EX-4.6





 Exhibit 4.6 
  

 
 



 
 Condensed Combined Financial Statements 

of Granite Real Estate Investment Trust 
 and Granite REIT
Inc. 
 For the three and six months ended June 30, 2021 and 2020 












 Condensed Combined Balance Sheets 

(Canadian dollars in thousands) 
 (Unaudited) 

 

													
	As at	 	Note	 	    	June 30,
2021	 	  	December 31,
2020	 
	 ASSETS
	 				    				  			
				
	 Non-current assets:
	 				    				  			
	 Investment properties
	 	 	4	 	    	$	6,396,560	 	  	$	5,855,583	 
	 Construction funds in escrow
	 	 	6	 	    	 	8,144		  	 	8,402	
	 Deferred tax assets
	 				    	 	3,242		  	 	4,730	
	 Fixed assets, net
	 				    	 	3,003		  	 	3,290	
	 Cross currency interest rate swap
	 	 	7(b)	 	    	 	48,816		  	 	28,676	
	 Other assets
	 	 	6	 	    	 	3,081		  	 	948	
		 				    	 	6,462,846		  	 	5,901,629	
				
	 Current assets:
	 				    				  			
	 Accounts receivable
	 				    	 	6,835		  	 	6,746	
	 Income taxes receivable
	 				    	 	1,401		  	 	915	
	 Prepaid expenses and other
	 				    	 	12,584		  	 	6,902	
	 Cash and cash equivalents
	 	 	14(d)	 	    	 	678,142		  	 	831,280	
	 Total assets
	 	 	 	 	    	$	7,161,808	 	  	$	6,747,472	 
				
	 LIABILITIES AND EQUITY
	 				    				  			
				
	 Non-current liabilities:
	 				    				  			
	 Unsecured debt, net
	 	 	7(a)	 	    	$	1,922,398	 	  	$	1,928,252	 
	 Cross currency interest rate swaps
	 	 	7(b)	 	    	 	29,471		  	 	97,311	
	 Long-term portion of lease obligations
	 	 	8	 	    	 	32,030		  	 	32,944	
	 Deferred tax liabilities
	 	 	 	 	    	 	460,538		  	 	392,841	
		 				    	 	2,444,437		  	 	2,451,348	
	 Current liabilities:
	 				    				  			
	 Unsecured debt, net
	 	 	7(a)	 	    	 	—	 	  	 	249,870	
	 Cross currency interest rate swaps
	 	 	7(b)	 	    	 	—	 	  	 	16,953	
	 Deferred revenue
	 	 	9	 	    	 	11,701		  	 	11,276	
	 Accounts payable and accrued liabilities
	 	 	9	 	    	 	56,249		  	 	61,197	
	 Distributions payable
	 	 	10	 	    	 	16,421		  	 	15,422	
	 Short-term portion of lease obligations
	 	 	8	 	    	 	726		  	 	829	
	 Income taxes payable
	 	 	 	 	    	 	22,706		  	 	18,373	
	 Total liabilities
	 	 	 	 	    	 	2,552,240		  	 	2,825,268	
				
	 Equity:
	 				    				  			
	 Stapled unitholders’ equity
	 	 	11	 	    	 	4,607,400		  	 	3,920,069	
	 Non-controlling
interests
	 	 	 	 	    	 	2,168		  	 	2,135	
	 Total equity
	 	 	 	 	    	 	4,609,568		  	 	3,922,204	
	 Total liabilities and equity
	 	 	 	 	    	$	7,161,808	 	  	$	6,747,472	 

 Commitments and contingencies (note 17) 

See accompanying notes 

  
 56    Granite REIT 2021 Second
Quarter Report 













 Condensed Combined Statements of Net Income 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	 	  	 	 	Three Months Ended
June 30,	 	  	Six Months Ended
June 30,	 
	  	 	Note	 	 	2021	 	  	2020	 	  	2021	 	  	2020	 
	 Rental revenue
	 	 	12(a)	 	 	$	93,963		  	$	81,008	 	  	$	189,905	 	  	$	159,058	 
	 Property operating costs
	 	 	12(b)	 	 	 	13,634		  	 	9,843		  	 	28,030		  	 	20,011	
	 Net operating income
	 				 	 	80,329		  	 	71,165		  	 	161,875		  	 	139,047	
						
	 General and administrative expenses
	 	 	12(c)	 	 	 	8,333		  	 	8,986		  	 	17,154		  	 	14,713	
	 Depreciation and amortization
	 				 	 	360		  	 	271		  	 	691		  	 	508	
	 Interest income
	 				 	 	(550	) 	  	 	(407	) 	  	 	(1,366	) 	  	 	(1,275	) 
	 Interest expense and other financing costs
	 	 	12(d)	 	 	 	9,603		  	 	7,763		  	 	24,397		  	 	14,408	
	 Foreign exchange (gains) losses, net
	 				 	 	(1,077	) 	  	 	18		  	 	(1,795	) 	  	 	(2,742	) 
	 Fair value gains on investment properties, net
	 	 	4	 	 	 	(308,025	) 	  	 	(34,548	) 	  	 	(517,541	) 	  	 	(70,541	) 
	 Fair value losses on financial instruments, net
	 	 	12(e)	 	 	 	149		  	 	3,891		  	 	488		  	 	5,785	
	 Loss on sale of investment properties
	 	 	5	 	 	 	421		  	 	—	 	  	 	576		  	 	—	 
	 Income before income taxes
	 				 	 	371,115		  	 	85,191	 	  	 	639,271	 	  	 	178,191	 
	 Income tax expense
	 	 	13	 	 	 	54,141		  	 	9,549		  	 	92,021	 	  	 	21,137	 
	 Net income
	 	 	 	 	 	$	316,974		  	$	75,642		  	$	547,250		  	$	157,054	
						
	 Net income attributable to:
	 				 				  				  				  			
	 Stapled unitholders
	 				 	$	316,911		  	$	75,657	 	  	$	547,044	 	  	$	156,953	 
	 Non-controlling
interests
	 	 	 	 	 	 	63		  	 	(15	) 	  	 	206		  	 	101	 
	 	 	 	 	 	 	$	316,974		  	$	75,642		  	$	547,250		  	$	157,054	

 See accompanying notes 

  
 Granite REIT 2021 Second Quarter
Report    57 













 Condensed Combined Statements of Comprehensive Income (Loss) 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	 	  	 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 
	  	 	Note	 	 	2021	 	 	2020	 	 	2021	 	 	2020	 
	 Net income
	 				 	$	316,974		 	$	75,642		 	$	547,250		 	$	157,054	
						
	 Other comprehensive (loss) income:
	 				 				 				 				 			
	 Foreign currency translation adjustment(1)
	 				 	 	(34,117	) 	 	 	(95,491	) 	 	 	(164,079	) 	 	 	164,148	
	 Unrealized gain (loss) on net investment hedges, includes income
taxes of nil(1)
	 	 	7(b)	 	 	 	26,452		 	 	12,433	 	 	 	93,419	 	 	 	(44,346	) 
	 Total other comprehensive (loss) income
	 	 	 	 	 	 	(7,665	) 	 	 	(83,058	) 	 	 	(70,660	) 	 	 	119,802	 
	 Comprehensive income (loss)
	 	 	 	 	 	$	309,309	 	 	$	(7,416	) 	 	$	476,590	 	 	$	276,856	 
	  
 (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 (loss) attributable to:
	  
	 				 			
						
	 Stapled unitholders
	 				 	$	309,220	 	 	$	(7,399	) 	 	$	476,427	 	 	$	276,735	 
	 Non-controlling
interests
	 	 	 	 	 	 	89		 	 	(17	) 	 	 	163		 	 	121	
	 	 	 	 	 	 	$	309,309	 	 	$	(7,416	) 	 	$	476,590	 	 	$	276,856	 

 See accompanying notes 

  
 58    Granite REIT 2021 Second
Quarter Report 













 Condensed Combined Statements of Unitholders’ Equity 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																																	
	Six Months Ended June 30, 2021	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 
	  	 	 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, 2021
	 	 	61,688		 	$	3,139,194	 	 	$	53,326	 	 	$	631,649	 	 	$	95,900	 	 	$	3,920,069	 	 	$	2,135	 	 	$	3,922,204	 
	 Net income
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	547,044		 	 	—	 	 	 	547,044		 	 	206		 	 	547,250	
	 Other comprehensive loss
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(70,617	) 	 	 	(70,617	) 	 	 	(43	) 	 	 	(70,660	) 
	 Stapled unit offering, net of issuance costs (note 11(c))
	 	 	3,979		 	 	303,131		 	 	—	 	 	 	—	 	 	 	—	 	 	 	303,131		 	 	—	 	 	 	303,131	
	 Distributions (note 10)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(93,544	) 	 	 	—	 	 	 	(93,544	) 	 	 	(144	) 	 	 	(93,688	) 
	 Contributions from non-controlling interests
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	14		 	 	14	
	 Units issued under the stapled unit plan (note 11(a))
	 	 	17		 	 	1,317		 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,317		 	 	—	 	 	 	1,317	
	 As at June 30, 2021
	 	 	65,684		 	$	3,443,642	 	 	$	53,326	 	 	$	1,085,149	 	 	$	25,283	 	 	$	4,607,400	 	 	$	2,168	 	 	$	4,609,568	 
									
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Six Months Ended June 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
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	156,953		 	 	—	 	 	 	156,953		 	 	101		 	 	157,054	
	 Other comprehensive income
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	119,782		 	 	119,782		 	 	20		 	 	119,802	
	 Stapled unit offering, net of issuance costs (note 11(c))
	 	 	4,255		 	 	276,918		 	 	—	 	 	 	—	 	 	 	—	 	 	 	276,918		 	 	—	 	 	 	276,918	
	 Distributions (note 10)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(79,060	) 	 	 	—	 	 	 	(79,060	) 	 	 	(130	) 	 	 	(79,190	) 
	 Contributions from non-controlling interests
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	72		 	 	72	
	 Units issued under the stapled unit plan (note 11(a))
	 	 	22		 	 	1,278		 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,278		 	 	—	 	 	 	1,278	
	 Units repurchased for cancellation (note 11(b))
	 	 	(491	) 	 	 	(23,689	) 	 	 	(1,328	) 	 	 	—	 	 	 	—	 	 	 	(25,017	) 	 	 	—	 	 	 	(25,017	) 
	 As at June 30, 2020
	 	 	57,838		 	$	2,862,557	 	 	$	53,326	 	 	$	445,142	 	 	$	235,972	 	 	$	3,596,997	 	 	$	2,030	 	 	$	3,599,027	 

 See accompanying notes 

  
 Granite REIT 2021 Second Quarter
Report    59 













 Condensed Combined Statements of Cash Flows 

(Canadian dollars in thousands) 
 (Unaudited) 

 

																					
	  	  	  	 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 
	  	  	Note	 	 	2021	 	 	2020	 	 	2021	 	 	2020	 
	 OPERATING ACTIVITIES
	  				 				 				 				 			
						
	 Net income
	  				 	$	316,974		 	$	75,642		 	$	547,250	 	 	$	157,054	
	 Items not involving operating cash flows
	  	 	14(a)	 	 	 	(254,786	) 	 	 	(19,633	) 	 	 	(422,685	) 	 	 	(43,330	) 
	 Current income tax expense
	  	 	13(a)	 	 	 	4,301		 	 	2,099		 	 	6,303		 	 	3,376	
	 Income taxes (paid) recovered
	  				 	 	(820	) 	 	 	(397	) 	 	 	(1,788	) 	 	 	23	
	 Interest expense
	  				 	 	9,316		 	 	7,365		 	 	19,413		 	 	13,584	
	 Interest paid
	  				 	 	(8,579	) 	 	 	(6,947	) 	 	 	(14,388	) 	 	 	(12,304	) 
	 Changes in working capital balances
	  	 	14(b)	 	 	 	(1,671	) 	 	 	7,040		 	 	(5,065	) 	 	 	1,628	
	 Cash provided by operating activities
	  	 	 	 	 	 	64,735		 	 	65,169		 	 	129,040		 	 	120,031	
						
	 INVESTING ACTIVITIES
	  				 				 				 				 			
						
	 Investment properties:
	  				 				 				 				 			
	 Property acquisitions
	  	 	3	 	 	 	(133,376	) 	 	 	(331,805	) 	 	 	(219,289	) 	 	 	(360,754	) 
	 Proceeds from disposals, net
	  	 	4, 5	 	 	 	12,809		 	 	—	 	 	 	23,204		 	 	—	 
	 Leasing commissions paid
	  				 	 	(390	) 	 	 	—	 	 	 	(880	) 	 	 	—	 
	 Tenant allowances paid
	  				 	 	(144	) 	 	 	—	 	 	 	(301	) 	 	 	(241	) 
	 Additions to income-producing properties
	  				 	 	(783	) 	 	 	(1,083	) 	 	 	(783	) 	 	 	(3,318	) 
	 Additions to properties under development
	  				 	 	(4,865	) 	 	 	(26,122	) 	 	 	(17,286	) 	 	 	(32,194	) 
	 Construction funds released from escrow
	  	 	6		 	 	—	 	 	 	4,291		 	 	28		 	 	6,591	
	 Acquisition deposits
	  				 	 	(1,000	) 	 	 	(72,450	) 	 	 	(1,000	) 	 	 	(89,879	) 
	 Fixed asset additions
	  	 	 	 	 	 	(373	) 	 	 	(156	) 	 	 	(397	) 	 	 	(734	) 
	 Cash used in investing activities
	  	 	 	 	 	 	(128,122	) 	 	 	(427,325	) 	 	 	(216,704	) 	 	 	(480,529	) 
						
	 FINANCING ACTIVITIES
	  				 				 				 				 			
						
	 Monthly distributions paid
	  				 	 	(46,288	) 	 	 	(38,890	) 	 	 	(92,551	) 	 	 	(78,140	) 
	 Proceeds from unsecured debentures, net of financing costs
	  				 	 	—	 	 	 	497,894		 	 	—	 	 	 	497,894	
	 Repayment of lease obligations
	  	 	8		 	 	(177	) 	 	 	(366	) 	 	 	(359	) 	 	 	(444	) 
	 Repayment of unsecured debt, including early redemption premium
	  	 	7(a)	 	 	 	—	 	 	 	—	 	 	 	(253,963	) 	 	 	—	 
	 Settlement of cross currency interest rate swap
	  	 	7(a)	 	 	 	—	 	 	 	—	 	 	 	(18,787	) 	 	 	—	 
	 Financing costs paid
	  	 	6	 	 	 	—	 	 	 	—	 	 	 	(2,914	) 	 	 	(30	) 
	 Distributions to non-controlling interests
	  				 	 	(144	) 	 	 	(130	) 	 	 	(144	) 	 	 	(130	) 
	 Proceeds from stapled unit offerings, net of issuance costs
	  	 	11(c)	 	 	 	303,132		 	 	277,511		 	 	303,132		 	 	277,511	
	 Repurchase of stapled units
	  	 	11(b)	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(25,017	) 
	 Cash provided by (used in) financing activities
	  	 	 	 	 	 	256,523		 	 	736,019		 	 	(65,586	) 	 	 	671,644	
	 Effect of exchange rate changes on cash and cash
equivalents
	  	 	 	 	 	 	4,295		 	 	1,313		 	 	112		 	 	7,425	
	 Net increase (decrease) in cash and cash equivalents during the period
	  				 	 	197,431		 	 	375,176		 	 	(153,138	) 	 	 	318,571	
	 Cash and cash equivalents, beginning of period
	  	 	 	 	 	 	480,711		 	 	242,072		 	 	831,280		 	 	298,677	
	 Cash and cash equivalents, end of period
	  	 	 	 	 	$	678,142	 	 	$	617,248	 	 	$	678,142	 	 	$	617,248	 

 See accompanying notes 

  
 60    Granite REIT 2021 Second
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 August 4, 2021. 
  

	
	 2.  SIGNIFICANT
ACCOUNTING POLICIES


  

	(a)	 Basis of Presentation and Statement of Compliance 



The condensed combined financial statements for the three and six month periods ended June 30, 2021 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, 2020. 
  

	(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 

  
 Granite REIT 2021 Second Quarter
Report    61 













 
subsidiaries continue to be consolidated until the date that such control ceases. Control exists 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, 2020. 
  

	(d)	 Future Accounting Policy Changes 



As at June 30, 2021, there are no new accounting standards issued but not yet applicable to the condensed combined financial statements. 

 

	(e)	 COVID-19 Pandemic 



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 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 six month periods ended June 30, 2021, there has not been any significant impact on Granite’s operations, assets or
liabilities as a result of COVID-19. Throughout the pandemic thus far, Granite has collected 100% of rents due and therefore has not recognized any provisions for uncollected rent at this time. Granite
reviewed its future cash flow projections and the valuation of its properties considering the impacts of the COVID-19 pandemic during the six month period ended June 30, 2021 and Granite does not expect,
at this time, that COVID-19 will have a significant negative impact to the fair value of its investment property portfolio. 

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 June 30, 2021 (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 additional emergency measures, cannot be predicted. As such, the length and full
scope of the economic 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. 

  
 62    Granite REIT 2021 Second
Quarter Report 














	
	
3.  ACQUISITIONS


 During the six month period ended June 30, 2021 and 2020, Granite made the following property acquisitions: 

Acquisitions During The Six Months Ended June 30, 2021 
  

																					
	Property	  	Location	 	  	Date acquired	 	  	Property
purchase
price	 	  	 Transaction

costs
	 	  	Total
acquisition
cost	 
	 Income-producing properties:
	  				  				  				  				  			
	 3090 Highway 42(1)
	  	 
	Locust Grove,
GA	 
 	  	 	March 12, 2021	 	  	$	85,512	 	  	$	401	 	  	$	85,913	 
	 3801 Rock Creek Blvd.
	  	 	Joliet, IL	 	  	 	June 25, 2021	 	  	 	30,247		  	 	75		  	 	30,322	
	 3900 Rock Creek Blvd.
	  	 	Joliet, IL	 	  	 	June 25, 2021	 	  	 	34,673		  	 	85		  	 	34,758	
	 1695-1701 Crossroads Dr.
	  	 	Joliet, IL	 	  	 	June 25, 2021	 	  	 	50,657		  	 	118		  	 	50,775	
		  				  				  	 	201,089		  	 	679		  	 	201,768	
	 Property under development:
	  				  				  				  				  			
	 2120 Logistics Way
	  	 
	Murfreesboro,
TN	 
 	  	 	June 30, 2021	 	  	 	17,308		  	 	213		  	 	17,521	
	 	  	 	 	 	  	 	 	 	  	$	218,397	 	  	$	892	 	  	$	219,289	 

  

	(1) 	 	 The Trust acquired the leasehold interest in the property which resulted in the recognition of a right-of-use asset, including transaction costs, of $85,913. The Trust will acquire freehold title to the property on December 1, 2028. 



The property under development in Murfreesboro, Tennessee is expected to be completed by September 2022. As at June 30, 2021, the remaining costs to
complete the development are expected to be approximately $64.7 million (US$52.2 million) and are included in the commitments and contingencies note (note 17). 

Acquisitions During The Six Months Ended June 30, 2020 
  

																					
	Property	 	Location	 	 	Date acquired	 	 	Property
purchase
price	 	 	 Transaction

costs
	 	 	Total
acquisition
cost	 
	 Property under development:
	 				 				 				 				 			
	 Aquamarijnweg 2
	 	 
	Bleiswijk,
Netherlands	 
 	 	 	March 13, 2020	 	 	$	28,804	 	 	$	145	 	 	$	28,949	 
	 Income-producing properties:
	 				 				 				 				 			
	 Oude Graaf 15
	 	 	Weert, Netherlands	 	 	 	May 1, 2020	 	 	 	31,910		 	 	173		 	 	32,083	
	 Midwest portfolio (four 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		 	 	757		 	 	178,404	
	 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		 	 	464		 	 	112,054	
		 				 				 	 	321,147		 	 	1,394		 	 	322,541	
	 Development land:
	 				 				 				 				 			
	 5005 Parker Henderson Road
	 	 	Fort Worth, TX	 	 	 	June 8, 2020	 	 	 	8,932		 	 	332		 	 	9,264	
	 	 	 	 	 	 	 	 	 	 	$	358,883	 	 	$	1,871	 	 	$	360,754	 


  
 Granite REIT 2021 Second Quarter
Report    63 













 During the six month period ended June 30, 2021, transaction costs of $0.9 million (2020
— $1.9 million), which included legal and advisory costs, were first capitalized to the cost of the respective properties 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	  	June 30,
2021	 	  	December 31,
2020	 
	 Income-producing properties
	  	$	6,307,725	 	  	$	5,786,338	 
	 Properties under development
	  	 	60,949		  	 	31,488	
	 Land held for development
	  	 	27,886		  	 	37,757	
	 	  	$	6,396,560	 	  	$	5,855,583	 

 Changes in investment properties are shown in the following table: 

 

																																	
	  	 	 Six Months Ended

June 30, 2021
	 	 	  	 	 	  	 	 	 Year Ended

December 31, 2020
	 
	  	 	Income-
producing
properties	 	 	Properties
under
development	 	 	Land held
for
development	 	 	  	 	 	  	 	 	Income-
producing
properties	 	 	 Properties

under
development
	 	 	Land held
for
development	 
	 Balance, beginning of period
	 	$	5,786,338	 	 	$	31,488	 	 	$	37,757	 	 				 				 	$	4,377,623	 	 	$	51,310	 	 	$	28,966	 
	 Maintenance or improvements
	 	 	1,582		 	 	—	 	 	 	—	 	 				 				 	 	3,997		 	 	—	 	 	 	—	 
	 Leasing commissions
	 	 	177		 	 	—	 	 	 	—	 	 				 				 	 	3,449		 	 	—	 	 	 	—	 
	 Tenant allowances
	 	 	301		 	 	—	 	 	 	—	 	 				 				 	 	1,784		 	 	—	 	 	 	—	 
	 Developments or expansions
	 	 	2,071		 	 	4,745		 	 	—	 	 				 				 	 	12,582		 	 	39,083		 	 	458	
	 Acquisitions (note 3)
	 	 	201,768		 	 	17,521		 	 	—	 	 				 				 	 	1,000,618		 	 	35,777		 	 	9,264	
	 Costs to complete acquired property (note 6)
	 	 	28		 	 	—	 	 	 	—	 	 				 				 	 	8,622		 	 	—	 	 	 	—	 
	 Disposals (note 5)
	 	 	(23,780	) 	 	 	—	 	 	 	—	 	 				 				 	 	(31,276	) 	 	 	—	 	 	 	—	 
	 Transfer to properties under development
	 	 	—	 	 	 	8,952		 	 	(8,952	) 	 				 				 	 	—	 	 	 	—	 	 	 	—	 
	 Transfer to income-producing properties
	 	 	—	 	 	 	—	 	 	 	—	 	 				 				 	 	97,733		 	 	(97,733	) 	 	 	—	 
	 Amortization of straight-line rent
	 	 	4,847		 	 	—	 	 	 	—	 	 				 				 	 	8,842		 	 	—	 	 	 	—	 
	 Amortization of tenant allowances
	 	 	(2,599	) 	 	 	—	 	 	 	—	 	 				 				 	 	(5,321	) 	 	 	—	 	 	 	—	 
	 Other changes
	 	 	203		 	 	—	 	 	 	—	 	 				 				 	 	(16	) 	 	 	—	 	 	 	—	 
	 Fair value gains (losses), net
	 	 	517,541		 	 	—	 	 	 	—	 	 				 				 	 	273,914		 	 	(145	) 	 	 	(332	) 
	 Foreign currency translation, net
	 	 	(180,752	) 	 	 	(1,757	) 	 	 	(919	) 	 	 	 	 	 	 	 	 	 	 	33,787		 	 	3,196		 	 	(599	) 
	 Balance, end of period
	 	$	6,307,725	 	 	$	60,949		 	$	27,886		 	 	 	 	 	 	 	 	 	$	5,786,338	 	 	$	31,488		 	$	37,757	 

 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


  
 64    Granite REIT 2021 Second
Quarter Report 













 
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. 
 Included in investment properties is $31.2 million (December 31, 2020 —
$27.2 million) of net straight-line rent receivables 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 17).

 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	 	June 30, 2021	 	 	  	 	 	  	 	 	December 31, 2020	 
	  	 	Weighted
average(1)	 	 	Maximum	 	 	Minimum	 	 	  	 	 	  	 	 	Weighted
average(1)	 	 	Maximum	 	 	Minimum	 
	 Canada
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	5.38%	 	 	 	5.75%	 	 	 	4.75%	 	 				 				 	 	5.71%	 	 	 	6.25%	 	 	 	5.25%	 
	 Terminal capitalization rate
	 	 	4.80%	 	 	 	5.25%	 	 	 	4.25%	 	 				 				 	 	5.22%	 	 	 	5.50%	 	 	 	4.75%	 
	 United States
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	5.87%	 	 	 	9.25%	 	 	 	5.00%	 	 				 				 	 	6.18%	 	 	 	9.25%	 	 	 	5.00%	 
	 Terminal capitalization rate
	 	 	5.22%	 	 	 	8.50%	 	 	 	4.25%	 	 				 				 	 	5.58%	 	 	 	8.50%	 	 	 	4.75%	 
	 Germany
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	6.73%	 	 	 	9.75%	 	 	 	5.25%	 	 				 				 	 	6.85%	 	 	 	9.00%	 	 	 	5.50%	 
	 Terminal capitalization rate
	 	 	5.63%	 	 	 	8.75%	 	 	 	4.25%	 	 				 				 	 	5.83%	 	 	 	8.25%	 	 	 	4.50%	 
	 Austria
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	8.58%	 	 	 	10.50%	 	 	 	8.25%	 	 				 				 	 	8.58%	 	 	 	10.50%	 	 	 	8.25%	 
	 Terminal capitalization rate
	 	 	7.47%	 	 	 	9.75%	 	 	 	7.00%	 	 				 				 	 	7.47%	 	 	 	9.75%	 	 	 	7.00%	 
	 Netherlands
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	4.59%	 	 	 	6.50%	 	 	 	3.70%	 	 				 				 	 	4.99%	 	 	 	6.25%	 	 	 	4.40%	 
	 Terminal capitalization rate
	 	 	5.24%	 	 	 	7.75%	 	 	 	3.90%	 	 				 				 	 	5.58%	 	 	 	7.40%	 	 	 	4.80%	 
	 Other
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	6.85%	 	 	 	7.00%	 	 	 	6.75%	 	 				 				 	 	7.32%	 	 	 	7.50%	 	 	 	7.00%	 
	 Terminal capitalization rate
	 	 	6.30%	 	 	 	6.50%	 	 	 	6.00%	 	 				 				 	 	6.97%	 	 	 	9.75%	 	 	 	6.00%	 
	 Total
	 				 				 				 				 				 				 				 			
	 Discount rate
	 	 	6.05%	 	 	 	10.50%	 	 	 	3.70%	 	 				 				 	 	6.38%	 	 	 	10.50%	 	 	 	4.40%	 
	 Terminal capitalization rate
	 	 	5.45%	 	 	 	9.75%	 	 	 	3.90%	 	 	 	 	 	 	 	 	 	 	 	5.82%	 	 	 	9.75%	 	 	 	4.50%	 

  

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



  
 Granite REIT 2021 Second Quarter
Report    65 














	
	
5.  DISPOSITIONS


 During the six month period ended June 30, 2021, Granite disposed of two properties located in the United Kingdom
and Austria. The details of the disposed properties are as follows: 
  

													
	Property	  	Location	 	  	Date disposed	 	  	Sale price	 
	 Hedera Road, Ravensbank Business Park
	  	 	Redditch, United Kingdom	 	  	 	January 28, 2021	 	  	$	10,550	 
	 Puchberger Straße 267
	  	 	Weikersdorf, Austria	 	  	 	June 30, 2021	 	  	 	13,230	
	 	  	 	 	 	  	 	 	 	  	$	23,780	 

 There were no property dispositions during the six month period ended June 30, 2020. 

During the three and six month periods ended June 30, 2021, Granite incurred $0.4 million (2020 — nil) and $0.6 million (2020 —
nil), respectively, of broker commissions and legal and advisory costs associated with the disposal which are included in loss on sale of investment properties on the condensed combined statements of net income. 

 

	
	
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 June 30, 2021,
$8.1 million (US$6.6 million) remained in escrow (December 31, 2020 — $8.4 million (US$6.6 million)). As construction is completed, the construction costs are capitalized to the cost of the investment property. During the six month
period ended June 30, 2021, less than $0.1 million (less than US$0.1 million) was released from escrow and capitalized to the property (note 4) (2020 — $6.6 million (US$4.8 million)). 

Other Assets 
  

									
	As at	  	June 30,
2021	 	  	December 31,
2020	 
	 Deferred financing costs associated with the revolving credit facility
	  	$	2,760	 	  	$	599	 
	 Long-term receivables
	  	 	321		  	 	349	
	 	  	$	3,081	 	  	$	948	 

 On March 31, 2021, the Trust amended its existing unsecured revolving credit facility agreement to extend the
existing maturity date from February 1, 2023 to March 31, 2026 and increased its borrowing capacity under the credit facility from $0.5 billion to $1.0 billion (note 9), resulting in financing costs of $2.9 million being
incurred. In addition, during the six month period ended June 30, 2021, Granite recorded an acceleration of $0.5 million amortization for its original credit facility’s financing costs (note 12(d)) (2020 — nil). 

  
 66    Granite REIT 2021 Second
Quarter Report 














	
	 7.  UNSECURED DEBT AND
CROSS CURRENCY INTEREST RATE SWAPS


  

	(a)	 Unsecured Debentures and Term Loans, Net 



 

																					
	As at	 	  	 	 	June 30, 2021	 	 	December 31, 2020	 
	  	 	Maturity Date	 	 	Amortized
Cost(1)	 	 	 Principal

issued and
outstanding
	 	 	Amortized
Cost(1)	 	 	 Principal

issued and
outstanding
	 
	 2021 Debentures
	 	 	July 5, 2021	 	 	$	—		 	$	—		 	$	249,870		 	$	250,000	
	 2023 Debentures
	 	 	November 30, 2023	 	 	 	399,226		 	 	400,000		 	 	399,066		 	 	400,000	
	 2027 Debentures
	 	 	June 4, 2027	 	 	 	497,397		 	 	500,000		 	 	497,179		 	 	500,000	
	 2030 Debentures
	 	 	December 18, 2030	 	 	 	497,189		 	 	500,000		 	 	497,060		 	 	500,000	
	 2024 Term Loan
	 	 	December 19, 2024	 	 	 	229,019		 	 	229,483		 	 	235,419		 	 	235,949	
	 2026 Term Loan
	 	 	December 11, 2026	 	 	 	299,567		 	 	300,000		 	 	299,528		 	 	300,000	
	 	 	 	 	 	 	$	1,922,398	 	 	$	1,929,483	 	 	$	2,178,122	 	 	$	2,185,949	 

  

	(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	  	June 30,
2021	 	  	December 31,
2020	 
	 Unsecured Debentures and Term Loans, Net
	  				  			
	 Non-current
	  	$	1,922,398		  	$	1,928,252	
	 Current
	  	 	—	 	  	 	249,870	
	 	  	$	1,922,398	 	  	$	2,178,122	 

 On January 4, 2021, the Trust redeemed in full the outstanding $250.0 million aggregate principal amount of
the 2021 Debentures. Granite incurred early redemption premium of $4.0 million, which have been recorded in interest expense and other financing costs in the condensed combined statement of net income (note 12(d)). In conjunction with the
redemption, the 2021 Cross Currency Interest Rate Swap was terminated on January 4, 2021, and the related mark to market liability of $18.8 million was settled. 
  

	(b)	 Cross Currency Interest Rate Swaps 



 

									
	As at	  	June 30,
2021	 	 	December 31,
2020	 
	 Financial assets at fair value
	  				 			
	 2027 Cross Currency Interest Rate Swap
	  	$	38,300		 	$	28,676	
	 2030 Cross Currency Interest Rate Swap
	  	 	10,516		 	 	—	 
		  	$	48,816		 	$	28,676	
	 Financial liabilities at fair value
	  				 			
	 2021 Cross Currency Interest Rate Swap
	  	$	—	 	 	$	16,953	
	 2023 Cross Currency Interest Rate Swap
	  	 	12,351		 	 	36,540	
	 2030 Cross Currency Interest Rate Swap
	  	 	—	 	 	 	10,545	
	 2024 Cross Currency Interest Rate Swap
	  	 	16,300		 	 	25,370	
	 2026 Cross Currency Interest Rate Swap
	  	 	820		 	 	24,856	
	 	  	$	29,471		 	$	114,264	


  
 Granite REIT 2021 Second Quarter
Report    67 














									
	As at	  	June 30,
2021	 	  	December 31,
2020	 
	 Financial liabilities at fair value
	  				  			
	 Non-current
	  	$	29,471		  	$	97,311	
	 Current
	  	 	—	 	  	 	16,953	
	 	  	$	29,471		  	$	114,264	

 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 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 January 4, 2021, the 2021 Cross Currency Interest Rate Swap was terminated in conjunction
with the redemption of the 2021 Debentures (note 7(a)). 
 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 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 LIBOR plus margin monthly interest payments from 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 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. 
 On
December 18, 2020, the Trust entered into a cross currency interest rate swap (the “2030 Cross Currency Interest Rate Swap”) to exchange the 2.378% semi-annual interest payments from the 2030 Debentures for Euro denominated interest
payments at a 1.045% fixed interest rate. In addition, under the terms of the swap, the Trust will pay principal proceeds of €319.4 million in exchange for which it will receive
$500.0 million on December 18, 2030. 
 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 is assessed quarterly. Gains 

  
 68    Granite REIT 2021 Second
Quarter Report 













 
and losses associated with the effective portion of the hedges are recognized in other comprehensive income. For the three and six month periods ended June 30, 2021, the Trust has assessed
the net investment hedge associated with each cross currency interest rate swap, except for the 2021 Cross Currency Interest Rate Swap and a portion of the 2024 Cross Currency Interest Rate Swap, to be effective. 

On December 18, 2020, as a result of the designation of the 2030 Cross Currency Interest Rate Swap, the Trust
de-designated the 2021 Cross Currency Interest Rate Swap. Since the Trust did not employ hedge accounting for the 2021 Cross Currency Interest Rate Swap from the period January 1 to January 3, 2021,
a fair value loss of $0.7 million is recognized in fair value losses on financial instruments, net (note 12(e)) in the condensed combined statement of net income. 

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 is recorded in other comprehensive income. For the three and six
month periods ended June 30, 2021, 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 $0.6 million and
$0.9 million is recognized in fair value losses on financial instruments, net (note 12(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. 
  

	
	 8.  LEASE
OBLIGATIONS


 As at June 30, 2021, 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. 
 Future minimum lease payments relating to the
right-of-use assets as at June 30, 2021 in aggregate for the next five years and thereafter are as follows: 

 

					
	 Remainder of 2021
	  	$	427	
	 2022
	  	 	535	
	 2023
	  	 	321	
	 2024
	  	 	294	
	 2025
	  	 	261	
	 2026 and thereafter
	  	 	30,918	
	 	  	$	32,756	 

 During the three and six month periods ended June 30, 2021, the Trust recognized $0.3 million (2020 — $0.4
million) and $0.8 million (2020 — $0.8 million) of interest expense, respectively, related to lease obligations (note 12(d)). 

  
 Granite REIT 2021 Second Quarter
Report    69 














	
	 9.  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 March 31, 2021, the Trust amended its existing unsecured revolving credit facility agreement to extend the existing maturity date of
February 1, 2023 to March 31, 2026. In addition, the credit facility’s limit increased from $0.5 billion to $1.0 billion. Draws on the credit facility are available by way of Canadian dollar, US dollar or Euro denominated
loans or Canadian dollar or US dollar denominated letters of credit. The credit facility provides Granite the ability to increase the amount of the commitment by an additional aggregate principal amount of up to $500.0 million with the consent
of the participating lenders. As at June 30, 2021, the Trust had no amounts drawn (December 31, 2020 — nil) from the credit facility and $1.7 million (December 31, 2020 — $1.0 million) in letters of credit issued against the
facility. 
 Accounts Payable and Accrued Liabilities 
  

									
	As at	  	June 30,
2021	 	  	December 31,
2020	 
	 Accounts payable
	  	$	2,256	 	  	$	3,849	 
	 Commodity tax payable
	  	 	5,807		  	 	4,337	
	 Tenant security deposits
	  	 	6,143		  	 	6,793	
	 Employee unit-based compensation
	  	 	7,824		  	 	7,118	
	 Trustee/director unit-based compensation
	  	 	6,291		  	 	5,219	
	 Accrued salaries, incentives and benefits
	  	 	3,328		  	 	5,783	
	 Accrued interest payable
	  	 	2,952		  	 	7,956	
	 Accrued construction payable
	  	 	1,985		  	 	6,285	
	 Accrued professional fees
	  	 	1,621		  	 	2,620	
	 Accrued property operating costs
	  	 	10,849		  	 	8,878	
	 Other tenant related liabilities
	  	 	3,624		  	 	1,690	
	 Other accrued liabilities
	  	 	3,569		  	 	669	
	 	  	$	56,249	 	  	$	61,197	 

  

	
	 10.  DISTRIBUTIONS TO
STAPLED UNITHOLDERS


 Total distributions declared to stapled unitholders in the three month period ended June 30, 2021 were
$47.3 million (2020 — $39.9 million) or 75.0 cents per stapled unit (2020 — 72.6 cents per stapled unit). Total distributions declared to stapled unitholders in the six month period ended June 30, 2021 were $93.5 million
(2020 — $79.1 million) or $1.50 per stapled unit (2020 — $1.45 per stapled unit). 
 Distributions payable at June 30, 2021 of
$16.4 million (25.0 cents per stapled unit), representing the June 2021 monthly distribution, were paid on July 15, 2021. Distributions payable at December 31, 2020 of $15.4 million were paid on January 15, 2021 and
represented the December 2020 monthly distribution. 
 Subsequent to June 30, 2021, the distributions declared in July 2021 in the amount of
$16.4 million or 25.0 cents per stapled unit will be paid on August 16, 2021. 

  
 70    Granite REIT 2021 Second
Quarter Report 














	
	 11.  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 June 30, 2021 and December 31, 2020, there were no options outstanding under this plan. 

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: 

 

																					
	  	  	2021	 	  	  	 	  	2020	 
	  	  	Number
(000s)	 	  	Weighted Average
Grant Date
Fair Value	 	  	  	 	  	Number
(000s)	 	  	Weighted Average
Grant Date
Fair Value	 
	 DSUs outstanding, January 1
	  	 	67		  	$	52.93	 	  				  	 	50		  	$	48.01	 
	 Granted
	  	 	9		  	 	78.22		  	 	 	 	  	 	8		  	 	66.31	
	 DSUs outstanding, June 30
	  	 	76		  	$	56.01	 	  	 	 	 	  	 	58		  	$	50.70	 

 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: 
  

																					
	  	 	2021	 	  	  	 	  	2020	 
	  	 	Number
(000s)	 	 	 Weighted Average
Grant Date

Fair Value
	 	  	  	 	  	Number
(000s)	 	 	 Weighted Average

Grant Date
 Fair Value
	 
	 RSUs and PSUs outstanding, January 1
	 	 	128		 	$	59.83	 	  				  	 	145		 	$	55.93	 
	 New grants and distributions(1) 
	 	 	49		 	 	78.24		  				  	 	52		 	 	66.39	
	 Forfeited
	 	 	—	 	 	 	—	 	  				  	 	(1	) 	 	 	67.66	
	 Settled in cash
	 	 	(13	) 	 	 	60.09		  				  	 	(23	) 	 	 	55.35	
	 Settled in stapled units
	 	 	(17	) 	 	 	60.09		  	 	 	 	  	 	(22	) 	 	 	55.35	
	 RSUs and PSUs outstanding, June 30(2)
	 	 	147		 	$	65.58	 	  	 	 	 	  	 	151		 	$	59.57	 

  

	(1)	 	 Includes 18.7 RSUs and 25.0 PSUs granted during the six month period ended June 30, 2021 (2020 — 20.8 RSUs and
26.5 PSUs). 



	(2)	 	 Total restricted stapled units outstanding at June 30, 2021 include a total of 69.8 RSUs and 76.8 PSUs granted (2020
— 94.1 RSUs and 56.8 PSUs). 



  
 Granite REIT 2021 Second Quarter
Report    71 













 The fair value of the outstanding RSUs was $4.9 million at June 30, 2021 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 9). 

The fair value of the outstanding PSUs was $2.9 million at June 30, 2021 and is recorded as a liability in the employee unit-based
compensation payables (note 9). The fair value is calculated using the Monte-Carlo simulation model based on the assumptions below as well as a 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, 2021, January 1, 2020, January 1, August 12 and
September 24, 2019	 
	 PSUs granted
	  	 	76,100	
	 Term to expiry
	  	 	2.5 years	 
	 Average volatility rate
	  	 	34.5%	 
	 Weighted average risk free interest rate
	  	 	0.4%	 

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

 

																					
	  	 	
Three Months Ended

June 30,
	 	  	  	 	  	
Six Months Ended

June 30,
	 
	  	 	2021	 	  	2020	 	  	  	 	  	2021	 	    	2020	 
	 DSUs for trustees/directors (1)
	 	$	742		  	$	1,147	 	  				  	$	1,045	 	    	$	630	 
	 Restricted Stapled Unit Plan for executives and employees
	 	 	1,727		  	 	2,079		  	 	 	 	  	 	3,227		    	 	2,374	
	 Unit-based compensation expense
	 	$	2,469		  	$	3,226	 	  	 	 	 	  	$	4,272	 	    	$	3,004	 
	 Fair value remeasurement expense included in the above:
	 				  				  				  				    			
	 ● DSUs for trustees/directors 
	 	$	420		  	$	853	 	  				  	$	310	 	    	$	116	 
	 ● Restricted
Stapled Unit Plan for executives and employees
	 	 	624		  	 	1,021		  	 	 	 	  	 	621		    	 	259	
	 Total fair value remeasurement expense
	 	$	1,044		  	$	1,874	 	  	 	 	 	  	$	931		    	$	375	 

  

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



 

	(b)	 Normal Course Issuer Bid 



On May 19, 2021, 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
6,154,057 of Granite’s issued and outstanding stapled units. The NCIB commenced on May 21, 2021 and will conclude on the earlier of the date on which purchases under the bid have been completed and May 20, 2022. Pursuant to the
policies of the TSX, daily purchases made by Granite through the TSX may not exceed 46,074 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, 2020 to May 20,
2021. 

  
 72    Granite REIT 2021 Second
Quarter Report 













 During the six month period ended June 30, 2021, there were no stapled unit repurchases under the
NCIB. During the six month period ended June 30, 2020, Granite repurchased 490,952 stapled units at an average stapled unit cost of $50.95 for total consideration of $25.0 million. The difference between the repurchase price and the
average cost of the stapled units of $1.3 million was recorded to contributed surplus. 
  

	(c)    Stapled	 Unit Offerings 



On June 9, 2021, Granite completed an offering of 3,979,000 stapled units at a price of $79.50 per unit for gross proceeds of $316.3 million,
including 519,000 stapled units issued pursuant to the exercise of the over-allotment option granted to the underwriters. Total costs related to the offering totaled $13.2 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 $303.1 million. 
 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. 
  

	(d)    Accumulated	 Other Comprehensive Income 



Accumulated other comprehensive income consists of the following: 
  

									
	As at June 30,	  	2021	 	 	2020	 
	 Foreign currency translation gains on investments in subsidiaries, net of related hedging activities and non-controlling interests(1)
	  	$	30,599	 	 	$	311,565	 
	 Fair value losses on derivatives designated as net investment
hedges
	  	 	(5,316	) 	 	 	(75,593	) 
	 	  	$	25,283	 	 	$	235,972	 

  

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


  

	
	 12.  RENTAL REVENUE,
RECOVERIES, COSTS AND EXPENSES


  

	(a)	 Rental revenue consists of: 



 

																			
	  	  	
Three Months Ended

June 30,
	 	 	  	    	 Six Months Ended

June 30,
	 
	  	  	2021	 	  	2020	 	 	  	    	2021	 	  	2020	 
	 Base rent
	  	$	79,924	 	  	$	71,293	 	 		    	$	160,217	 	  	$	139,683	 
	 Straight-line rent amortization
	  	 	1,737		  	 	1,509		 		    	 	4,847		  	 	2,925	
	 Tenant incentive amortization
	  	 	(1,285	) 	  	 	(1,311	) 	 		    	 	(2,599	) 	  	 	(2,586	) 
	 Property tax recoveries
	  	 	8,807		  	 	6,346		 		    	 	17,015		  	 	12,501	
	 Property insurance recoveries
	  	 	751		  	 	620		 		    	 	1,505		  	 	1,199	
	 Operating cost recoveries
	  	 	4,029		  	 	2,551		 	 	    	 	8,920		  	 	5,336	
	 	  	$	93,963		  	$	81,008		 	 	    	$	189,905	 	  	$	159,058	


  
 Granite REIT 2021 Second Quarter
Report    73 














																			
	 (b)  Property operating costs consist of:

 
	 	  	 
	 	 	Three Months Ended
June 30,	 	 	 	    	 Six Months Ended

June 30,
	 
	  	 	2021	 	    	2020	 	 	  	    	2021	 	    	2020	 
	 Non-recoverable from tenants:
	 				    				 		    				    			
	 Property taxes and utilities
	 	$	191		    	$	213		 		    	$	332		    	$	470	
	 Property insurance
	 	 	151		    	 	70		 		    	 	233		    	 	137	
	 Repairs and maintenance
	 	 	78		    	 	183		 		    	 	141		    	 	328	
	 Property management fees
	 	 	61		    	 	87		 		    	 	163		    	 	164	
	 Professional fees
	 	 	70		    	 	—	 	 		    	 	148		    	 	75	
	 Environmental and appraisals
	 	 	63		    	 	87		 		    	 	129		    	 	237	
	 Other
	 	 	51		    	 	(11	) 	 	 	    	 	127		    	 	22	
	 	 	$	665		    	$	629	 	 	 	    	$	1,273	 	    	$	1,433	 
	 Recoverable from tenants:
	 				    				 		    				    			
	 Property taxes and utilities
	 	$	9,647		    	$	6,992	 	 		    	$	18,835		    	$	13,869	 
	 Property insurance
	 	 	1,076		    	 	720		 		    	 	1,982		    	 	1,396	
	 Repairs and maintenance
	 	 	1,522		    	 	819		 		    	 	4,465		    	 	1,469	
	 Property management fees
	 	 	677		    	 	603		 		    	 	1,355		    	 	1,230	
	 Other
	 	 	47		    	 	80		 	 	    	 	120		    	 	614	
	 	 	$	12,969		    	$	9,214	 	 	 	    	$	26,757	 	    	$	18,578	 
	 Property operating costs
	 	$	13,634		    	$	9,843		 	 	    	$	28,030		    	$	20,011	

  

	(c)	 General and administrative expenses consist of: 



 

																			
	  	 	Three Months Ended
June 30,	 	 	  	    	
Six Months Ended

June 30,
	 
	  	 	2021	 	  	2020	 	 	  	    	2021	 	  	2020	 
	 Salaries, incentives and benefits
	 	$	3,601		  	$	3,234	 	 		    	$	8,577	 	  	$	7,044	 
	 Audit, legal and consulting
	 	 	848		  	 	938		 		    	 	1,625		  	 	1,790	
	 Trustee/director fees including distributions, revaluations and expenses(1)
	 	 	782		  	 	1,194		 		    	 	1,125		  	 	740	
	 RSU and PSU compensation expense including distributions and revaluations(1)
	 	 	1,727		  	 	2,079		 		    	 	3,227		  	 	2,374	
	 Other public entity costs
	 	 	658		  	 	562		 		    	 	1,082		  	 	936	
	 Office rents including property taxes and common area maintenance costs
	 	 	84		  	 	99		 		    	 	202		  	 	198	
	 Capital tax
	 	 	144		  	 	257		 		    	 	292		  	 	340	
	 Information technology costs
	 	 	466		  	 	257		 		    	 	902		  	 	514	
	 Other
	 	 	216		  	 	384		 	 	    	 	326		  	 	795	
		 	$	8,526		  	$	9,004	 	 		    	$	17,358		  	$	14,731	 
	 Less: capitalized general and administrative expenses
	 	 	(193	) 	  	 	(18	) 	 	 	    	 	(204	) 	  	 	(18)	 
	 	 	$	8,333		  	$	8,986		 	 	    	$	17,154		  	$	14,713	

  

	(1)	 	 For fair value remeasurement expense amounts see note 11(a). 



During the three and six month periods ended June 30, 2021, Granite incurred less than $0.1 million of general and administrative expenses
relating to COVID-19 (2020 — $0.1 million). 

  
 74    Granite REIT 2021 Second
Quarter Report 














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



 

																			
	  	  	Three Months Ended
June 30,	 	 	  	  	
Six Months Ended

June 30,
	 
	  	  	2021	 	    	2020	 	 	  	  	2021	 	  	2020	 
	 Interest and amortized issuance costs and modification losses relating to debentures and term
loans
	  	$	8,438		    	$	7,090	 	 		  	$	17,780	 	  	$	12,879	 
	 Early redemption premium relating to 2021 Debentures (note 7(a))
	  	 	—	 	    	 	—	 	 		  	 	3,963		  	 	—	 
	 Amortization of deferred financing costs and other interest expense and charges (note 6)
	  	 	890		    	 	532		 		  	 	1,980		  	 	1,119	
	 Interest expense related to lease obligations (note 8)
	  	 	338		    	 	400		 	 	  	 	796		  	 	793	
		  	$	9,666		    	$	8,022		 		  	$	24,519		  	$	14,791	
	 Less: capitalized interest
	  	 	(63	) 	    	 	(259	) 	 	 	  	 	(122	) 	  	 	(383	) 
	 	  	$	9,603		    	$	7,763		 	 	  	$	24,397		  	$	14,408	

  

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



 

																			
	  	 	Three Months Ended
June 30,	 	 	  	    	
Six Months Ended

June 30,
	 
	  	 	2021	 	    	2020	 	 	  	    	2021	 	    	2020	 
	 Foreign exchange forward contracts, net (note 15(a))
	 	$	—		    	$	395	 	 		    	$	—		    	$	11	 
	 Foreign exchange collar contracts, net (note 15(a))
	 	 	807		    	 	(1,377	) 	 		    	 	742		    	 	(1,377	) 
	 Cross currency interest rate swaps (note 7(b))
	 	 	(658	) 	    	 	4,873		 	 	    	 	(254	) 	    	 	7,151	
	 	 	$	149	 	    	$	3,891	 	 	 	    	$	488	 	    	$	5,785	 

 For the three month period ended June 30, 2021, the fair value gain of $0.6 million is associated with the fair
value movement of the 2024 Cross Currency Interest Rate Swap. For the six month period ended June 30, 2021, the net fair value gain of $0.2 million is associated with the fair value movements of the 2021 Cross Currency Interest Rate Swap
and 2024 Cross Currency Interest Rate Swap. The Trust did not employ or partially employed hedge accounting for the derivatives and therefore the change in fair value is recognized in fair value losses on financial instruments, net, in the condensed
combined statements of net income (note 7(b)). 
 For the three and six month periods ended June 30, 2020, the fair value losses of
$4.9 million and $7.2 million, respectively, were associated with the fair value movement of the 2024 Cross Currency Interest Rate Swap. The Trust did not employ or partially employed hedge accounting for the derivative and therefore the
change in fair value was recognized in fair value losses on financial instruments, net, in the condensed combined statements of net income. 

  
 Granite REIT 2021 Second Quarter
Report    75 














	
	 13.  INCOME
TAXES


  

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



 

																			
	  	 	Three Months Ended
June 30,	 	 	  	  	
Six Months Ended

June 30,
	 
	  	 	2021	 	  	2020	 	 	  	  	2021	 	  	2020	 
	 Current income tax expense
	 	$	4,301		  	$	2,099		 		  	$	6,303		  	$	3,376	
	 Deferred income tax expense
	 	 	49,840		  	 	7,450		 	 	  	 	85,718		  	 	17,761	
	 Income tax expense
	 	$	54,141		  	$	9,549	 	 	 	  	$	92,021	 	  	$	21,137	 

 (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
June 30,	 	 	  	  	 Six Months Ended

June 30,
	 
	  	 	2021	 	  	2020	 	 	  	  	2021	 	 	2020	 
	 Income before income taxes
	 	$	371,115		  	$	85,191		 	 	  	$	639,271		 	$	178,191	
	 Expected income taxes at the Canadian statutory tax rate of 26.5% (2020 — 26.5%)
	 	$	98,346	 	  	$	22,576	 	 		  	$	169,407	 	 	$	47,221	
	 Income distributed and taxable to unitholders
	 	 	(36,564	) 	  	 	(12,954	) 	 		  	 	(66,053	) 	 	 	(25,314	) 
	 Net foreign rate differentials
	 	 	(6,775	) 	  	 	(1,095	) 	 		  	 	(10,636	) 	 	 	(3,449	) 
	 Net change in provisions for uncertain tax positions
	 	 	287		  	 	423		 		  	 	450		 	 	23	
	 Net permanent differences
	 	 	(48	) 	  	 	(88	) 	 		  	 	10		 	 	(49	) 
	 Net effect of change in tax rates
	 	 	(1,044	) 	  	 	—	 	 		  	 	(1,044	) 	 	 	—	 
	 Withholding taxes and other
	 	 	(61	) 	  	 	687		 	 	  	 	(113	) 	 	 	2,705	
	 Income tax expense
	 	$	54,141	 	  	$	9,549	 	 	 	  	$	92,021	 	 	$	21,137	 


  
 76    Granite REIT 2021 Second
Quarter Report 














	
	 14.  DETAILS OF CASH
FLOWS


  

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



 

																			
	  	 	
Three Months Ended

June 30,
	 	 	  	 	 Six Months Ended

June 30,
	 
	  	 	2021	 	 	2020	 	 	  	 	2021	 	 	2020	 
	 Straight-line rent amortization
	 	$	(1,737	) 	 	$	(1,509	) 	 		 	$	(4,847	) 	 	$	(2,925	) 
	 Tenant incentive amortization
	 	 	1,285		 	 	1,311		 		 	 	2,599		 	 	2,586	
	 Unit-based compensation expense (note 11(a))
	 	 	2,469		 	 	3,226		 		 	 	4,272		 	 	3,004	
	 Fair value gains on investment properties
	 	 	(308,025	) 	 	 	(34,548	) 	 		 	 	(517,541	) 	 	 	(70,541	) 
	 Depreciation and amortization
	 	 	360		 	 	271		 		 	 	691		 	 	508	
	 Fair value losses on financial instruments, net (note 12(e))
	 	 	149		 	 	3,891		 		 	 	488		 	 	5,785	
	 Loss on sale of investment properties
	 	 	421		 	 	—	 	 		 	 	576		 	 	—	 
	 Amortization of issuance costs and modification losses relating to debentures and term loans
	 	 	311		 	 	221		 		 	 	739		 	 	411	
	 Amortization of deferred financing costs
	 	 	143		 	 	78		 		 	 	742		 	 	156	
	 Deferred income taxes (note 13(a))
	 	 	49,840		 	 	7,450		 		 	 	85,718		 	 	17,761	
	 Early redemption premium (note 7(a))
	 	 	—	 	 	 	—	 	 		 	 	3,963		 	 	—	 
	 Other
	 	 	(2	) 	 	 	(24	) 	 	 	 	 	(85	) 	 	 	(75	) 
	 	 	$	(254,786	) 	 	$	(19,633	) 	 	 	 	$	(422,685	) 	 	$	(43,330	) 

  

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



 

																			
	  	  	
Three Months Ended

June 30,
	 	 	  	  	
Six Months Ended

June 30,
	 
	  	  	2021	 	  	2020	 	 	  	  	2021	 	  	2020	 
	 Accounts receivable
	  	$	2,052	 	  	$	(1,093	) 	 		  	$	(1,024	) 	  	$	1,384	 
	 Prepaid expenses and other
	  	 	1,028		  	 	1,285		 		  	 	(302	) 	  	 	(49	) 
	 Accounts payable and accrued liabilities
	  	 	(4,177	) 	  	 	5,565		 		  	 	(4,431	) 	  	 	(1,112	) 
	 Deferred revenue
	  	 	(574	) 	  	 	1,283		 	 	  	 	692		  	 	1,405	
	 	  	$	(1,671	) 	  	$	7,040	 	 	 	  	$	(5,065	) 	  	$	1,628	 

  

	(c)	 Non-cash investing and financing activities 



During the six month period ended June 30, 2021, 17 thousand stapled units (2020 — 22 thousand stapled units) with a value of
$1.3 million (2020 — $1.3 million) were issued under the Restricted Stapled Unit Plan (note 11(a)) and are not recorded in the condensed combined statements of cash flows. 

 

	(d)	 Cash and cash equivalents consist of: 



 

									
	As at	  	June 30, 2021	 	  	December 31, 2020	 
	 Cash
	  	$	577,620	 	  	$	780,979	 
	 Short-term deposits
	  	 	100,522		  	 	50,301	
	 	  	$	678,142	 	  	$	831,280	 


  
 Granite REIT 2021 Second Quarter
Report    77 














	
	 15.  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 June 30, 2021 and December 31, 2020: 

 

																	
	As at	  	June 30, 2021	 	  	December 31, 2020	 
	  	  	Carrying
Value	 	 	Fair Value	 	  	Carrying
Value	 	 	Fair Value	 
	 Financial assets
	  				 				  				 			
	 Construction funds in escrow
	  	$	8,144	 	 	$	8,144	 	  	$	8,402	 	 	$	8,402	
	 Other assets
	  	 	321	(1) 	 	 	321		  	 	349	(1) 	 	 	349	
	 Cross currency interest rate swap
	  	 	48,816	 	 	 	48,816	 	  	 	28,676	 	 	 	28,676	
	 Accounts receivable
	  	 	6,835	 	 	 	6,835		  	 	6,746	 	 	 	6,746	
	 Prepaid expenses and other
	  	 	1,885	(2) 	 	 	1,885		  	 	2,627	(2) 	 	 	2,627	
	 Cash and cash equivalents
	  	 	678,142	 	 	 	678,142		  	 	831,280	 	 	 	831,280	
	 	  	$	744,143	 	 	$	744,143	 	  	$	878,080	 	 	$	878,080	 
	 Financial liabilities
	  				 				  				 			
	 Unsecured debentures, net
	  	$	1,393,812	 	 	$	1,435,530	 	  	$	1,643,175	(3) 	 	$	1,737,185	 
	 Unsecured term loans, net
	  	 	528,586	 	 	 	528,586		  	 	534,947	 	 	 	534,947	
	 Cross currency interest rate swaps
	  	 	29,471	 	 	 	29,471		  	 	114,264	(4) 	 	 	114,264	
	 Accounts payable and accrued liabilities
	  	 	56,249	 	 	 	56,249		  	 	61,197	 	 	 	61,197	
	 Distributions payable
	  	 	16,421	 	 	 	16,421		  	 	15,422	 	 	 	15,422	
	 	  	$	2,024,539	 	 	$	2,066,257	 	  	$	2,369,005	 	 	$	2,463,015	 

  

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



	(2) 	 	 Foreign exchange collars included in prepaid expenses. 



	(3) 	 	 Balance includes current and non-current portions (note 7(a)).




	(4) 	 	 Balance includes current and non-current portions (note 7(b)).  


 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 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. 

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 June 30, 2021 and December 31, 2020, the Trust did not have any outstanding foreign exchange forward contracts. For the three and six month periods ended June 30, 2020,
the Trust recorded a net fair value loss of $0.4 million and less than $0.1 million, respectively, related to outstanding foreign exchange forward contracts (note 12(e)). At June 30, 2021, the Trust held six outstanding foreign
exchange collar contracts (December 31, 2020 — 12) with a 

  
 78    Granite REIT 2021 Second
Quarter Report 













 
notional value of US$30.0 million (December 31, 2020 — 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 six outstanding foreign exchange collar contracts (December 31, 2020 — 12) with a notional value of €12.0 million (December
31, 2020 — €24.0 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 six
month periods ended June 30, 2021, the Trust recorded a net fair value loss of $0.8 million (2020 — net fair value gain of $1.4 million) and $0.7 million (2020 — net fair value gain of $1.4 million), respectively, related to
the outstanding foreign exchange collar contracts (note 12(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 2021 Second Quarter
Report    79 













 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 June 30, 2021	  	Level 1	 	 	Level 2	 	 	Level 3	 
	 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE
	  				 				 			
				
	 Assets measured at fair value
	  				 				 			
	 Investment properties (note 4)
	  	$	—		 	$	—		 	$	6,396,560	
	 Cross currency interest rate swap (note 7)
	  	 	—	 	 	 	48,816		 	 	—	 
	 Foreign exchange collars included in prepaid expenses and other
	  	 	—	 	 	 	1,885		 	 	—	 
				
	 Liabilities measured or disclosed at fair value
	  				 				 			
	 Unsecured debentures, net (note 7)
	  	 	1,435,530		 	 	—	 	 	 	—	 
	 Unsecured term loans, net (note 7)
	  	 	—	 	 	 	528,586		 	 	—	 
	 Cross currency interest rate swaps (note 7)
	  	 	—	 	 	 	29,471		 	 	—	 
	 Net (liabilities) assets measured or disclosed at fair
value
	  	$	(1,435,530	) 	 	$	(507,356	) 	 	$	6,396,560	 

  

													
	As at December 31, 2020	  	Level 1	 	 	Level 2	 	 	Level 3	 
	 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE
	  				 				 			
				
	 Assets measured at fair value
	  				 				 			
	 Investment properties (note 4)
	  	$	—		 	$	—		 	$	5,855,583	
	 Cross currency interest rate swap (note 7)
	  	 	—	 	 	 	28,676		 	 	—	 
	 Foreign exchange collars included in prepaid expenses and other
	  	 	—	 	 	 	2,627		 	 	—	 
				
	 Liabilities measured or disclosed at fair value
	  				 				 			
	 Unsecured debentures, net (note 7)
	  	 	1,737,185		 	 	—	 	 	 	—	 
	 Unsecured term loans, net (note 7)
	  	 	—	 	 	 	534,947		 	 	—	 
	 Cross currency interest rate swaps (note 7)
	  	 	—	 	 	 	114,264		 	 	—	 
	 Net (liabilities) assets measured or disclosed at fair
value
	  	$	(1,737,185	) 	 	$	(617,908	) 	 	$	5,855,583	 

 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 six
month periods ended June 30, 2021 and the year ended December 31, 2020, there were no transfers between the levels. 
  

	(c)	 Risk Management 



Foreign exchange risk 
 As at June 30, 2021, 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


  
 80    Granite REIT 2021 Second
Quarter Report 













 
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 June 30, 2021, the Trust’s foreign currency denominated net assets are $4.9 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 $32.5 million and $16.1 million, respectively, to comprehensive income. 

 

	
	 16.  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 June 30, 2021	 
	  	  	Granite REIT	 	  	Granite GP	 	  	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 ASSETS
	  				  				  				 			
	 Non-current assets:
	  				  				  				 			
	 Investment properties
	  	$	6,396,560	 	  				  				 	$	6,396,560	 
	 Investment in Granite LP(1)
	  	 	—	 	  	 	30		  	 	(30	) 	 	 	—	 
	 Other non-current
assets
	  	 	66,286		  	 	 	 	  	 	 	 	 	 	66,286	
		  	 	6,462,846		  	 	30		  	 	(30	) 	 	 	6,462,846	
					
	 Current assets:
	  				  				  				 			
	 Other current assets
	  	 	20,795		  	 	25		  				 	 	20,820	
	 Intercompany receivable(2)
	  	 	—	 	  	 	14,092		  	 	(14,092	) 	 	 	—	 
	 Cash and cash equivalents
	  	 	677,888		  	 	254		  	 	 	 	 	 	678,142	
	 Total assets
	  	$	7,161,529	 	  	 	14,401		  	 	(14,122	) 	 	$	7,161,808	 
					
	 LIABILITIES AND EQUITY
	  				  				  				 			
	 Non-current liabilities:
	  				  				  				 			
	 Unsecured debt, net
	  	$	1,922,398	 	  				  				 	$	1,922,398	 
	 Other non-current
liabilities
	  	 	522,039		  	 	 	 	  	 	 	 	 	 	522,039	
		  	 	2,444,437		  				  				 	 	2,444,437	
					
	 Current liabilities:
	  				  				  				 			
	 Intercompany payable (2)
	  	 	14,092		  				  	 	(14,092	) 	 	 	—	 
	 Other current liabilities
	  	 	93,432		  	 	14,371		  	 	 	 	 	 	107,803	
	 Total liabilities
	  	 	2,551,961		  	 	14,371		  	 	(14,092	) 	 	 	2,552,240	
					
	 Equity:
	  				  				  				 			
	 Stapled unitholders’ equity
	  	 	4,607,370		  	 	30		  				 	 	4,607,400	
	 Non-controlling
interests
	  	 	2,198		  	 	 	 	  	 	(30	) 	 	 	2,168	
	 Total liabilities and equity
	  	$	7,161,529	 	  	 	14,401		  	 	(14,122	) 	 	$	7,161,808	 

  

	(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.




  
 Granite REIT 2021 Second Quarter
Report    81 














																	
	Balance Sheet	  	As at December 31, 2020	 
	  	  	Granite REIT	 	  	Granite GP	 	  	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 ASSETS
	  				  				  				 			
	 Non-current assets:
	  				  				  				 			
	 Investment properties
	  	$	5,855,583	 	  				  				 	$	5,855,583	 
	 Investment in Granite LP(1)
	  	 	—	 	  	 	25		  	 	(25	) 	 	 	—	 
	 Other non-current
assets
	  	 	46,046		  	 	 	 	  	 	 	 	 	 	46,046	
		  	 	5,901,629		  	 	25		  	 	(25	) 	 	 	5,901,629	
					
	 Current assets:
	  				  				  				 			
	 Other current assets
	  	 	14,546		  	 	17		  				 	 	14,563	
	 Intercompany receivable(2)
	  	 	—	 	  	 	13,792		  	 	(13,792	) 	 	 	—	 
	 Cash and cash equivalents
	  	 	830,455		  	 	825		  	 	 	 	 	 	831,280	
	 Total assets
	  	$	6,746,630	 	  	 	14,659		  	 	(13,817	) 	 	$	6,747,472	 
				
	 LIABILITIES AND EQUITY
	  
	  				  				 			
	 Non-current liabilities:
	  				  				  				 			
	 Unsecured debt, net
	  	$	1,928,252	 	  				  				 	$	1,928,252	 
	 Other non-current
liabilities
	  	 	523,096		  	 	 	 	  	 	 	 	 	 	523,096	
		  	 	2,451,348		  				  				 	 	2,451,348	
	 Current liabilities:
	  				  				  				 			
	 Unsecured debt, net
	  	 	249,870		  				  				 	 	249,870	
	 Intercompany payable(2)
	  	 	13,792		  				  	 	(13,792	) 	 	 	—	 
	 Other current liabilities
	  	 	109,416		  	 	14,634		  	 	 	 	 	 	124,050	
	 Total liabilities
	  	 	2,824,426		  	 	14,634		  	 	(13,792	) 	 	 	2,825,268	
					
	 Equity:
	  				  				  				 			
	 Stapled unitholders’ equity
	  	 	3,920,044		  	 	25		  				 	 	3,920,069	
	 Non-controlling
interests
	  	 	2,160		  	 	 	 	  	 	(25	) 	 	 	2,135	
	 Total liabilities and equity
	  	$	6,746,630	 	  	 	14,659		  	 	(13,817	) 	 	$	6,747,472	 

  

	(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.




  
 82    Granite REIT 2021 Second
Quarter Report 














																	
	Income Statement	  	Three Months Ended June 30, 2021	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	  	$	93,963	 	 				 				 	$	93,963	
					
	 General and administrative expenses
	  	 	8,333		 				 				 	 	8,333	
	 Interest expense and other financing costs, net
	  	 	9,603		 				 				 	 	9,603	
	 Other costs and expenses, net
	  	 	12,367		 				 				 	 	12,367	
	 Share of (income) loss of Granite LP
	  	 	—	 	 	 	(3	) 	 	 	3		 	 	—	 
	 Fair value gains on investment properties, net
	  	 	(308,025	) 	 				 				 	 	(308,025	) 
	 Fair value losses on financial instruments, net
	  	 	149		 				 				 	 	149	
	 Loss on sale of investment properties
	  	 	421		 	 	 	 	 	 	 	 	 	 	421	
	 Income before income taxes
	  	 	371,115		 	 	3		 	 	(3	) 	 	 	371,115	
	 Income tax expense
	  	 	54,141		 	 	 	 	 	 	 	 	 	 	54,141	
	 Net income
	  	 	316,974		 	 	3		 	 	(3	) 	 	 	316,974	
	 Less net income attributable to
non-controlling interests
	  	 	66		 	 	 	 	 	 	(3	) 	 	 	63	
	 Net income attributable to stapled unitholders
	  	$	316,908	 	 	 	3		 	 	—	 	 	$	316,911	

  

																	
	Income Statement	  	Three Months Ended June 30, 2020	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	  	$	81,008	 	 				 				 	$	81,008	 
					
	 General and administrative expenses
	  	 	8,986		 				 				 	 	8,986	
	 Interest expense and other financing costs, net
	  	 	7,763		 				 				 	 	7,763	
	 Other costs and expenses, net
	  	 	9,725		 				 				 	 	9,725	
	 Share of (income) loss of Granite LP
	  	 	—	 	 	 	(1	) 	 	 	1		 	 	—	 
	 Fair value gains on investment properties, net
	  	 	(34,548	) 	 				 				 	 	(34,548	) 
	 Fair value losses on financial instruments, net
	  	 	3,891		 	 	 	 	 	 	 	 	 	 	3,891	
	 Income before income taxes
	  	 	85,191		 	 	1		 	 	(1	) 	 	 	85,191	
	 Income tax expense
	  	 	9,549		 	 	 	 	 	 	 	 	 	 	9,549	
	 Net income
	  	 	75,642		 	 	1		 	 	(1	) 	 	 	75,642	
	 Less net loss attributable to
non-controlling interests
	  	 	(14	) 	 	 	 	 	 	 	(1	) 	 	 	(15	) 
	 Net income attributable to stapled unitholders
	  	$	75,656	 	 	 	1		 	 	—	 	 	$	75,657	 


  
 Granite REIT 2021 Second Quarter
Report    83 














																	
	Income Statement	  	Six Months Ended June 30, 2021	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	  	$	189,905	 	 				 				 	$	189,905	 
					
	 General and administrative expenses
	  	 	17,154		 				 				 	 	17,154	
	 Interest expense and other financing costs
	  	 	24,397		 				 				 	 	24,397	
	 Other costs and expenses, net
	  	 	25,560		 				 				 	 	25,560	
	 Share of (income) loss of Granite LP
	  	 	—	 	 	 	(5	) 	 	 	5		 	 	—	 
	 Fair value gains on investment properties, net
	  	 	(517,541	) 	 				 				 	 	(517,541	) 
	 Fair value losses on financial instruments, net
	  	 	488		 				 				 	 	488	
	 Loss on sale of investment properties
	  	 	576		 	 	 	 	 	 	 	 	 	 	576	
	 Income before income taxes
	  	 	639,271		 	 	5		 	 	(5	) 	 	 	639,271	
	 Income tax expense
	  	 	92,021		 	 	 	 	 	 	 	 	 	 	92,021	
	 Net income
	  	 	547,250		 	 	5		 	 	(5	) 	 	 	547,250	
	 Less net income attributable to
non-controlling interests
	  	 	211		 	 	 	 	 	 	(5	) 	 	 	206	
	 Net income attributable to stapled unitholders
	  	$	547,039	 	 	 	5		 	 	—	 	 	$	547,044	 

  

																	
	Income Statement	  	Six Months Ended June 30, 2020	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 Revenue
	  	$	159,058	 	 				 				 	$	159,058	 
					
	 General and administrative expenses
	  	 	14,713		 				 				 	 	14,713	
	 Interest expense and other financing costs
	  	 	14,408		 				 				 	 	14,408	
	 Other costs and expenses, net
	  	 	16,502		 				 				 	 	16,502	
	 Share of (income) loss of Granite LP
	  	 	—	 	 	 	(2	) 	 	 	2		 	 	—	 
	 Fair value gains on investment properties, net
	  	 	(70,541	) 	 				 				 	 	(70,541	) 
	 Fair value losses on financial instruments, net
	  	 	5,785		 	 	 	 	 	 	 	 	 	 	5,785	
	 Income before income taxes
	  	 	178,191		 	 	2		 	 	(2	) 	 	 	178,191	
	 Income tax expense
	  	 	21,137		 	 	 	 	 	 	 	 	 	 	21,137	
	 Net income
	  	 	157,054		 	 	2		 	 	(2	) 	 	 	157,054	
	 Less net income attributable to
non-controlling interests
	  	 	103		 	 	 	 	 	 	(2	) 	 	 	101	
	 Net income attributable to stapled unitholders
	  	$	156,951	 	 	 	2		 	 	—	 	 	$	156,953	 


  
 84    Granite REIT 2021 Second
Quarter Report 














																	
	Statement of Cash Flows	  	Three Months Ended June 30, 2021	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	  				 				 				 			
					
	 Net income
	  	$	316,974	 	 	 	3		 	 	(3	) 	 	$	316,974	 
	 Items not involving current cash flows
	  	 	(254,786	) 	 	 	(3	) 	 	 	3		 	 	(254,786	) 
	 Changes in working capital balances
	  	 	(795	) 	 	 	(876	) 	 				 	 	(1,671	) 
	 Other operating activities
	  	 	4,218		 	 	 	 	 	 	 	 	 	 	4,218	
	 Cash provided by (used in) operating activities
	  	 	65,611		 	 	(876	) 	 	 	—	 	 	 	64,735	
	 INVESTING ACTIVITIES
	  				 				 				 			
	 Property acquisitions
	  	 	(133,376	) 	 				 				 	 	(133,376	) 
	 Proceeds from disposals, net
	  	 	12,809		 				 				 	 	12,809	
	 Additions to income-producing properties
	  	 	(783	) 	 				 				 	 	(783	) 
	 Additions to properties under development
	  	 	(4,865	) 	 				 				 	 	(4,865	) 
	 Other investing activities
	  	 	(1,907	) 	 	 	 	 	 	 	 	 	 	 	(1,907	) 
	 Cash used in investing activities
	  	 	(128,122	) 	 	 	—	 	 	 	—	 	 	 	(128,122	) 
	 FINANCING ACTIVITIES
	  				 				 				 			
	 Distributions paid
	  	 	(46,288	) 	 				 				 	 	(46,288	) 
	 Other financing activities
	  	 	302,811		 	 	 	 	 	 	 	 	 	 	302,811	
	 Cash provided by financing activities
	  	 	256,523		 	 	—	 	 	 	—	 	 	 	256,523	
	 Effect of exchange rate changes
	  	 	4,295		 	 	 	 	 	 	 	 	 	 	4,295	
	 Net increase (decrease) in cash and cash equivalents during
the period
	  	$	198,307	 	 	 	(876	) 	 	 	—	 	 	$	197,431	 

  

																	
	Statement of Cash Flows	  	Three Months Ended June 30, 2020	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	  				 				 				 			
					
	 Net income
	  	$	75,642	 	 	 	1		 	 	(1	) 	 	$	75,642	 
	 Items not involving current cash flows
	  	 	(19,633	) 	 	 	(1	) 	 	 	1		 	 	(19,633	) 
	 Changes in working capital balances
	  	 	7,084		 	 	(44	) 	 	 	—	 	 	 	7,040	
	 Other operating activities
	  	 	2,120		 	 	 	 	 	 	 	 	 	 	2,120	
	 Cash provided by (used in) operating activities
	  	 	65,213		 	 	(44	) 	 	 	—	 	 	 	65,169	
	 INVESTING ACTIVITIES
	  				 				 				 			
	 Property acquisitions
	  	 	(331,805	) 	 				 				 	 	(331,805	) 
	 Additions to income-producing properties
	  	 	(1,083	) 	 				 				 	 	(1,083	) 
	 Additions to properties under development
	  	 	(26,122	) 	 				 				 	 	(26,122	) 
	 Construction funds released from escrow
	  	 	4,291		 				 				 	 	4,291	
	 Other investing activities
	  	 	(72,606	) 	 	 	 	 	 	 	 	 	 	 	(72,606	) 
	 Cash used in investing activities
	  	 	(427,325	) 	 	 	—	 	 	 	—	 	 	 	(427,325	) 
	 FINANCING ACTIVITIES
	  				 				 				 			
	 Distributions paid
	  	 	(38,890	) 	 				 				 	 	(38,890	) 
	 Other financing activities
	  	 	774,909		 	 	 	 	 	 	 	 	 	 	774,909	
	 Cash provided by financing activities
	  	 	736,019		 	 	—	 	 	 	—	 	 	 	736,019	
	 Effect of exchange rate changes
	  	 	1,313		 	 	 	 	 	 	 	 	 	 	1,313	
	 Net increase (decrease) in cash and cash equivalents during
the period
	  	$	375,220	 	 	 	(44	) 	 	 	—	 	 	$	375,176	 


  
 Granite REIT 2021 Second Quarter
Report    85 














																	
	Statement of Cash Flows	  	Six Months Ended June 30, 2021	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	  				 				 				 			
					
	 Net income
	  	$	547,250	 	 	 	5		 	 	(5	) 	 	$	547,250	 
	 Items not involving operating cash flows
	  	 	(422,685	) 	 	 	(5	) 	 	 	5		 	 	(422,685	) 
	 Changes in working capital balances
	  	 	(4,494	) 	 	 	(571	) 	 				 	 	(5,065	) 
	 Other operating activities
	  	 	9,540		 	 	 	 	 	 	 	 	 	 	9,540	
	 Cash provided by (used in) operating activities
	  	 	129,611		 	 	(571	) 	 	 	—	 	 	 	129,040	
	 INVESTING ACTIVITIES
	  				 				 				 			
	 Property acquisitions
	  	 	(219,289	) 	 				 				 	 	(219,289	) 
	 Proceeds from disposals, net
	  	 	23,204		 				 				 	 	23,204	
	 Additions to income-producing properties
	  	 	(783	) 	 				 				 	 	(783	) 
	 Additions to properties under development
	  	 	(17,286	) 	 				 				 	 	(17,286	) 
	 Construction funds released from escrow
	  	 	28		 				 				 	 	28	
	 Other investing activities
	  	 	(2,578	) 	 	 	 	 	 	 	 	 	 	 	(2,578	) 
	 Cash used in investing activities
	  	 	(216,704	) 	 	 	—	 	 	 	—	 	 	 	(216,704	) 
	 FINANCING ACTIVITIES
	  				 				 				 			
	 Distributions paid
	  	 	(92,551	) 	 				 				 	 	(92,551	) 
	 Other financing activities
	  	 	26,965		 	 	 	 	 	 	 	 	 	 	26,965	
	 Cash used in financing activities
	  	 	(65,586	) 	 	 	—	 	 	 	—	 	 	 	(65,586	) 
	 Effect of exchange rate changes
	  	 	112		 	 	 	 	 	 	 	 	 	 	112	
	 Net decrease in cash and cash equivalents during the
period
	  	$	(152,567	) 	 	 	(571	) 	 	 	—	 	 	$	(153,138	) 

  

																	
	Statement of Cash Flows	  	Six Months Ended June 30, 2020	 
	  	  	Granite REIT	 	 	Granite GP	 	 	 Eliminations/

Adjustments
	 	 	Granite REIT and
Granite GP
Combined	 
	 OPERATING ACTIVITIES
	  				 				 				 			
					
	 Net income
	  	$	157,054	 	 	 	2		 	 	(2	) 	 	$	157,054	 
	 Items not involving operating cash flows
	  	 	(43,330	) 	 	 	(2	) 	 	 	2		 	 	(43,330	) 
	 Changes in working capital balances
	  	 	1,814		 	 	(186	) 	 				 	 	1,628	
	 Other operating activities
	  	 	4,679		 	 	 	 	 	 	 	 	 	 	4,679	
	 Cash provided by (used in) operating activities
	  	 	120,217		 	 	(186	) 	 	 	—	 	 	 	120,031	
	 INVESTING ACTIVITIES
	  				 				 				 			
	 Property acquisitions
	  	 	(360,754	) 	 				 				 	 	(360,754	) 
	 Additions to income-producing properties
	  	 	(3,318	) 	 				 				 	 	(3,318	) 
	 Additions to properties under development
	  	 	(32,194	) 	 				 				 	 	(32,194	) 
	 Construction funds released from escrow
	  	 	6,591		 				 				 	 	6,591	
	 Other investing activities
	  	 	(90,854	) 	 	 	 	 	 	 	 	 	 	 	(90,854	) 
	 Cash used in investing activities
	  	 	(480,529	) 	 	 	—	 	 	 	—	 	 	 	(480,529	) 
	 FINANCING ACTIVITIES
	  				 				 				 			
	 Distributions paid
	  	 	(78,140	) 	 				 				 	 	(78,140	) 
	 Other financing activities
	  	 	749,784		 	 	 	 	 	 	 	 	 	 	749,784	
	 Cash provided by financing activities
	  	 	671,644		 	 	—	 	 	 	—	 	 	 	671,644	
	 Effect of exchange rate changes
	  	 	7,425		 	 	 	 	 	 	 	 	 	 	7,425	
	 Net increase (decrease) in cash and cash equivalents during
the period
	  	$	318,757	 	 	 	(186	) 	 	 	—	 	 	$	318,571	 


  
 86    Granite REIT 2021 Second
Quarter Report 














	
	 17.  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 June 30, 2021, the Trust’s contractual commitments totaled $182.1 million which comprised of construction
and development projects of $117.4 million, the construction costs associated with a property under development in Murfreesboro, Tennessee of $64.7 million (US$52.2 million) (note 3). 

(c)    In connection with the acquisitions of investment properties located in Palmetto, Georgia on November 12, 2020 and in
Locust Grove, Georgia on March 12, 2021, $120.4 million (US$97.1 million) of bonds were assumed. The authorized amount of the bonds is $129.0 million (US$104.0 million), of which $120.4 million (US$97.1 million) was outstanding
as at June 30, 2021. The bonds provide for a real estate tax abatement for the acquired investment properties. Through a series of transactions, the Trust is both the bondholder and the obligor of the bonds. Therefore, in accordance with IAS
32, the bonds are not recorded in the condensed combined balance sheet. 
 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. 
  

	
	 18.  SUBSEQUENT
EVENTS


 (a)    Subsequent to June 30, 2021, the Trust declared monthly distributions for July 2021 of
$16.4 million (note 10). 

  
 Granite REIT 2021 Second Quarter
Report    87