 	38,543	
	 Net income
	 	 	291,633		 	 	3		 	 	(3	) 	 	 	291,633	
	 Less net income attributable to
non-controlling interests
	 	 	185		 	 	 	 	 	 	(3	) 	 	 	182	
	 Net income attributable to stapled unitholders
	 	$	291,448	 	 	 	3		 	 	—	 	 	$	291,451	 


  
 Granite REIT 2020 Third Quarter
Report    33 














																	
	Statement of Cash Flows	 	Three Months Ended September 30, 2020	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	 				 				 				 			
					
	 Net income
	 	$	105,236	 	 	 	1		 	 	(1	) 	 	$	105,236	 
	 Items not involving current cash flows
	 	 	(48,497	) 	 	 	(1	) 	 	 	1		 	 	(48,497	) 
	 Changes in working capital balances
	 	 	10,254		 	 	134		 	 	—	 	 	 	10,388	
	 Other operating activities
	 	 	(1,017	) 	 	 	 	 	 	 	 	 	 	 	(1,017	) 
	 Cash provided by operating activities
	 	 	65,976		 	 	134		 	 	—	 	 	 	66,110	
	 INVESTING ACTIVITIES
	 				 				 				 			
	 Property acquisitions
	 	 	(114,713	) 	 				 				 	 	(114,713	) 
	 Proceeds from disposals, net
	 	 	35,468		 				 				 	 	35,468	
	 Investment property capital additions
	 				 				 				 			
	 — Maintenance or improvements
	 	 	(1,431	) 	 				 				 	 	(1,431	) 
	 — Developments or expansions
	 	 	(7,830	) 	 				 				 	 	(7,830	) 
	 — Costs to complete acquired property
	 	 	(2,012	) 	 				 				 	 	(2,012	) 
	 Other investing activities
	 	 	(5,554	) 	 	 	 	 	 	 	 	 	 	 	(5,554	) 
	 Cash used in investing activities
	 	 	(96,072	) 	 	 	—	 	 	 	—	 	 	 	(96,072	) 
	 FINANCING ACTIVITIES
	 				 				 				 			
	 Distributions paid
	 	 	(41,994	) 	 				 				 	 	(41,994	) 
	 Other financing activities
	 	 	(1,790	) 	 	 	 	 	 	 	 	 	 	 	(1,790	) 
	 Cash used in financing activities
	 	 	(43,784	) 	 	 	—	 	 	 	—	 	 	 	(43,784	) 
	 Effect of exchange rate changes
	 	 	(3,825	) 	 	 	 	 	 	 	 	 	 	 	(3,825	) 
	 Net (decrease) increase in cash and cash equivalents during
the period
	 	$	(77,705	) 	 	 	134		 	 	—	 	 	$	(77,571	) 

  

																	
	Statement of Cash Flows	 	Three Months Ended September 30, 2019	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	 				 				 				 			
					
	 Net income
	 	$	114,628	 	 	 	1		 	 	(1	) 	 	$	114,628	 
	 Items not involving current cash flows
	 	 	(66,750	) 	 	 	(1	) 	 	 	1		 	 	(66,750	) 
	 Changes in working capital balances
	 	 	(5,660	) 	 	 	371		 	 	—	 	 	 	(5,289	) 
	 Other operating activities
	 	 	207		 	 	 	 	 	 	 	 	 	 	207	
	 Cash provided by operating activities
	 	 	42,425		 	 	371		 	 	—	 	 	 	42,796	
	 INVESTING ACTIVITIES
	 				 				 				 			
	 Property acquisitions
	 	 	(51,570	) 	 				 				 	 	(51,570	) 
	 Proceeds from disposals, net
	 	 	12,610		 				 				 	 	12,610	
	 Investment property capital additions
	 				 				 				 			
	 — Maintenance or improvements
	 	 	(847	) 	 				 				 	 	(847	) 
	 — Developments or expansions
	 	 	(7,203	) 	 				 				 	 	(7,203	) 
	 Acquisition deposits
	 	 	(1,325	) 	 				 				 	 	(1,325	) 
	 Other investing activities
	 	 	(44	) 	 	 	 	 	 	 	 	 	 	 	(44	) 
	 Cash used in investing activities
	 	 	(48,379	) 	 	 	—	 	 	 	—	 	 	 	(48,379	) 
	 FINANCING ACTIVITIES
	 				 				 				 			
	 Distributions paid
	 	 	(34,564	) 	 				 				 	 	(34,564	) 
	 Other financing activities
	 	 	(659	) 	 	 	 	 	 	 	 	 	 	 	(659	) 
	 Cash used in financing activities
	 	 	(35,223	) 	 	 	—	 	 	 	—	 	 	 	(35,223	) 
	 Effect of exchange rate changes
	 	 	(642	) 	 	 	 	 	 	 	 	 	 	 	(642	) 
	 Net (decrease) increase in cash and cash equivalents during
the period
	 	$	(41,819	) 	 	 	371		 	 	—	 	 	$	(41,448	) 


  
 34    Granite REIT 2020 Third
Quarter Report 














																	
	Statement of Cash Flows	 	Nine Months Ended September 30, 2020	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	 				 				 				 			
					
	 Net income
	 	$	262,290	 	 	 	3		 	 	(3	) 	 	$	262,290	 
	 Items not involving operating cash flows
	 	 	(91,827	) 	 	 	(3	) 	 	 	3		 	 	(91,827	) 
	 Changes in working capital balances
	 	 	12,068		 	 	(52	) 	 				 	 	12,016	
	 Other operating activities
	 	 	3,421		 	 	 	 	 	 	 	 	 	 	3,421	
	 Cash provided by (used in) operating activities
	 	 	185,952		 	 	(52	) 	 	 	—	 	 	 	185,900	
	 INVESTING ACTIVITIES
	 				 				 				 			
	 Property acquisitions
	 	 	(565,346	) 	 				 				 	 	(565,346	) 
	 Proceeds from disposals, net
	 	 	35,468		 				 				 	 	35,468	
	 Investment property capital additions
	 				 				 				 			
	 — Maintenance or improvements
	 	 	(4,749	) 	 				 				 	 	(4,749	) 
	 — Developments or expansions
	 	 	(33,433	) 	 				 				 	 	(33,433	) 
	 — Costs to complete acquired property
	 	 	(8,603	) 	 				 				 	 	(8,603	) 
	 Other investing activities
	 	 	303		 	 	 	 	 	 	 	 	 	 	303	
	 Cash used in investing activities
	 	 	(576,360	) 	 	 	—	 	 	 	—	 	 	 	(576,360	) 
	 FINANCING ACTIVITIES
	 				 				 				 			
	 Distributions paid
	 	 	(120,134	) 	 				 				 	 	(120,134	) 
	 Other financing activities
	 	 	747,994		 	 	 	 	 	 	 	 	 	 	747,994	
	 Cash provided by financing activities
	 	 	627,860		 	 	—	 	 	 	—	 	 	 	627,860	
	 Effect of exchange rate changes
	 	 	3,600		 	 	 	 	 	 	 	 	 	 	3,600	
	 Net increase (decrease) in cash and cash equivalents during
the period
	 	$	241,052	 	 	 	(52	) 	 	 	—	 	 	$	241,000	 

  

																	
	Statement of Cash Flows	 	Nine Months Ended September 30, 2019	 
	  	 	Granite REIT	 	 	Granite GP	 	 	Eliminations/
Adjustments	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	 				 				 				 			
					
	 Net income
	 	$	291,633	 	 	 	3		 	 	(3	) 	 	$	291,633	 
	 Items not involving operating cash flows
	 	 	(156,014	) 	 	 	(3	) 	 	 	3		 	 	(156,014	) 
	 Changes in working capital balances
	 	 	(2,288	) 	 	 	(209	) 	 				 	 	(2,497	) 
	 Other operating activities
	 	 	208		 	 	 	 	 	 	 	 	 	 	208	
	 Cash provided by (used in) operating activities
	 	 	133,539		 	 	(209	) 	 	 	—	 	 	 	133,330	
	 INVESTING ACTIVITIES
	 				 				 				 			
	 Property acquisitions
	 	 	(469,254	) 	 				 				 	 	(469,254	) 
	 Proceeds from disposals, net
	 	 	38,238		 				 				 	 	38,238	
	 Investment property capital additions
	 				 				 				 			
	 — Maintenance or improvements
	 	 	(2,632	) 	 				 				 	 	(2,632	) 
	 — Developments or expansions
	 	 	(11,884	) 	 				 				 	 	(11,884	) 
	 Acquisition deposits
	 	 	(1,325	) 	 				 				 	 	(1,325	) 
	 Other investing activities
	 	 	16,713		 	 	 	 	 	 	 	 	 	 	16,713	
	 Cash used in investing activities
	 	 	(430,144	) 	 	 	—	 	 	 	—	 	 	 	(430,144	) 
	 FINANCING ACTIVITIES
	 				 				 				 			
	 Distributions paid
	 	 	(100,187	) 	 				 				 	 	(100,187	) 
	 Other financing activities
	 	 	204,945		 	 	 	 	 	 	 	 	 	 	204,945	
	 Cash provided by financing activities
	 	 	104,758		 	 	—	 	 	 	—	 	 	 	104,758	
	 Effect of exchange rate changes
	 	 	(10,776	) 	 	 	 	 	 	 	 	 	 	 	(10,776	) 
	 Net decrease in cash and cash equivalents during the
period
	 	$	(202,623	) 	 	 	(209	) 	 	 	—	 	 	$	(202,832	) 


  
 Granite REIT 2020 Third Quarter
Report    35 














	
	 18. COMMITMENTS AND
CONTINGENCIES


 (a)    The Trust is subject to various legal proceedings and claims that arise in the ordinary course
of business. Management evaluates all claims with the advice of legal counsel. Management believes these claims are generally covered by Granite’s insurance policies and that any liability from remaining claims is not probable to occur and
would not have a material adverse effect on the condensed combined financial statements. However, actual outcomes may differ from management’s expectations. 

(b)    As at September 30, 2020, the Trust’s contractual commitments totaled $65.9 million and comprised of
construction and development projects of $54.1 million and the remaining construction costs associated with the property in Tilburg, Netherlands acquired in July 2020 for $11.8 million
(€7.6 million) (note 3). 
 The Trust is involved, in the normal course of business, in
discussions, and has various letters of intent or conditional agreements, with respect to possible acquisitions of new properties and dispositions of existing properties in its portfolio. None of these commitments or contingencies, individually or
in aggregate, would have a material impact on the condensed combined financial statements. 
  

	
	 19. SUBSEQUENT
EVENTS


 (a)    On October 16, 2020, the Trust declared monthly distributions for October 2020 of
$14.0 million (note 11). 
 (b)    On October 23, 2020, the Trust disposed of one property located in Barcelona, Spain
for gross proceeds of $7.8 million (€5.0 million). 
 (c)    On
October 23, 2020, the Trust agreed to acquire an income-producing property located in Atlanta, Georgia, for approximately $107 million (US$80.3 million). The acquisition is subject to customary closing conditions and is expected to close
in the fourth quarter of 2020. 

  
 36    Granite REIT 2020 Third
Quarter Report