Document:

EX-4.6

 Exhibit 4.6 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION 

 
  

	
	TABLE OF CONTENTS

 

					
	 Basis of Presentation
	  	 	1	 
		
	 Financial and Operating Highlights
	  	 	2	 
		
	 Business Overview and Strategic Outlook
	  	 	4	 
		
	 Significant Matters including COVID-19 Pandemic

	  	 	5	 
		
	 Results of Operations
	  	 	10	 
		
	 Investment Properties
	  	 	27	 
		
	 Liquidity and Capital Resources
	  	 	38	 
		
	 Commitments, Contractual Obligations, Contingencies and Off-Balance Sheet Arrangements
	  	 	46	 

					
	 Non-IFRS Performance
Measures
	  	 	47	 
		
	 Significant Accounting Estimates
	  	 	50	 
		
	 New Accounting Pronouncements and Developments
	  	 	51	 
		
	 Internal Controls over Financial Reporting
	  	 	52	 
		
	 Risks and Uncertainties
	  	 	52	 
		
	 Quarterly Financial Data
	  	 	54	 
		
	 Forward-Looking Statements
	  	 	55	 

 
 

  

	
	BASIS OF PRESENTATION

 Management’s Discussion and Analysis of Results of Operations and Financial Position (“MD&A”) of
Granite Real Estate Investment Trust (“Granite REIT”) and Granite REIT Inc. (“Granite GP”) summarizes the significant factors affecting the combined operating results, financial condition, liquidity and cash flows of Granite
REIT, Granite GP and their subsidiaries (collectively “Granite” or the “Trust”) for the three and nine month periods ended September 30, 2020. Unless otherwise noted, all amounts are in millions of Canadian dollars. This
MD&A should be read in conjunction with the accompanying unaudited condensed combined financial statements for the three and nine month periods ended September 30, 2020 and the audited combined financial statements for the year ended
December 31, 2019 prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The MD&A was prepared as at November 4, 2020 and its contents were
approved by the Board of Trustees of Granite REIT and Board of Directors of Granite GP on this date. Additional information relating to Granite, including the Annual Report and Annual Information Form (“AIF”) for fiscal 2019 and dated
March 4, 2020, can be obtained from the Trust’s website at www.granitereit.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. 

In addition to using financial measures determined in accordance with IFRS, Granite also uses certain non-IFRS
measures in managing its business to measure financial and operating performance as well as for capital allocation decisions and valuation purposes. Granite believes that providing these measures on a supplemental basis to the IFRS amounts is
helpful to investors in assessing the overall performance of Granite’s business. These non-IFRS measures include net operating income before lease termination and
close-out fees, straight-line rent and tenant incentive amortization (“NOI — cash basis”), same property NOI — cash basis, funds from operations (“FFO”), adjusted funds from
operations (“AFFO”), FFO payout ratio, AFFO payout ratio, leverage ratio, interest coverage ratio, net leverage ratio, indebtedness ratio, adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted
EBITDA”), unencumbered asset coverage ratio and any related per unit amounts. Readers are cautioned that these measures do not have standardized meanings prescribed under IFRS and, therefore, should not be construed as alternatives to net
income, cash provided by operating activities or any other 

  
 Granite REIT 2020 Third Quarter
Report    1 

 
measure calculated in accordance with IFRS. Additionally, because these terms do not have standardized meanings prescribed by IFRS, they may not be comparable to similarly titled measures
presented by other reporting issuers. Refer to “NON-IFRS PERFORMANCE MEASURES” for definitions and reconciliations of non-IFRS measures to IFRS
financial measures. 
  

	
	FINANCIAL AND OPERATING HIGHLIGHTS

  

																	
	  	  	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 
	(in millions, except as noted)	  	2020	 	 	2019	 	 	2020	 	 	2019	 
					
	 Operating highlights
	  				 				 				 			
	 Revenue
	  	$	87.9	 	 	$	68.8	 	 	$	247.0	 	 	$	200.1	 
	 NOI — cash basis(1)
	  	 	74.5	 	 	 	60.3	 	 	 	213.2	 	 	 	173.7	 
	 Net income attributable to stapled unitholders
	  	 	105.2	 	 	 	114.5	 	 	 	262.2	 	 	 	291.5	 
	 FFO(1)
	  	 	55.5	 	 	 	45.8	 	 	 	165.8	 	 	 	129.6	 
	 AFFO(1)(2)
	  	 	52.7	 	 	 	44.4	 	 	 	159.6	 	 	 	126.5	 
	 Cash flows provided from operating activities
	  	 	66.1	 	 	 	42.8	 	 	 	185.9	 	 	 	133.3	 
	 Monthly distributions paid
	  	 	(42.0	) 	 	 	(34.6	) 	 	 	(120.1	) 	 	 	(100.2	) 
	 Special distribution paid
	  	 	—	 	 	 	—	 	 	 	—	 	 	 	13.7	 
	 FFO payout ratio(1)(3)
	  	 	76%	 	 	 	76%	 	 	 	73%	 	 	 	79%	 
	 AFFO payout ratio(1)(2)(3)
	  	 	80%	 	 	 	78%	 	 	 	76%	 	 	 	80%	 
					
	 Per unit amounts
	  				 				 				 			
	 Diluted FFO(1)
	  	$	0.96	 	 	$	0.93	 	 	$	2.98	 	 	$	2.71	 
	 Diluted AFFO(1)(2)
	  	$	0.91	 	 	$	0.90	 	 	$	2.87	 	 	$	2.65	 
	 Monthly distributions paid
	  	$	0.73	 	 	$	0.70	 	 	$	1.45	 	 	$	2.10	 
	 Special distribution paid
	  	 	—	 	 	 	—	 	 	 	—	 	 	$	0.30	 
	 Diluted weighted average number of units
	  	 	57.9	 	 	 	49.5	 	 	 	55.7	 	 	 	47.9	 

  

									
	As at September 30, 2020 and December 31, 2019	  	2020	 	  	2019	 
	 Financial highlights
	  				  			
	 Investment properties — fair value
	  	 	$5,338.9	 	  	 	$4,457.9	 
	 Cash and cash equivalents
	  	 	539.7	 	  	 	298.7	 
	 Total debt(4)
	  	 	1,814.8	 	  	 	1,250.3	 
	 Trading price per unit (TSX: GRT.UN)
	  	 	$   70.06	 	  	 	$   65.98	 
			
	 Debt metrics, ratings and outlook
	  				  			
	 Net leverage ratio(1)
	  	 	24%	 	  	 	21%	 
	 Interest coverage ratio(1)
	  	 	8.8x	 	  	 	10.1x	 
	 Indebtedness ratio (total debt to adjusted
EBITDA)(1)
	  	 	7.3x	 	  	 	6.1x	 
	 Weighted average cost of debt(5)
	  	 	2.16%	 	  	 	1.83%	 
	 Weighted average debt
term-to-maturity, in years(5)
	  	 	4.5	 	  	 	4.4	 
	 DBRS rating and outlook
	  	 	BBB stable	 	  	 	BBB stable	 
	 Moody’s rating and outlook
	  	 	Baa2 stable	 	  	 	Baa2 stable	 

  
 2    Granite REIT 2020 Third
Quarter Report 

									
	As at September 30, 2020 and December 31, 2019	  	2020	 	  	2019	 
			
	 Property metrics
	  				  			
	 Number of investment properties
	  	 	109	 	  	 	91	 
	 Income-producing properties
	  	 	102	 	  	 	85	 
	 Properties under development
	  	 	3	 	  	 	3	 
	 Land held for development
	  	 	4	 	  	 	3	 
	 Gross leasable area (“GLA”), square feet
	  	 	45.4	 	  	 	40.0	 
	 Occupancy, by GLA
	  	 	98.9%	 	  	 	99.0%	 
	 Magna as a percentage of annualized revenue(6)
	  	 	37%	 	  	 	42%	 
	 Magna as a percentage of GLA
	  	 	30%	 	  	 	35%	 
	 Weighted average lease term in years, by GLA
	  	 	5.9	 	  	 	6.5	 
	 Overall capitalization rate(7)
	  	 	5.8%	 	  	 	6.1%	 

  
  

	(1)	 	 For definitions of Granite’s non-IFRS measures, refer to the section
“NON-IFRS PERFORMANCE MEASURES”. 

	(2) 	 	 In the current year period AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing
commissions and tenant allowances incurred whereas in prior year periods AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing commissions and tenant allowances paid. The AFFO metrics in the comparative period
have been updated to conform to the current period’s presentation. AFFO, diluted AFFO per unit and AFFO payout ratio for the quarter ended September 30, 2019 were previously reported as $44.6 million, $0.90 per unit and 78%,
respectively. AFFO as well as basic and diluted AFFO per unit for the nine months ended September 30, 2019 were previously reported as $126.2 million, $2.64 per unit and 81%, respectively. Both methods of calculation are in accordance with
the REALPAC White Paper (see “NON-IFRS PERFORMANCE MEASURES”). 

	(3)	 	 The FFO and AFFO payout ratios are calculated as monthly distributions, which exclude the special distribution, declared
to unitholders divided by FFO and AFFO, respectively, in a period. 

	(4)	 	 Total debt includes lease obligations recognized under IFRS 16, Leases. 

	(5)	 	 Excludes lease obligations recognized under IFRS 16, Leases noted above. 

	(6)	 	 Annualized revenue for each period presented is calculated as rental revenue excluding tenant recoveries, recognized in
accordance with IFRS, in the reported month multiplied by 12 months. 

	(7)	 	 Refer to “Valuation Metrics by Investment Property Asset Category” in the “Investment Properties”
section. 

  
 Granite REIT 2020 Third Quarter
Report    3 

	
	BUSINESS OVERVIEW AND STRATEGIC OUTLOOK

 Business Overview 
 Granite is
a Canadian-based real estate investment trust (“REIT”) engaged in the acquisition, development, ownership and management of logistics, warehouse and industrial properties in North America and Europe. As at November 4, 2020, Granite
owns 108 investment properties in eight countries having approximately 45.3 million square feet of gross leasable area. 
 Granite’s
investment properties consist of income-producing properties, properties under development and land held for development (see “INVESTMENT PROPERTIES”). The income-producing properties consist primarily of logistics, e-commerce and distribution warehouse facilities, light industrial properties and heavy industrial manufacturing facilities. Lease payments are primarily denominated in three currencies: the Canadian dollar
(“$”), the Euro (“€”) and the US dollar (“US$”). Granite’s investment properties by geographic location, property count and square footage as at
November 4, 2020 are summarized below: 
  

	
	  

Investment Properties Summary(1)

 
 Eight countries/108
properties/45.3 million square feet
  

  
  
  

 
  

	(1)	 	 Reflects the disposition of the property in Barcelona, Spain subsequent to September 30, 2020.

 Strategic Outlook 
 Management
continues to identify and pursue value creation and investment opportunities that management believes will generate superior long-term total returns for unitholders. 

Granite’s long-term strategy is to continue to build an institutional quality and globally diversified industrial real estate business; to grow and
diversify its asset base through acquisitions, development, re-development and dispositions; to optimize its balance sheet; and to reduce its exposure to its largest tenant, Magna International Inc. and its
operating subsidiaries (collectively, “Magna”) and the special purpose properties (see “INVESTMENT PROPERTIES”) over the long-term. 

Granite has positioned itself financially to execute on its strategic plan including to capitalize on a strong pipeline of acquisition and development
opportunities within its targeted geographic footprint. 

  
 4    Granite REIT 2020 Third
Quarter Report 

 As Granite looks to the remainder of 2020, its priorities are set out below; however, the timing and
extent of current economic conditions resulting from the coronavirus disease (“COVID-19”) pandemic and their impact on these priorities is unknown at this time (see “SIGNIFICANT MATTERS
— COVID-19 Pandemic”): 
  

	 	•	 	 Continue to grow in its target markets in North America and Europe primarily through property and portfolio acquisitions
as well as through the development of modern logistics and e-commerce assets and selective joint venture arrangements; 

 

	 	•	 	 Grow net asset value as well as FFO and AFFO per unit through intensive asset management; 

 

	 	•	 	 Continue to enhance Granite’s global platform; 

 

	 	•	 	 Maintain a target occupancy in excess of 98%; 

 

	 	•	 	 Maintain lower leverage providing balance sheet flexibility and liquidity; 

 

	 	•	 	 Pursue development and expansion opportunities within the existing portfolio; and 

 

	 	•	 	 Continue to dispose of select non-core assets. 

 

	
	SIGNIFICANT MATTERS

 COVID-19 Pandemic 

Granite’s portfolio is well positioned to deliver both cash flow stability and growth as well as long-term value for unitholders. While the full
impact of the COVID-19 pandemic cannot be predicted, Granite believes at this time that its portfolio and strong liquidity position will allow it to weather the impact of
COVID-19. 
 Granite’s tenant base is comprised of generally high-quality credit companies with 60% of
total annualized revenue represented by Granite’s top ten tenants (see “INVESTMENT PROPERTIES — Leasing Profile-Other Tenants” for a summary of Granite’s top ten tenants).
COVID-19 has had, and will continue to have, a varied impact on Granite’s tenants depending on their specific businesses. Certain tenants are seeing increased activity during this COVID-19 period while other tenants have slowed down or shut down operations fully for a period of time. It is difficult to predict at this time what continued impact
COVID-19, including further waves of new infections in the markets where Granite operates that have led to targeted public health restrictions and could lead to reinstated emergency measures, will have on the
businesses of Granite’s tenants and the resulting direct impact on Granite’s 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 both the second and
third quarters of 2020, and 99.9% of October rents. In addition, Granite granted one rent deferral to a tenant in Germany and the rent in arrears for May and June totaling $0.3 million (€0.2
million), has been paid fully as at the end of the third quarter 2020. 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. 
 Requests for rent deferrals from tenants were reviewed by management on a case by case basis. For
each request, management reviewed tenant financial information and credit, assessed the impact of COVID-19 on the tenant’s operations and considered lease terms and local legislation,

  
 Granite REIT 2020 Third Quarter
Report    5 

 
among other factors. Granite will continue to monitor its portfolio and dialogue with its tenants, where applicable, to understand the ongoing impact of
COVID-19 on its tenants’ operations. The dynamic nature of the situation, which continues to evolve day-to-day, makes the
longer-term financial impacts on Granite’s operations difficult to predict. 
 From a liquidity perspective, as at the date of this MD&A,
November 4, 2020, Granite has total liquidity of approximately $1.0 billion, including its fully undrawn operating facility which is sufficient to meet its current committed acquisitions, development and construction projects of
approximately $172.9 million, including new acquisitions announced and expected to close in Q4 2020 (see “SIGNIFICANT MATTERS — Subsequent Events”). Granite’s nearest debt maturity of $250 million occurs in
July 2021 and Granite’s investment property portfolio of approximately $5.3 billion remains fully unencumbered. Granite believes it is well-positioned to weather the current market volatility and any negative impacts on its business;
however, Granite will continue to evaluate and monitor its liquidity as the situation prolongs. 
 From a leasing perspective, as at the date of this
MD&A, November 4, 2020, Granite has renewed 89% of its 2020 lease maturities with 0.3 million square feet outstanding representing less than 1% of its total portfolio. With respect to 2021, Granite has renewed 70% of its 2021 lease
maturities with 0.6 million square feet outstanding representing 1% of the total portfolio. It is unclear at this time how the impacts of COVID-19 will affect the overall leasing markets for the remainder
of 2020, the year 2021 or beyond, including its impact on market rents, tenant demand for space, tenant allowances or incentives and lease terms. 

With respect to Granite’s outstanding development projects, most have not been materially impacted to date by
COVID-19. Granite’s development project in Plainfield, Indiana was completed and leased for an initial 10 year term during the second quarter of 2020 and the development of Granite’s recently
acquired Bleiswijk, Netherlands property was completed in the third quarter of 2020. Granite’s development project in Houston, Texas is in the early stages with site servicing currently underway and Granite is presently assessing the viability
of commencing vertical construction in early 2021. With respect to the development project in Altbach, Germany, where construction has not yet begun, Granite made the decision to place this development temporarily on hold during the second and third
quarters of 2020. Granite now expects to move forward with the Altbach development later in 2020 or early 2021 and is currently engaged in pre-leasing activity and construction contract pricing. In regards to
the recently acquired land in Fort Worth, Texas, Granite has commenced the early stages of development with permitting and design underway and expects no delays or disruptions at this time due to COVID-19.
Despite limited disruption thus far as a result of COVID-19, the active development project in Houston, Texas may be impacted by temporary delays due to work suspensions, labour shortages and delays in supply
chains, all of which may impact timing of construction spending and expected completion dates. Further, due to market demand and other macro-economic factors, Granite may also experience delays to the commencement of construction for new development
projects including the development projects in Altbach, Germany and Forth Worth, Texas, or the next phase of the development in Houston, Texas. For more information on Granite’s development projects, please see “SIGNIFICANT
MATTERS — Construction, Development and Property Commitments”. 
 Granite’s current liquidity positions it well to
capitalize on acquisition opportunities and to continue to execute on its strategic plan in 2020; however, Granite will act on its acquisition pipeline and other opportunities while considering the potential impact that COVID-19, both in the short-term and long-term, will have on its operations, cash flows and portfolio. 
 Consistent
with its usual practice, Granite continues to review the value of its investment properties. To date, the COVID-19 pandemic has not had a significant impact on the valuation of

  
 6    Granite REIT 2020 Third
Quarter Report 

 
Granite’s investment properties. The duration of the COVID-19 pandemic, including further waves of new infections in the markets where Granite
operates that have led to some targeted public health restrictions and could lead to the reinstatement of 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. Refer to
“Risks and Uncertainties” for a discussion of the risks associated with the COVID-19 pandemic. 
 Property
Acquisitions 
 As at the date of this MD&A, November 4, 2020, during 2020, Granite has acquired 17 income-producing modern industrial
properties in Canada, the United States and the Netherlands, a property under development in the Netherlands (subsequently completed) and a parcel of development land in the United States. Property acquisitions consisted of the following: 

 

																									
	 Acquisitions
 (in millions,
except as noted)
  

Property Address
	 	Location	 	 	Sq
ft(1)	 	 	Weighted
Average
Lease Term,
in years by
sq ft(1)	 	 	Date Acquired	 	 	Property
Purchase
Price(2)
	 	 	In-going
Yield(1)
	 
	 Acquired during the nine months ended September 30, 2020:
	  

							
	 Property under development:
	 				 				 				 				 				 			
	 Aquamarijnweg
2(3)
	 	  

	 Bleiswijk,
Netherlands
	  
 
	 	  
	 0.2
	  
	 	  
	 10
	  
	 	  
	 March 13, 2020
	  
	 	 $
	 35.6
	  
	 	  
	 4.2
	 % 

	 Income-producing properties:
	 				 				 				 				 				 			
	 Oude Graaf 15
	 	  

	 Weert,
Netherlands
	  
 
	 	  
	 0.2
	  
	 	  
	 10.0
	  
	 	  
	 May 1, 2020
	  
	 	  
	 31.9
	  
	 	  
	 4.9
	 % 

	 De Kroonstraat
1(4)
	 	  

	 Tilburg,
Netherlands
	  
 
	 	  
	 0.5
	  
	 	  
	 10.0
	  
	 	  
	 July 1, 2020
	  
	 	  
	 71.7
	 
	 	  
	 4.3
	 % 

	 Francis Baconstraat 4
	 	  
	 Ede, Netherlands
	  
	 	  
	 0.1
	 
	 	  
	 15.1
	  
	 	  
	 July 1, 2020
	  
	 	  
	 21.4
	 
	 	  
	 5.8
	 % 

	 5600-5630
Timberlea(5)
	 	  
	 Mississauga, ON
	  
	 	  
	 0.1
	 
	 	  
	 5.6
	  
	 	  
	 September 28, 2020
	  
	 	  
	 19.5
	 
	 	  
	 4.1
	 % 

	 8995 Airport Road
	 	  
	 Brampton, ON
	  
	 	  
	 0.1
	 
	 	  
	 4.9
	  
	 	  
	 September 1, 2020
	  
	 	  
	 22.2
	 
	 	  
	 5.1
	 % 

	 555 Beck Crescent
	 	  
	 Ajax, ON
	  
	 	  
	 0.1
	 
	 	  
	 10.0
	  
	 	  
	 September 30, 2020
	  
	 	  
	 15.4
	 
	 	  
	 4.6
	 % 

							
	 Midwest portfolio (five properties):
	 				 				 				 				 				 			
	 6201 Green Pointe Drive South
	 	  
	 Groveport, OH
	  
	 	  
	 0.5
	  
	 	  
	 1.4
	  
	 				 				 			
	 8779 Le Saint Drive
	 	  
	 Hamilton, OH
	  
	 	  
	 0.3
	  
	 	  
	 2.5
	  
	 				 				 			
	 8754 Trade Port Drive
	 	  
	 West Chester, OH
	  
	 	  
	 0.5
	  
	 	  
	 5.4
	  
	 				 				 			
	 445 Airtech Parkway
	 	  
	 Indianapolis, IN
	  
	 	  
	 0.6
	  
	 	  
	 3.5
	  
	 	  
	 June 18, 2020
	  
	 	  
	 177.6
	 
	 	  
	 5.4
	 % 

	 5415 Centerpoint Parkway
	 	  
	 Obetz, OH
	  
	 	  
	 0.5
	  
	 	  
	 9.5
	  
	 	  
	 July 8, 2020
	  
	 	  
	 45.1
	 
	 	  
	 5.4
	 % 

	
	 Memphis portfolio (three properties):
	  

	 4460 East Holmes Road
	 	  
	 Memphis, TN
	  
	 	  
	 0.4
	  
	 	  
	 7.1
	  
	 				 				 			
	 4995 Citation Drive
	 	  
	 Memphis, TN
	  
	 	  
	 0.4
	  
	 	  
	 2.8
	  
	 				 				 			
	 8650 Commerce Drive
	 	  
	 Southaven, MS
	  
	 	  
	 0.7
	  
	 	  
	 7.3
	  
	 	  
	 June 18, 2020
	  
	 	  
	 111.6
	  
	 	  
	 5.8
	 % 

							
	 Development land:
	 				 				 				 				 				 			
							
	 5005 Parker Henderson Road
	 	  
	 Fort Worth, TX
	  
	 	  
	 N/A
	  
	 	  
	 N/A
	  
	 	  
	 June 8, 2020
	  
	 	  
	 8.9
	  
	 	  
	 N/A
	  

	 	 	 	 	 	 	  
	 5.2
	 
	 	 	 	 	 	 	 	 	 	 $
	 560.9
	  
	 	  
	 5.1
	 % 

  

	(1) 	 	 As at the date of acquisition except as noted in note 3 and 4 below. 

 

	(2) 	 	 Purchase price does not include transaction costs associated with property acquisitions. 

 

	(3)	 	 Acquired as a property under development in March 2020, however the development was completed and the tenant occupied the
property as at September 1, 2020. The square feet, weighted average lease term and in-going yield was based on the asset as complete. 

  
 Granite REIT 2020 Third Quarter
Report    7 

	(4) 	 	 The square footage, purchase price and in-going yield for this property includes
the impact of a 0.1 million square foot expansion that was underway at the date of acquisition and is expected to be completed and occupied by the tenant in the fourth quarter of 2020. As at September 30, 2020, the estimated costs to
complete the expansion were $11.8 million (€7.6 million). See “Construction, Development and Property”. 

 

	(5)	 	 Represents a complex of four properties located at 5600, 5610, 5620 and 5630 Timberlea Boulevard, Mississauga, Ontario.

 During the third quarter, Granite completed the development of the recently acquired grocery
e-commerce distribution facility in Bleiswijk, Netherlands. Commencing September 1, 2020, the property is leased to Ahold, a global food-retailer. 

On July 1, 2020, Granite closed on the previously announced acquisitions of the remaining two of the three state-of-the-art facilities in the Netherlands. Granite acquired the property located at Francis Baconstraat 4, Ede, Netherlands for $21.4 million (€14.0 million). 
 The Ede property is 100% leased to ERIKS, a global industrial service provider, and
recently received a BREEAM “Very Good” sustainability certification. The property located at De Kroonstraat 1, Tilburg, Netherlands was acquired for $71.7 million (€46.9 million)
excluding unpaid construction costs and holdbacks of $11.8 million (€7.6 million) related to a 0.1 million square foot expansion expected to be paid during the fourth quarter of 2020.
The acquisition includes approximately 1.8 acres of additional land for potential future expansion. The Tilburg property is 100% leased to Decathlon, the world’s largest sports retailer and the property is expected to receive a BREEAM
“Excellent” sustainability certification in Q1 2021. The properties are located in close proximity to established distribution infrastructures and are situated in densely populated areas making them attractive e-commerce locations. 
 On July 8, 2020, Granite closed the previously announced acquisition of the fifth of
five income-producing properties located in the Midwest United States (the “Midwest Portfolio”) for $45.1 million (US$33.3 million) excluding transaction costs which was funded with cash on hand. The property, located at 5415
Centerpoint Parkway in Columbus, Ohio, is a 100% leased, modern distribution warehouse facility located in close proximity to extensive highways, air and rail systems. 

On September 1, 2020, Granite closed on the acquisition of 8995 Airport Road, a 0.1 million square foot, 26’ clear height modern
distribution facility situated on 5.5 acres of land in Brampton, Ontario. The property was acquired at a purchase price of $22.2 million through a sale-leaseback of their Canadian headquarters with GameStop Corporation who has agreed to lease
the property for an initial term of approximately 5 years with contractual rent escalations, and representing an in-going yield of 5.1%. The property is well located within the Greater Toronto Area’s
(“GTA”) Brampton sub-market, with easy access to the 400 series Highway network. The property is less than 3 kilometers to the CN Brampton Intermodal Terminal, and less than 10 kilometers to Toronto
Pearson International Airport, Canada’s busiest passenger and cargo airport, with service to 163 international destinations. 
 On
September 28, 2020, Granite closed on the acquisition of four industrial buildings in Mississauga, Ontario, collectively totaling 0.1 million square feet on 6.1 acres of contiguous land, for consideration of $19.5 million. The
properties are 100% leased to four tenants for a weighted average lease term of 5.6 years, representing an in-going yield of 4.1%. The current in-place rents are
significantly below market, providing a strong mark-to-market opportunity on lease rollover. The properties are strategically located at the intersection of Highways
401, 410 and 403 within the Mississauga industrial sub-market, the GTA’s largest and most active distribution node. The property also offers exceptional access to Pearson International Airport. 

  
 8    Granite REIT 2020 Third
Quarter Report 

 On September 30, 2020, Granite closed on the acquisition of 555 Beck Crescent in Ajax, Ontario,
through a sale-leaseback for consideration of $15.4 million. The 0.1 million square foot, 24’ clear height light manufacturing industrial facility is fully leased for an initial term of 10.0 years with contractual rent escalations and
represents an in-going yield of 4.6%. The property is well located in the GTA’s east sub-market, with easy access to the 400 series Highway network. The 7.6 acre
site contains excess land which can support a building expansion of approximately 0.04 million square feet, providing the potential for additional income and return enhancement in the future. 

Property Dispositions 
 During the three and nine month
periods ended September 30, 2020, Granite disposed of two properties for total proceeds of $23.5 million. The two properties were tenanted by Magna, thereby reducing Granite’s overall exposure to Magna to 30% of total GLA and 37% of
total annualized revenue as at the end of the third quarter 2020. 
  

																					
	 Dispositions
 (in millions,
except as noted)
  

Property Address
	 	Location	 	 	Sq ft	 	 	Date Disposed	 	 	Sale 
Price(1)	 	 	Annualized
Revenue	 
	 Disposed during the nine months ended September 30, 2020:
	  

	 201 Patillo Road
	 	  
	 Tecumseh, ON
	  
	 	  
	 0.3
	  
	 	  
	 September 14, 2020
	  
	 	 $
	 17.0
	  
	 	 $
	 1.3
	  

						
	 2032 First Street Louth
	 	  
	 St. Catharines, ON
	  
	 	  
	 0.1
	  
	 	  
	 September 14, 2020
	  
	 	  
	 6.5
	 
	 	  
	 0.5
	  

	 	 	 	 	 	 	  
	 0.4
	 
	 	 	 	 	 	 $
	 23.5
	  
	 	 $
	 1.8
	  

  

	(1) 	 	 Sale price does not include transaction costs associated with disposition. 

Construction, Development and Property Commitments 
 Granite
had the following construction and development commitments as at September 30, 2020: 
  

																					
	 Commitments
 (in millions, except as
noted)
  

Property Location
	 	Additional
sq ft	 	  	Accruals/
Payments/
Deposits
Made(1)	 	  	Future
Commitments	 	  	Total
Cost	 	  	Year-One
Stabilized
Yield
	 
	 As at September 30, 2020:
	 				  				  				  				  			
	 Development, construction or expansion:
	 				  				  				  				  			
	 Expansion of acquired property in Tilburg, Netherlands
	 	  
	 0.1
	 
	  	 $
	 11.6
	  
	  	 $
	 11.8
	  
	  	 $
	 23.4
	  
	  	  
	 4.3
	 % 

	 Tenant improvement commitment at developed property in Plainfield, Indiana
	 	  
	 —
	  
	  	  
	 —
	  
	  	  
	 2.7
	 
	  	  
	 2.7
	 
	  	  
	 —
	 % 

	 Property under development in Houston, Texas
	 	  
	 0.7
	 
	  	  
	 4.9
	 
	  	  
	 38.4
	 
	  	  
	 43.3
	 
	  	  
	 7.4
	 % 

	 Expansion of 2095 Logistics Drive, Mississauga, ON
	 	  
	 0.1
	 
	  	  
	 0.3
	 
	  	  
	 10.2
	 
	  	  
	 10.5
	 
	  	  
	 8.1
	 % 

	 Other construction commitments
	 	  
	 —
	  
	  	  
	 5.3
	 
	  	  
	 2.8
	 
	  	  
	 8.1
	 
	  	  
	 —
	 % 

	 	 	  
	 0.9
	 
	  	 $
	 22.1
	  
	  	 $
	 65.9
	  
	  	 $
	 88.0
	  
	  	 	 	 

  

	(1) 	 	 As at September 30, 2020. 

The Tilburg, Netherlands income-producing property was acquired on July 1, 2020 and included a 0.1 million square foot expansion that was
underway at the date of acquisition and is expected to be completed and occupied by the tenant in the fourth quarter of 2020. As at September 30, 2020, the estimated costs to complete the expansion were $11.8 million (€7.6 million). 
 At Granite’s greenfield site in Houston, Texas, speculative construction of the
initial phase, consisting of two buildings totaling 0.7 million square feet, commenced in the fourth quarter of 2019. Site servicing is currently underway and Granite is presently assessing the viability of commencing vertical construction in
early 2021. 

  
 Granite REIT 2020 Third Quarter
Report    9 

 Increase in Distributions 

On November 4, 2020, the Trust increased its targeted annualized distribution by 3.4% to $3.00 ($0.25 cents per month) per stapled unit from $2.90
per stapled unit to be effective upon the declaration of the distribution in respect of the month of December 2020 and payable in mid-January 2021. 

Subsequent Events 
 On October 23, 2020, the Trust
disposed of one property located in Barcelona, Spain for gross proceeds of $7.8 million (€5.0 million). 

Granite has agreed to acquire 8500 Tatum Road, a 1.0 million square foot, 36’ clear height modern warehouse distribution facility situated on
83.5 acres in the city of Atlanta, Georgia, for approximately $107 million (US $80.3 million). The state-of-the-art facility
was completed in 2019 and is 100% leased to PVH Corp. for a remaining lease term of 15 years. The property, which serves as PVH Corp.’s primary e-commerce distribution facility, is being acquired at an in-going yield of 4.4%. The acquisition is subject to customary closing conditions and is expected to close in the fourth quarter of 2020. The property is well positioned in Atlanta’s Palmetto sub-market within Atlanta’s I-85 logistical thoroughfare less than 15 miles from Hartsfield-Jackson Atlanta International Airport, the world’s busiest passenger
airport. The property is approximately 4 miles from the Fairburn CSX Intermodal connecting Atlanta directly to the Port of Savannah and to Southern California. 
  

	
	RESULTS OF OPERATIONS

 Foreign Currency Translation 

The majority of Granite’s investment properties are located in Europe and the United States and the cash flows derived from such properties are
primarily denominated in Euros and US dollars. Accordingly, fluctuations in the Canadian dollar, Granite’s reporting currency, relative to the Euro and US dollar will result in fluctuations in the reported values of revenues, expenses, cash
flows, assets and liabilities. The most significant foreign currency exchange rates that impact Granite’s business are summarized in the following table: 
  

																																													
	  	 	
Average Exchange Rates
	 	 	  	 	 	Period End Exchange Rates	 
	 	 	Three Months Ended
September 30,	 	 	 	 	 	 	 	 	Nine Months Ended
September 30,	 	 	 	 	 	 	 	 	 September 30,

2020
	 	 	 December 31,

2019
	 	 	 	 
	  	 	2020	 	 	2019	 	 	Change	 	 	 	 	 	2020	 	 	2019	 	 	Change	 	 	 	 	 	Change	 
	 $ per €1.00
	 	 	1.558		 	 	1.468		 	 	6%	 	 				 	 	1.521		 	 	1.493		 	 	2%	 	 				 	 	1.562		 	 	1.455		 	 	7%	 
	 $ per US$1.00
	 	 	1.332		 	 	1.321		 	 	1%	 	 	 	 	 	 	 	1.354		 	 	1.329		 	 	2%	 	 	 	 	 	 	 	1.332		 	 	1.296		 	 	3%	 

 The average exchange rates of the Canadian dollar relative to the Euro for the three and nine months ended
September 30, 2020 compared to the prior year periods were higher, which on a comparative basis, increased the Canadian dollar equivalent of revenue and expenses from Granite’s European operations. 

For the three and nine months ended September 30, 2020 compared to the prior year periods, the average exchange rates of the Canadian dollar
relative to the US dollar were higher, which on a comparative basis, increased the Canadian dollar equivalent of revenue and expenses from Granite’s US operations. 

  
 10    Granite REIT 2020 Third
Quarter Report 

 The period end exchange rates of the Canadian dollar relative to the Euro and US dollar on
September 30, 2020 were higher when compared to the December 31, 2019 exchange rates. As a result, the Canadian dollar equivalent of assets and liabilities from Granite’s European and US subsidiaries were higher when compared to
December 31, 2019. 
 On a net basis, the effect of the changes in exchange rates on Granite’s operating results for the three and nine
months ended September 30, 2020 was as follows: 
  

					
	 Effects of Changes in
Exchange Rates on Operating Results

  

									
	  	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 
	 (in millions, except per unit information)
	  	 2020 vs 2019
	 	  	 2020 vs 2019
	 
	 Increase in revenue
	  	 $
	 1.8
	  
	  	 $
	 2.9
	  

	 Increase in NOI — cash basis
	  	  
	 1.7
	 
	  	  
	 2.5
	  

	 Increase in net income
	  	  
	 1.7
	 
	  	  
	 4.2
	 

	 Increase in FFO
	  	  
	 1.3
	 
	  	  
	 2.8
	  

	 Increase in AFFO
	  	  
	 1.3
	 
	  	  
	 2.8
	  

	 Increase in FFO per unit
	  	 $
	 0.02
	  
	  	 $
	 0.05
	  

	 Increase in AFFO per unit
	  	 $
	 0.02
	  
	  	 $
	 0.05
	  

 Operating Results 

Revenue 
  

	
	  

Revenue

 

																													
	  	  	
Three Months Ended
September 30,
	 	  	  	 	  	  	 	 	Nine Months Ended
September 30,	 	  	  	 
	  	  	2020	 	  	2019	 	  	$ change	 	  	 	 	 	2020	 	  	2019	 	  	$ change	 
	 Rental revenue and amortization(1)
	  	$	77.0	 	  	$	60.6	 	  	 	16.4		  				 	$	217.1	 	  	$	176.0	 	  	 	41.1	
	 Tenant recoveries
	  	 	10.9		  	 	8.2		  	 	2.7		  				 	 	29.9		  	 	23.2		  	 	6.7	
	 Lease termination and
close-out fees
	  	 	—	 	  	 	—	 	  	 	—	 	  	 	 	 	 	 	—	 	  	 	0.9		  	 	(0.9	) 
	 Revenue
	  	$	87.9	 	  	$	68.8	 	  	 	19.1		  	 	 	 	 	$	247.0	 	  	$	200.1	 	  	 	46.9	

  

	(1) 	 	 Rental revenue and amortization include base rent, straight-line rent amortization and tenant incentive amortization.

  
 Granite REIT 2020 Third Quarter
Report    11 

 Revenue for the three month period ended September 30, 2020 increased by $19.1 million to
$87.9 million from $68.8 million in the prior year period. The components contributing to the change in revenue are detailed below: 
  

	
	 Q3
2020 vs Q3 2019 Change in Revenue
  

  

 
 

 
 Additional details pertaining to the components of the change in revenue are as follows: 

 

	 	•	 	 contractual rent adjustments included $0.2 million from consumer price index based increases and $0.9 million
from fixed contractual adjustments related to rent escalations; 

  

	 	•	 	 the acquisitions of properties located in the United States, Canada and the Netherlands beginning in the third quarter
of 2019 increased revenue by $17.4 million, which included $2.5 million of tenant recoveries; 

  

	 	•	 	 revenue increased by $0.6 million due to various renewal and re-leasing
activities for properties primarily in Canada and the United States; 

  

	 	•	 	 the sale of properties located in Canada and the United States during 2019 and 2020 decreased revenue by
$1.2 million; and 

  

	 	•	 	 foreign exchange had a $1.8 million positive impact as the relative weakening of the Canadian dollar against the
Euro and US dollar increased revenue by $1.6 million and $0.2 million, respectively. 

  
 12    Granite REIT 2020 Third
Quarter Report 

 Revenue for the nine month period ended September 30, 2020 increased $46.9 million to
$247.0 million from $200.1 million in the prior year period. The components contributing to the change in revenue are detailed below: 
  

	
	 Q3 2020 YTD vs Q3 2019 YTD
Change in Revenue

  
  
 

 
 Additional details pertaining to the components of the change in revenue are as follows: 

 

	 	•	 	 contractual rent adjustments included $0.8 million from consumer price index based increases and $1.8 million
from fixed contractual adjustments related to rent escalations; 

  

	 	•	 	 the acquisitions of properties located in the United States, Canada and the Netherlands during 2019 and 2020 increased
revenue by $45.0 million, which included $6.2 million of tenant recoveries; 

  

	 	•	 	 revenue increased by $2.0 million due to various renewal and re-leasing
activities for properties located in Canada, the United States, Austria and Spain; 

  

	 	•	 	 revenue decreased by $0.9 million as a result of lease close-out fees
received in 2019 for two properties in Canada that were disposed of in the prior year; 

  

	 	•	 	 the sale of properties located in Canada and the United States during 2019 and 2020 decreased revenue by
$4.6 million; and 

  

	 	•	 	 foreign exchange had a net $2.9 million positive impact as the relative weakening of the Canadian dollar against
the Euro and US dollar increased revenue by $1.5 million and $1.4 million, respectively. 

  
 Granite REIT 2020 Third Quarter
Report    13 

 Revenue by major currency for the three and nine month periods ended September 30, 2020 and 2019
was as follows: 
  

	
	 Revenue by
Currency

  
  
 

 
  
  
 

 
 As a majority of the Trust’s revenue is denominated in currencies other than the Canadian dollar, Granite uses
derivative financial instruments, including cross currency interest rate swaps, forward currency contracts and foreign exchange collars, to partially hedge its exposure to foreign currencies and reduce the potential impact that foreign currency rate
changes may have on Granite’s operating results, cash flows and distributions (see “LIQUIDITY AND CAPITAL RESOURCES — Debt Structure”). 

  
 14    Granite REIT 2020 Third
Quarter Report 

 Net Operating Income 

Net operating income (“NOI”) in the three months ended September 30, 2020 was $76.5 million compared to $60.1 million in the
three months ended September 30, 2019. NOI in the nine months ended September 30, 2020 was $215.6 million compared to $174.4 million in the nine months ended September 30, 2019. NOI — cash basis excludes the impact of
lease termination and close-out fees, and straight-line rent and tenant incentive amortization and reflects the cash generated by the income-producing properties excluding lease termination and close-out fees on a period-over-period basis. NOI — cash basis was $74.5 million in the three months ended September 30, 2020 compared with $60.3 million in the prior year period, an increase of
23.5%. NOI — cash basis was $213.2 million in the nine months ended September 30, 2020 compared with $173.7 million in the nine months ended September 30, 2019, an increase of 22.7%. 

Same property NOI — cash basis refers to the NOI — cash basis for those properties owned by Granite throughout the entire current and prior
year periods under comparison. Same property NOI — cash basis excludes properties that were acquired, disposed of, classified as properties under or held for development or assets held for sale during the periods under comparison. Same property
NOI — cash basis in the three months ended September 30, 2020 was $61.7 million, compared with $58.2 million in the prior year period. Same property NOI — cash basis in the nine months ended September 30, 2020 was
$166.1 million, compared to $157.0 million in the nine months ended September 30, 2019. The changes in NOI, NOI — cash basis and same property NOI — cash basis are detailed below: 

 

	
	 Changes in NOI, NOI —
Cash Basis and Same Property NOI — Cash Basis

  

																																									
	  	 	 Sq ft(1)
 (in
millions)
	 	 	 Three
Months Ended
September 30,
	 	 	Sq ft(1)	 	 	 Nine
Months Ended
September 30,
	 
	  	 	2020	 	 	2019	 	 	$ change	 	 	%
change	 	 	(in
millions)	 	 	2020	 	 	2019	 	 	$ change	 	 	%
change	 
	 Revenue
	 				 	$	87.9	 	 	$	68.8	 	 	 	19.1		 				 				 	$	247.0	 	 	$	200.1		 	 	46.9		 			
	 Less: Property operating costs
	 	 	 	 	 	 	(11.4	) 	 	 	(8.7	) 	 	 	(2.7	) 	 	 	 	 	 	 	 	 	 	 	(31.4	) 	 	 	(25.7	) 	 	 	(5.7	) 	 	 	 	 
	 NOI
	 				 	 $
	 76.5
	  
	 	 $
	 60.1
	  
	 	  
	 16.4
	 
	 	  
	 27.3%
	  
	 				 	 $
	 215.6
	  
	 	 $
	 174.4
	  
	 	  
	 41.2
	 
	 	  
	 23.6%
	  

	 Add (deduct):
	 				 				 				 				 				 				 				 				 				 			
	 Lease termination and close-out fees
	 				 	 	—	 	 	 	—	 	 	 	—	 	 				 				 	 	—	 	 	 	(0.9	) 	 	 	0.9		 			
	 Straight-line rent amortization
	 				 	 	(3.3	) 	 	 	(1.1	) 	 	 	(2.2	) 	 				 				 	 	(6.3	) 	 	 	(3.7	) 	 	 	(2.6	) 	 			
	 Tenant incentive amortization
	 	 	 	 	 	 	1.3	 	 	 	1.3	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	3.9	 	 	 	3.9	 	 	 	—	 	 	 	 	 
	 NOI — cash basis
	 	  
	 45.4
	 
	 	 $
	 74.5
	  
	 	 $
	 60.3
	  
	 	  
	 14.2
	 
	 	  
	 23.5%
	  
	 	  
	 45.4
	 
	 	 $
	 213.2
	  
	 	 $
	 173.7
	  
	 	  
	 39.5
	 
	 	  
	 22.7%
	  

	 Less NOI — cash basis for:
	 				 				 				 				 				 				 				 				 				 			
	 Acquisitions
	 	 	11.1	 	 	 	(12.3	) 	 	 	(0.6	) 	 	 	(11.7	) 	 				 	 	13.7	 	 	 	(45.8	) 	 	 	(11.4	) 	 	 	(34.4	) 	 			
	 Dispositions, assets held for sale and developments
	 	 	1.4		 	 	(0.5	) 	 	 	(1.5	) 	 	 	1.0		 	 	 	 	 	 	1.4		 	 	(1.3	) 	 	 	(5.3	) 	 	 	4.0		 	 	 	 
	 Same property NOI — cash basis
	 	 	32.9	 	 	$	61.7	 	 	$	58.2	 	 	 	3.5		 	 	6.0%	 	 	 	30.3	 	 	$	166.1	 	 	$	157.0	 	 	 	9.1		 	 	5.8%	 

  

	(1) 	 	 The square footage relating to the NOI — cash basis represents GLA of 45.4 million square feet as at
September 30, 2020. The square footage relating to the same property NOI — cash basis represents the aforementioned GLA excluding the impact from the acquisitions, dispositions, and developments during the relevant period.

  
 Granite REIT 2020 Third Quarter
Report    15 

 Property operating costs include recoverable and
non-recoverable costs from tenants and consist of property taxes, utilities, insurance, repairs and maintenance, legal and other property-related expenses. None of Granite’s employee compensation expenses
are included in property operating costs. 
 Straight-line rent amortization represents the scheduled fixed rent changes or rent-free periods in
leases that are recognized in revenue evenly on a straight-line basis over the term of the lease. Tenant incentive amortization mainly represents allowances provided to tenants that are recognized in revenue evenly on a straight-line basis over the
term of the lease and primarily comprises the amortization associated with the cash allowance incentives paid to Magna in respect of the 10-year lease extensions exercised during the 2014 year at the Thondorf
and Eurostar properties in Graz, Austria. 
 NOI — cash basis for the three months ended September 30, 2020 increased $14.2 million to
$74.5 million from $60.3 million in the prior year period, representing an increase of 23.5%. NOI — cash basis for the nine months ended September 30, 2020 increased $39.5 million to $213.2 million from
$173.7 million in the prior year period, representing an increase of 22.7%. These increases in NOI — cash basis in the three and nine month periods ended September 30, 2020 were a result of the increase in rental revenue as noted
previously, partially offset by an increase in property operating costs primarily relating to the properties acquired in 2019 and 2020. 
 Same
property NOI — cash basis for the three months ended September 30, 2020 increased $3.5 million (6.0%) to $61.7 million primarily due to the increase in contractual rents arising from both consumer price index and fixed rent
increases, re-leasing and renewals of various leases for properties primarily located in the United States and Canada and the favourable foreign exchange impact from the weakening of the Canadian dollar
against the US dollar and Euro. Excluding the impact of foreign exchange, same property NOI—cash basis for the three month period ended September 30, 2020 would have increased by 3.0% relative to the prior year period. 

Same property NOI — cash basis for the nine months ended September 30, 2020 increased $9.1 million (5.8%) to $166.1 million primarily
due to the increase in contractual rents, re-leasing and renewals of various leases for properties located in the United States, Canada, Austria and Spain, an expansion at a property in the United States and
the favourable foreign exchange impact from the weakening of the Canadian dollar against the US dollar and the Euro. Excluding the impact of foreign exchange, same property NOI—cash basis for the nine month period ended September 30, 2020
would have increased by 4.1% relative to the prior year period. 

  
 16    Granite REIT 2020 Third
Quarter Report 

 NOI — cash basis for the three and nine month periods ended September 30, 2020 and 2019 by
geography was as follows: 
  

	
	 NOI — Cash Basis by
Geography

  
  
 

 
  
  
 

 
 Granite’s property portfolio and NOI — cash basis are geographically diversified, which reduces the risk to
Granite’s operating results from any particular country’s economic downturn. 

  
 Granite REIT 2020 Third Quarter
Report    17 

 Same property NOI — cash basis for the three and nine month periods ended September 30, 2020
and 2019 by geography was as follows: 
  

	
	 Same Property NOI —
Cash Basis by Geography

  

																													
	  	  	Three Months Ended
September 30,	 	  	  	 	  	Nine Months Ended
September 30,	 
	  	  	2020	 	  	2019	 	  	% change	 	  	  	 	  	2020	 	  	2019	 	  	% change	 
	 Canada
	  	$	12.0	 	  	$	11.2	 	  	 	7.1%	 	  				  	$	29.8	 	  	$	28.0	 	  	 	6.4%	 
	 United States
	  	 	21.6		  	 	20.4		  	 	5.9%	 	  				  	 	54.4		  	 	49.4		  	 	10.1%	 
	 Austria
	  	 	17.6		  	 	16.8		  	 	4.8%	 	  				  	 	51.7		  	 	50.4		  	 	2.6%	 
	 Germany
	  	 	6.5		  	 	6.1		  	 	6.6%	 	  				  	 	18.7		  	 	18.2		  	 	2.7%	 
	 Netherlands
	  	 	2.5		  	 	2.3		  	 	8.7%	 	  				  	 	7.0		  	 	6.7		  	 	4.5%	 
	 Europe — Other
	  	 	1.5		  	 	1.4		  	 	7.1%	 	  	 	 	 	  	 	4.5		  	 	4.3		  	 	4.7%	 
	 Same Property NOI — cash basis
	  	$	61.7		  	$	58.2	 	  	 	6.0%	 	  	 	 	 	  	$	166.1		  	$	157.0		  	 	5.8%	 

 Same property NOI — cash basis for the three and nine month periods ended September 30, 2020 includes
$0.4 million and $1.1 million, respectively, associated with a 0.3 million square foot building expansion at a property located in West Jefferson, Ohio that was completed in the prior year. Excluding the NOI associated with the
expansion, same property NOI — cash basis would have increased 5.4% in the three month period ended September 30, 2020 (2.4% on a constant currency basis) and 5.1% in the nine month period ended September 30, 2020 (3.4% on a constant
currency basis) relative to the prior periods. 
 Constant currency same property NOI — cash basis for the three and nine month periods ended
September 30, 2020 and 2019 by geography was as follows, which is calculated by converting the comparative same property NOI — cash basis at current exchange rates: 
  

	
	 Constant Currency Same
Property NOI — Cash Basis by Geography

  

																													
	  	  	Three Months Ended
September 30,	 	  	  	 	  	Nine Months Ended
September 30,	 
	  	  	2020	 	  	2019	 	  	% change	 	  	  	 	  	2020	 	  	2019	 	  	% change	 
	 Canada
	  	$	12.0	 	  	$	11.2	 	  	 	7.1%	 	  				  	$	29.8	 	  	$	28.0	 	  	 	6.4%	 
	 United States
	  	 	21.6		  	 	20.6		  	 	4.9%	 	  				  	 	54.4		  	 	50.3		  	 	8.2%	 
	 Austria
	  	 	17.6		  	 	17.8		  	 	(1.1)%	 	  				  	 	51.7		  	 	51.3		  	 	0.8%	 
	 Germany
	  	 	6.5		  	 	6.4		  	 	1.6%	 	  				  	 	18.7		  	 	18.6		  	 	0.5%	 
	 Netherlands
	  	 	2.5		  	 	2.4		  	 	4.2%	 	  				  	 	7.0		  	 	6.9		  	 	1.4%	 
	 Europe — Other
	  	 	1.5		  	 	1.5		  	 	—%	 	  	 	 	 	  	 	4.5		  	 	4.3		  	 	4.7%	 
	 Constant Currency Same Property NOI — cash
basis
	  	$	61.7		  	$	59.9	 	  	 	3.0%	 	  	 	 	 	  	$	166.1		  	$	159.4		  	 	4.2%	 

  
 18    Granite REIT 2020 Third
Quarter Report 

 General and Administrative Expenses 

General and administrative expenses consisted of the following: 
  

	
	 General and Administrative
Expenses

  

																													
	  	  	Three Months Ended
September 30,	 	 	  	 	  	Nine Months Ended
September 30,	 
	  	  	2020	 	  	2019	 	  	$ change	 	 	  	 	  	2020	 	  	2019	 	  	$ change	 
	 Salaries and benefits
	  	$	4.1	 	  	$	2.8	 	  	 	1.3		 				  	$	11.1	 	  	$	10.2	 	  	 	0.9	
	 Audit, legal and consulting
	  	 	0.8		  	 	1.0		  	 	(0.2	) 	 				  	 	2.6		  	 	3.5		  	 	(0.9	) 
	 Trustee/director fees and related expenses
	  	 	0.4		  	 	0.3		  	 	0.1		 				  	 	1.0		  	 	1.1		  	 	(0.1	)
	 Executive unit-based compensation expense including distributions
	  	 	1.5		  	 	1.1		  	 	0.4		 				  	 	3.7		  	 	3.0		  	 	0.7	
	 Fair value remeasurement of trustee/director and executive unit-based compensation plans
	  	 	1.4		  	 	0.4		  	 	1.0		 				  	 	1.8		  	 	1.5		  	 	0.3	
	 Other public entity costs
	  	 	0.5		  	 	0.4		  	 	0.1		 				  	 	1.4		  	 	1.6		  	 	(0.2	) 
	 Office rents including property taxes and common area maintenance costs
	  	 	0.1		  	 	0.1		  	 	—	 	 				  	 	0.3		  	 	0.3		  	 	—	 
	 Capital tax
	  	 	0.3		  	 	0.1		  	 	0.2		 				  	 	0.6		  	 	0.2		  	 	0.4	
	 Information technology
	  	 	0.3		  	 	0.2		  	 	0.1		 				  	 	0.8		  	 	0.7		  	 	0.1	
	 Other
	  	 	0.2		  	 	0.5		  	 	(0.3	) 	 	 	 	 	  	 	1.0		  	 	1.3		  	 	(0.3	) 
	 General and administrative expenses
	  	$	9.6		  	$	6.9	 	  	 	2.7		 	 	 	 	  	$	24.3		  	$	23.4		  	 	0.9	

 General and administrative expenses were $9.6 million for the three month period ended September 30, 2020 and
increased $2.7 million in comparison to the prior year period primarily as a result of the following: 
  

	 	•	 	 an increase in salaries and benefits expense primarily due to additional employees in the United States and the
Netherlands and an accrual of $1.1 million made related to severance for a departing senior executive in the current year period; 

  

	 	•	 	 an increase in executive unit-based compensation expense due to greater awards outstanding under the plan in the current
year period; and 

  

	 	•	 	 an increase in fair value remeasurement associated with the trustee/director and executive unit-based compensation plans
resulting from a larger increase in the market price of the Trust’s stapled units in the third quarter of 2020 compared to the prior year period, partially offset by; 

 

	 	•	 	 a decrease in audit, legal and consulting expenses due to costs incurred in the prior year period associated with
corporate advisory matters including internal reorganizations and administrative matters. 

 General and administrative expenses were
$24.3 million for the nine month period ended September 30, 2020 and increased $0.9 million in comparison to the prior year period primarily as a result of the following: 

 

	 	•	 	 an increase in salaries and benefits expense primarily due to an increase in salaries and benefits expense associated
with additional employees in the United States and the Netherlands and an accrual made related to severance for a departing senior executive noted above, partially offset by the higher compensation costs related to the departure of the former CFO in
the second quarter of 2019; 

  
 Granite REIT 2020 Third Quarter
Report    19 

	 	•	 	 an increase in executive unit-based compensation expense due to greater awards outstanding under the plan;

  

	 	•	 	 an increase in fair value remeasurement associated with the trustee/director and executive unit-based compensation plans
resulting from an increase in the market price of the Trust’s stapled units compared to the prior year period; and 

  

	 	•	 	 an increase in capital tax related to increased investment into the United States partially offset by;

  

	 	•	 	 a decrease in audit, legal and consulting expenses due to costs incurred in the prior year period associated with
corporate advisory matters including internal reorganizations and administrative matters. 

 Interest Income

 Interest income for the three month period ended September 30, 2020 decreased $1.8 million to $0.5 million from
$2.3 million in the prior year period due to lower interest rates on invested cash. Interest income for the nine month period ended September 30, 2020 decreased $6.1 million to $1.8 million from $7.9 million in the prior
year period due to the reduction of cash balances on hand and lower interest rates on invested cash. 
 Interest Expense and Other
Financing Costs 
 Interest expense and other financing costs for the three month periods ended September 30, 2020 increased
$3.0 million to $10.6 million from $7.6 million in the prior year period. Interest expense and other financing costs for the nine month period ended September 30, 2020 increased $2.1 million to $25.0 million from
$22.9 million in the prior year period. Both increases were primarily related to increased interest costs associated with higher debt balances resulting from the $500 million 2027 Debentures (as defined below) issued in June 2020. 

As at September 30, 2020, Granite’s weighted average cost of interest-bearing debt was 2.16% (September 30, 2019 — 2.17%) and the
weighted average debt term-to-maturity was 4.5 years (September 30, 2019 — 4.0 years). 

Foreign Exchange Gains/Losses, Net 

Granite recognized net foreign exchange gains of $0.2 million and foreign exchange losses of $0.4 million in the three month periods ended
September 30, 2020 and 2019, respectively. The $0.6 million increase in net foreign exchange gains is primarily due to the remeasurement of certain monetary assets and liabilities of the Trust that are denominated in US dollars and Euros
as a result of the weakening of the Canadian dollar against these currencies and foreign exchange gains realized on the settlement of foreign exchange collar contracts. 

Granite recognized net foreign exchange gains of $3.0 million and net foreign exchange losses of $1.2 million in the nine month periods ended
September 30, 2020 and 2019, respectively. The $4.2 million increase in net foreign exchange gains is primarily due to the remeasurement of certain monetary assets and liabilities of the Trust that are denominated in US dollars and Euros
as a result of the weakening of the Canadian dollar against these currencies and foreign exchange gains realized on the settlement of foreign exchange collar contracts. 

Fair Value Gains/Losses on Investment Properties, Net 

Net fair value gains on investment properties were $62.1 million and $78.2 million in the three month periods ended September 30, 2020 and
2019, respectively. In the three month period ended September 30, 2020, net fair value gains of $62.1 million were primarily attributable to favourable changes in leasing assumptions associated with fair market rent increases as well as

  
 20    Granite REIT 2020 Third
Quarter Report 

 
compression in discount and terminal capitalization rates for properties located in the GTA (Canada) and across the United States as well as compression in discount and terminal capitalization
rates for certain of the Trust’s modern warehouse properties in Germany and the Netherlands, partially offset by an increase in discount rates for certain properties located in Austria due to market conditions and the nature of the tenants and
properties in this jurisdiction. 
 Net fair value gains on investment properties in the three month period ended September 30, 2019 of
$78.2 million were primarily attributable to (i) a compression in discount or terminal capitalization rates for certain properties primarily located in Canada and the United States and, to a lesser extent, in Europe, which resulted from
the continued market demand for warehouse distribution facilities and (ii) the favourable changes in leasing assumptions associated with fair market rent increases for certain properties located in North America. 

Net fair value gains on investment properties were $132.6 million and $197.9 million in the nine month periods ended September 30, 2020
and 2019, respectively. In the nine month period ended September 30, 2020, net fair value gains of $132.6 million were attributable to various factors including (i) an increase in fair value for the recently acquired property in
Dallas, Texas as a result of market confirmation of capitalization rates favourable to initial acquisition metrics of the forward purchase for this modern e-commerce facility, (ii) the favourable changes
in leasing assumptions associated with fair market rent increases for properties located in Canada and the United States and (iii) the increase in fair value of the recently developed property in Plainfield, Indiana as a result of executing a
full building 10-year lease, partially offset by an increase in discount rates for certain properties located in Austria and Germany due to market conditions and the nature of the tenants and properties across
these jurisdictions. 
 Net fair value gains on investment properties in the nine month period ended September 30, 2019 of $197.9 million
were attributable to various factors including (i) the positive changes in leasing assumptions associated with lease renewals and fair market rent increases for properties located in Canada and the United States and (ii) a compression in
discount and terminal capitalization rates for certain properties across Granite’s portfolio resulting from the continued market demand for warehouse distribution facilities. 

Fair Value Gains and Losses on Financial Instruments, Net 

Fair value gains on financial instruments for the three month periods ended September 30, 2020 and 2019 were $1.0 million and
$1.9 million, respectively. Fair value losses on financial instruments for the nine month period ended September 30, 2020 were $4.7 million and fair value gains on financial instruments for the nine month period ended
September 30, 2019 were $0.2 million. The fair value gains on financial instruments for the three months ended September 30, 2020 and the fair value losses on financial instruments for the nine months ended September 30, 2020 are
related to (i) the fair value change of the 2024 Cross Currency Interest Rate Swap and (ii) unrealized losses on foreign exchange forward contracts, partially offset by fair value gains on foreign exchange collar contracts. These
derivatives have not been designated in a hedging relationship and are therefore recorded in the statements of net income. 
 Loss on Sale
of Investment Properties 
 The loss on sale of investment properties for the three and nine month periods ended September 30, 2020
was $0.2 million. The loss on sale of investment properties for the three and nine month periods ended September 30, 2019 were $0.7 million and $2.0 million, respectively. The loss on sale of investment properties is primarily
related to broker commissions and legal and advisory costs associated with the dispositions or planned dispositions of assets held for sale. 

  
 Granite REIT 2020 Third Quarter
Report    21 

 Income Tax Expense 

Income tax expense comprised the following: 
  

	
	 Income
Tax Expense

  

																													
	  	  	Three Months Ended
September 30,	 	  	  	 	  	  	 	  	Nine Months Ended
September 30,	 	  	  	 
	  	  	2020	 	  	2019	 	  	$ change	 	  	  	 	  	2020	 	  	2019	 	  	$ change	 
	 Foreign operations
	  	$	1.7	 	  	$	1.4	 	  	 	0.3		  				  	$	5.0	 	  	$	4.2	 	  	 	0.8	
	 Other
	  	 	0.5		  	 	0.4	 	  	 	0.1		  	 	 	 	  	 	0.5		  	 	1.2	 	  	 	(0.7	) 
	 Current tax expense
	  	 	2.2		  	 	1.8		  	 	0.4		  				  	 	5.5		  	 	5.4		  	 	0.1	
	 Deferred tax expense
	  	 	12.3		  	 	10.4		  	 	1.9		  	 	 	 	  	 	30.1		  	 	33.1		  	 	(3.0	) 
	 Income tax expense
	  	$	14.5	 	  	$	12.2	 	  	 	2.3		  	 	 	 	  	$	35.6		  	$	38.5	 	  	 	(2.9	) 

 For the three months ended September 30, 2020, the current tax expense increased compared to the prior year period
primarily due to higher taxes in foreign jurisdictions as a result of acquisitions and the foreign exchange impact resulting from the relative weakening of the Canadian dollar on Euro denominated tax expense. 

For the nine months ended September 30, 2020, the current tax expense increased compared to the prior year period primarily due to the recognition
of tax assets in Canada of $0.8 million for taxation years that have become statute barred, partially offset by higher income taxes in foreign jurisdictions of acquisitions and the foreign exchange impact resulting from the relative weakening
of the Canadian dollar on Euro denominated tax expense. 
 The increase in deferred tax expense for the three months ended September 30, 2020
compared to the prior year period was primarily due to fair value gains on acquired properties and partially offset by fair value losses in jurisdictions in which deferred taxes are recorded and as well as the foreign exchange impact resulting from
the relative weakening of the Canadian dollar on US and Euro denominated tax expense. 
 The decrease in deferred tax expense for the nine months ended
September 30, 2020 compared to the prior year period was primarily due to a decrease in fair value gains on investment properties in jurisdictions in which deferred taxes are recorded. 

  
 22    Granite REIT 2020 Third
Quarter Report 

 Net Income Attributable to Stapled Unitholders 

For the three month period ended September 30, 2020, net income attributable to stapled unitholders was $105.2 million compared to
$114.5 million in the prior year period. The $9.3 million decrease in net income attributable to stapled unitholders was primarily due to a $16.1 million decrease in fair value gains on investment properties, a $3.0 million
increase in interest expense as a result of the issuance of the 2027 Debentures, a $1.8 million decrease in interest income due to lower interest rates in North America and higher income tax expense of $2.3 million, partially offset by a
$16.4 million increase in net operating income. The period-over-period variance is further summarized below: 
  

	
	 Q3
2020 vs Q3 2019 Change in Net Income Attributable to Stapled Unitholders

  

 
 

 
 For the nine month period ended September 30, 2020, net income attributable to stapled unitholders was
$262.2 million compared to $291.5 million in the prior year period. The $29.3 million net decrease in net income attributable to stapled unitholders was primarily due to a $65.3 million decrease in net fair value gains on
investment properties, a $6.1 million decrease in interest income due to lower interest rates in North America, a $5.0 million increase in fair value losses on financial instruments and a $2.0 million increase in interest expense as a
result of the issuance of the 2027 Debentures, partially offset by a $41.2 million increase in net operating income. The period-over-period variance is further summarized below: 

 

	
	 Q3
2020 YTD vs Q3 2019 YTD Change in Net Income Attributable to Stapled Unitholder

  

 
 

 

  
 Granite REIT 2020 Third Quarter
Report    23 

 Funds From Operations and Adjusted Funds From Operations 

The reconciliation of net income attributable to stapled unitholders to FFO and AFFO for the three and nine months ended September 30, 2020 and 2019
is presented below: 
  

	
	 FFO
AND AFFO(1) RECONCILIATION

 

																			
	  	 	  	 	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 
	(in millions, except per unit information)	 	  	 	2020	 	 	2019	 	 	2020	 	 	2019	 
						
	 Net income attributable to stapled unitholders
	 		 	$	105.2	 	 	$	114.5	 	 	$	262.2	 	 	$	291.5	 
	 Add (deduct):
	 		 				 				 				 			
	 Fair value gains on investment properties, net
	 		 	 	(62.1	) 	 	 	(78.2	) 	 	 	(132.6	) 	 	 	(197.9	) 
	 Fair value (gains) losses on financial instruments
	 		 	 	(1.0	) 	 	 	(2.0	) 	 	 	4.7	 	 	 	(0.2	) 
	 Loss on sale of investment properties
	 		 	 	0.2		 	 	0.7		 	 	0.2		 	 	2.0	
	 Deferred income tax expense
	 		 	 	12.3		 	 	10.4		 	 	30.1	 	 	 	33.1	
	 Fair value remeasurement expense relating to the Executive Deferred Stapled Unit Plan
	 		 	 	0.9		 	 	0.3		 	 	1.1	 	 	 	1.0	
	 Non-controlling interests
relating to the above
	 	 	 	 	—	 	 	 	0.1		 	 	0.1		 	 	0.1	
	 FFO
	 	[A]	 	$	55.5	 	 	$	45.8	 	 	$	165.8	 	 	$	129.6	 
	 Add (deduct):
	 		 				 				 				 			
	 Maintenance or improvement capital expenditures incurred
	 		 	 	(0.2	) 	 	 	(1.4	) 	 	 	(3.2	) 	 	 	(2.5	) 
	 Leasing commissions incurred(2)
	 		 	 	—	 	 	 	(0.3	) 	 	 	(0.1	) 	 	 	(0.6	) 
	 Tenant allowances incurred
	 		 	 	(0.6	) 	 	 	0.1		 	 	(0.6	) 	 	 	(0.2	) 
	 Tenant incentive amortization
	 		 	 	1.4	 	 	 	1.3	 	 	 	4.0	 	 	 	3.9	 
	 Straight-line rent amortization
	 	 	 	 	(3.4	) 	 	 	(1.1	) 	 	 	(6.3	) 	 	 	(3.7	) 
	 AFFO(1)
(2)
	 	[B]	 	$	52.7	 	 	$	44.4	 	 	$	159.6	 	 	$	126.5	 
						
	 Per unit amounts:
	 		 				 				 				 			
	 Basic and diluted FFO per stapled unit
	 	[A]/[C] and [A]/[D]	 	$	0.96		 	$	0.93		 	$	2.98		 	$	2.71	
	 Basic and diluted AFFO per stapled unit(1)
	 	[B]/[C] and [B]/[D]	 	$	0.91		 	$	0.90		 	$	2.87		 	$	2.65	
	 Basic weighted average number of stapled units
	 	[C]	 	 	57.8		 	 	49.4		 	 	55.6		 	 	47.8	
						
	 Diluted weighted average number of stapled units
	 	[D]	 	 	57.9		 	 	49.5		 	 	55.7		 	 	47.9	

  

	(1) 	 	 In the current year period AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing
commissions and tenant allowances incurred whereas in prior year periods AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing commissions and tenant allowances paid. The AFFO metrics in the comparative period
have been updated to conform to the current period’s presentation. AFFO as well as basic and diluted AFFO per unit for the three months ended September 30, 2019 were previously reported as $44.6 million and $0.90 per unit,
respectively. AFFO as well as basic and diluted AFFO per unit for the nine months ended September 30, 2019 were previously reported as $126.2 million and $2.64 per unit, respectively. Both methods of calculation are in accordance with the
REALPAC White Paper (see “NON-IFRS PERFORMANCE MEASURES”). There is no significant difference in these metrics as a result of the change in calculation. 

	(2)	 	 In accordance with the REALPAC White Paper, leasing commissions incurred in the three and nine month periods ended
September 30, 2020 exclude $0.5 million of leasing commissions incurred on the lease-up of a recently acquired property in Groveport, Ohio and deemed related to the overall acquisition costs. Leasing
commissions incurred in the nine month period ended September 30, 2020 exclude $1.9 million of leasing commissions incurred on the lease-up of a recently completed development property in Plainfield,
Indiana in the second quarter of 2020. 

  
 24    Granite REIT 2020 Third
Quarter Report 

 Funds From Operations 

FFO for the three month period ended September 30, 2020 was $55.5 million ($0.96 per unit) compared to $45.8 million ($0.93 per unit) in
the prior year period. Included in the FFO for the third quarter of 2020 is $1.1 million of severance costs associated with the departure of a senior executive. Excluding this severance expense, FFO would be $56.6 million ($0.98 per unit).
The $9.7 million ($0.03 per unit) increase in FFO is summarized below: 
  

	
	 Q3
2020 vs Q3 2019 Change in FFO

  
  

 
 FFO for the nine month period ended September 30, 2020 was $165.8 million ($2.98 per unit) compared to
$129.6 million ($2.71 per unit) in the prior year period. Included in the FFO for the third quarter of 2020 is $1.1 million of severance costs associated with the departure of a senior executive. Excluding this severance expense, FFO would
be $166.9 million ($3.00 per unit). The $36.2 million ($0.27 per unit) increase in FFO is summarized below: 
  

	
	 Q3
2020 YTD vs Q3 2019 YTD Change in FFO

  
  

 
 FFO for the nine month period ended September 30, 2019 includes $2.5 million ($0.05 per unit) of
compensation costs associated with the departure of the former CFO. In comparison and excluding the compensation costs of $2.5 million, FFO would have been $132.1 million ($2.76 per unit) in the nine month period ended September 30,
2019. 

  
 Granite REIT 2020 Third Quarter
Report    25 

 Adjusted Funds From Operations 

As previously detailed in the FFO and AFFO reconciliation table, AFFO for the three month period ended September 30, 2020 was $52.7 million
($0.91 per unit) compared to $44.4 million ($0.90 per unit) in the prior year period. Excluding the aforementioned severance of $1.1 million recognized in the third quarter of 2020, AFFO would be $53.8 million ($0.93 per unit). The
$8.3 million ($0.01 per unit) increase in AFFO is summarized below: 
  

	
	 Q3
2020 vs Q3 2019 Change in AFFO

  
  

 
 Additional details pertaining to the components of the change in AFFO are as follows: 

 

	 	•	 	 the $9.7 million increase in FFO, as noted previously; and 

 

	 	•	 	 a $1.2 million increase in AFFO from higher maintenance or improvement capital expenditures incurred
in the prior year period relating to improvement projects in Thondorf, Austria and Bergen op Zoom, Netherlands, partially offset by; 

  

	 	•	 	 a $2.2 million decrease in AFFO from tenant incentive and straight-line rent amortization, primarily
from re-leasing and renewal activities and property acquisitions in Canada, the United States and the Netherlands. 

  
 26    Granite REIT 2020 Third
Quarter Report 

 AFFO for the nine month period ended September 30, 2020 was $159.6 million ($2.87 per unit)
compared to $126.5 million ($2.65 per unit) in the prior year period. Excluding the aforementioned severance of $1.1 million recognized in the nine-month period ending September 30, 2020, AFFO would be $160.7 million ($2.89 per
unit). The $33.1 million ($0.22 per unit) increase in AFFO is summarized below: 
  

	
	 Q3
2020 YTD vs Q3 2019 YTD Change in AFFO

  
  

 
 Additional details pertaining to the components of the change in AFFO are as follows: 

 

	 	•	 	 the $36.2 million increase in FFO, as noted previously, partially offset by; 

 

	 	•	 	 a $0.7 million decrease in AFFO from higher maintenance or improvement capital expenditures incurred
primarily due to a roof replacement at a property in Canada and improvement projects at properties in the United States; and 

  

	 	•	 	 a $2.5 million decrease in AFFO from tenant incentive and straight-line rent amortization, primarily
from releasing and renewal activities and property acquisitions in Canada, the United States. 

 AFFO for the nine month period
ended September 30, 2019 includes $2.5 million ($0.05 per unit) of compensation costs associated with the departure of the former CFO. In comparison and excluding the compensation costs of $2.5 million, AFFO would have been
$129.0 million ($2.7 per unit) in the nine month period ended September 30, 2019. 
  

	
	INVESTMENT PROPERTIES

 Granite’s investment properties consist of income-producing properties, properties under development and land held
for development. Substantially all of the income-producing properties are for industrial use and can be categorized as (i) modern logistics/distribution warehouse facilities (“modern warehouse facilities”), which were recently
acquired or newly developed/redeveloped, (ii) multi-purpose facilities, which are tenantable by a wide variety of potential users or (iii) special purpose properties designed and built with specialized features and leased to Magna. The
attributes of the income-producing properties are versatile and are based on the needs of the tenant such that an industrial property used by a certain tenant for light or heavy manufacturing can be used by another tenant for other industrial uses
after some retrofitting if necessary. Accordingly, the investment property portfolio is substantially for industrial use and, as such, Granite determined that its asset class comprises industrial properties

  
 Granite REIT 2020 Third Quarter
Report    27 

 
for purposes of financial reporting. The fair value of the industrial properties, as noted below, is based upon the current tenanting, existing use and attributes of such properties. 

Properties under development is comprised of (i) 50 acres of a greenfield site in Houston, Texas for which speculative construction of the initial phase,
consisting of two buildings totaling 0.7 million square feet, has begun and is expected to be completed in the fourth quarter of 2021, and (ii) a site in Altbach, Germany where the demolition of the property is complete and the
construction of a distribution/light industrial facility was temporarily placed on hold during the first and second quarters of 2020 as a result of the COVID-19 pandemic. Granite now expects to move forward
with this development later in 2020 or early 2021 and is currently engaged in pre-leasing activity and construction contact pricing (see “SIGNIFICANT MATTERS —
COVID-19 Pandemic”). 
 Land held for development comprises 36 acres of land in Fort Worth, Texas for
the planned future development of a 0.6 million square foot e-commerce and logistics warehouse, the remaining 141 acres of land in Houston, Texas acquired in 2019 and held for the future development of up
to a 2.5 million square foot multi-phased business park capable of accommodating buildings ranging from 0.3 million to 1.2 million square feet (of which 0.7 million square feet is planned in the initial phase of construction, as
noted above), 12.9 acres of development land in West Jefferson, Ohio that was acquired in 2018 and a 16-acre parcel of land located in Wroclaw, Poland that could provide for approximately 0.3 million
square feet of logistics-warehouse space. 
 Summary attributes of the investment properties as at September 30, 2020 and December 31, 2019
were as follows: 
  
  

	
	
Investment Properties Summary

 

									
	As at September 30, 2020 and December 31, 2019	  	2020	 	  	2019	 
	 (in millions, except as noted)
	  				  			
	 Investment properties — fair value
	  	$	5,338.9	 	  	$	4,457.9	 
	 Income-producing properties
	  	 	5,270.3	 	  	 	4,377.6	 
	 Properties under development
	  	 	29.5	 	  	 	51.3	 
	 Land held for development
	  	 	39.1	 	  	 	29.0	 
	 Overall capitalization rate(1)
	  	 	5.8%	 	  	 	6.1%	 
			
	 Number of investment properties
	  	 	109	 	  	 	91	 
	 Income-producing properties
	  	 	102	 	  	 	85	 
	 Properties under development
	  	 	3	 	  	 	3	 
	 Land held for development
	  	 	4	 	  	 	3	 
			
	 Property metrics
	  				  			
	 GLA, square feet
	  	 	45.4	 	  	 	40.0	 
	 Occupancy, by GLA
	  	 	98.9%	 	  	 	99.0%	 
	 Weighted average lease term in years, by square footage
	  	 	5.9	 	  	 	6.5	 
	 Total number of tenants
	  	 	80	 	  	 	60	 
	 Magna as a percentage of annualized revenue(2)
	  	 	37%	 	  	 	42%	 
	 Magna as a percentage of GLA
	  	 	30%	 	  	 	35%	 

  

	(1) 	 	 Overall capitalization rate pertains only to income-producing properties. 

	(2) 	 	 Annualized revenue for each period presented is calculated as rental revenue excluding tenant recoveries, recognized in
accordance with IFRS, in the reported month multiplied by 12 months. 

  
 28    Granite REIT 2020 Third
Quarter Report 

 The fair value of the investment properties by asset category as at September 30, 2020 and
December 31, 2019 was as follows: 
  

	
	  

Fair Value of Investment Properties by Asset
Category(1)

  
 

 
 Granite has a high quality global portfolio of large scale properties strategically located in Canada, the United
States and Europe. The fair value of the investment properties by country as at September 30, 2020 and December 31, 2019 was as follows: 
  

	
	  

Fair Value of Investment Properties by
Geography(1)

 

  
 

 

  
 Granite REIT 2020 Third Quarter
Report    29 

 The change in the fair value of investment properties by asset category during the nine month period
ended September 30, 2020 was as follows: 
  

	
	  

Change in Fair Value of Investment Properties by Asset Category

 

  

																																					
	 	 	 	 	 	 	 	 	 	 
	 	 	January 1,
2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	September 30,
2020	 
	  	 	Investment
properties	 	 	Fair
value
gains
(losses)	 	 	Acquisitions	 	 	Disposals	 	 	Capital and
leasing
expenditures	 	 	Foreign
exchange
gains	 	 	Other
changes	 	 	Transfers(1)	 	 	Investment
properties	 
	 Modern warehouse facilities
	 	 	$2,509.3		 	 	101.3		 	 	520.4		 	 	—	 	 	 	12.4		 	 	69.6		 	 	5.7		 	 	97.7		 	 	$3,316.4	
	 Multi-purpose facilities
	 	 	842.2		 	 	30.5		 	 	—	 	 	 	(23.5)	 	 	 	2.6		 	 	23.6		 	 	(0.1)	 	 	 	—	 	 	 	875.3	
	 Special purpose properties
	 	 	1,026.1		 	 	1.2		 	 	—	 	 	 	—	 	 	 	—	 	 	 	54.6		 	 	(3.3)	 	 	 	—	 	 	 	1,078.6	
	 Income-Producing Properties
	 	 	4,377.6		 	 	133.0		 	 	520.4		 	 	(23.5)	 	 	 	15.0		 	 	147.8		 	 	2.3		 	 	97.7		 	 	5,270.3	
	 Properties Under Development
	 	 	51.3		 	 	(0.1)	 	 	 	35.7		 	 	—	 	 	 	36.4		 	 	3.9		 	 	—	 	 	 	(97.7)	 	 	 	29.5	
	 Land Held For Development
	 	 	29.0		 	 	(0.3)	 	 	 	9.2		 	 	—	 	 	 	0.3		 	 	0.9		 	 	—	 	 	 	—	 	 	 	39.1	
	 	 	 	$4,457.9		 	 	$132.6	 	 	 	$565.3	 	 	 	$(23.5)	 	 	 	$51.7		 	 	$152.6	 	 	 	$2.3	 	 	 	—	 	 	 	$5,338.9	

  

	(1) 	 	 The transfers are related to the reclassification of a property under development in Plainfield, Indiana to
income-producing properties upon its completion during the second quarter of 2020 and the transfer of a property under development in Bleiswijk, Netherlands to income-producing properties upon its completion during the third quarter of 2020.

 During the nine month period ended September 30, 2020, the fair value of investment properties increased by
$881.0 million primarily due to: 
  

	 	•	 	 net fair value gains of $132.6 million which were attributable to various factors including (i) an increase in
fair value for the recently acquired property in Dallas, Texas as a result of market confirmation of capitalization rates favourable to initial acquisition metrics of the forward purchase for this modern
e-commerce facility, (ii) the favourable changes in leasing assumptions associated with fair market rent increases for properties located in the GTA, Canada and (iii) the increase in fair value of
the recently developed property in Plainfield, Indiana as a result of executing a full building 10-year lease with a new tenant, partially offset by an increase in discount rates for certain properties located
in Austria and Germany due to market conditions and the nature of the tenants and properties across these jurisdictions; 

  

	 	•	 	 the acquisitions of 17 income-producing properties in Canada, the United States and the Netherlands, a property under
development in the Netherlands and a parcel of development land in the United States for $565.3 million consisting of (i) a property in Weert, Netherlands for $31.9 million, (ii) five properties in Ohio and Indianapolis, United
States for $222.7 million, (iii) three properties in Memphis and Mississippi, United States for $111.6 million, (iv) a property under development in Bleiswijk, Netherlands for $35.6 million (completed in the third quarter
and transferred to income-producing properties), (v) development land in Fort Worth, Texas for $8.9 million (vi) two properties in Tilburg and Ede, Netherlands for $71.7 million and $21.4 million respectively, (vii) six
properties in the GTA, Canada for $57.0 million; and (viii) the associated transaction costs of $4.5 million (see “SIGNIFICANT MATTERS — Property Acquisitions”); 

 

	 	•	 	 capital expenditures and leasing costs of $51.7 million, of which $36.4 million related to development of four
properties under construction in Indiana and Texas, United States as 

  
 30    Granite REIT 2020 Third
Quarter Report 

	 	 
well as Bleiswijk, Netherlands and Altbach, Germany. During the nine month period ended September 30, 2020, the developments in Indiana and Bleiswijk were completed and subsequently
transferred to income-producing properties. Capital expenditures relating to modern warehouse facilities include $8.6 million of construction costs incurred to complete a developed property in Dallas, Texas which was acquired in November 2019
and $2.5 million of leasing commissions of which $2.4 million is related to recent acquisitions and completed developments; and 

  

	 	•	 	 foreign exchange gains of $152.6 million, which include foreign exchange gains of $105.0 million and
$47.6 million resulting from the relative weakening of the Canadian dollar against the Euro and the US dollar, respectively. 

Fair values were 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. Granite measures its investment properties using valuations prepared by management. Granite 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
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 used during the nine months ended September 30, 2020. The key valuation metrics for Granite’s investment properties including the discount and terminal capitalization rates by jurisdiction are summarized in note 4 to the
unaudited condensed combined financial statements for the three and nine month periods ended September 30, 2020. In addition, valuation metrics for Granite’s income-producing properties by asset category as at September 30, 2020 and
December 31, 2019 were as follows: 
  

	
	Valuation Metrics by Income-Producing Property Asset Category

  

																																													
	 As at September 30, 2020 and
December 31,
2019
	 	Modern
warehouse
facilities	 	 	  	 	 	Multi-purpose
facilities	 	 	  	 	 	Special
purpose
properties	 	 	  	 	 	Total	 
	 	2020	 	 	2019	 	 	  	 	 	2020	 	 	2019	 	 	  	 	 	2020	 	 	2019	 	 	  	 	 	2020	 	 	2019	 
	 Overall capitalization rate(1)(2)
	 	 	5.16%	 	 	 	5.42%	 	 				 	 	6.13%	 	 	 	6.28%	 	 				 	 	7.63%	 	 	 	7.44%	 	 				 	 	5.83%	 	 	 	6.06%	 
	 Terminal capitalization rate(1)
	 	 	5.60%	 	 	 	5.97%	 	 				 	 	6.14%	 	 	 	6.44%	 	 				 	 	6.78%	 	 	 	7.03%	 	 				 	 	5.93%	 	 	 	6.32%	 
	 Discount
rate(1)
	 	 	6.07%	 	 	 	6.17%	 	 	 	 	 	 	 	6.83%	 	 	 	6.91%	 	 	 	 	 	 	 	7.74%	 	 	 	7.38%	 	 	 	 	 	 	 	6.54%	 	 	 	6.60%	 

  

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

	(2)	 	 Overall capitalization rate is calculated as stabilized net operating income (property revenue less property expenses)
divided by the fair value of the property. 

  
 Granite REIT 2020 Third Quarter
Report    31 

 A sensitivity analysis of the fair value of income-producing properties to changes in the overall
capitalization rate, terminal capitalization rate and discount rate at September 30, 2020 is presented below: 
  

							
	 Sensitivity Analysis of Fair Value of Income-Producing Properties

 

													
	Rate sensitivity	  	Overall capitalization rate	 	  	Terminal capitalization rate	 	  	Discount rate	 
	 +50 bps
	  	 	4,827.6	 	  	 	5,021.7	 	  	 	5,076.4	 
	 +25 bps
	  	 	5,038.5	 	  	 	5,140.7	 	  	 	5,172.2	 
	 Base rate
	  	$	5,270.3	 	  	$	5,270.3	 	  	$	5,270.3	 
	 -25 bps
	  	 	5,526.2	 	  	 	5,412.0	 	  	 	5,370.7	 
	 -50 bps
	  	 	5,810.8	 	  	 	5,567.8	 	  	 	5,473.6	 

 Capital Expenditures and Leasing Costs 

Capital expenditures relate to sustaining the existing earnings capacity of the property portfolio. Capital expenditures can include expansion or
development expenditures and maintenance or improvement expenditures. Expansion or development capital expenditures are discretionary in nature and are incurred to generate new revenue streams and/or increase the productivity of a property.
Maintenance or improvement capital expenditures relate to sustaining the existing earnings capacity of a property. Leasing costs include direct leasing costs and lease incentives. Direct leasing costs include broker commissions incurred in
negotiating and arranging tenant leases. Lease incentives include the cost of leasehold improvements to tenant spaces and/or cash allowances provided to tenants for leasehold improvement costs. 

Included in total capital expenditure and leasing cost additions to investment properties are items which relate to the completion or lease up of
recently acquired or developed properties. Such items are excluded from Granite’s calculation of AFFO. A reconciliation of total capital and leasing cost additions to investment properties to those included in AFFO for the three and nine month
periods ended September 30, 2020 and 2019 is below: 
  

	
	 Maintenance Capital Expenditures
and Leasing Costs

  

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	  	Nine Months Ended
September 30,	 
	  	  	2020	 	 	2019	 	 	  	 	  	2020	 	 	2019	 
	 Additions to investment properties:
	  				 				 				  				 			
	 Leasing costs
	  	$	0.6	 	 	$	0.3	 	 				  	$	2.5	 	 	$	0.6	 
	 Tenant improvements(1)
	  	 	0.6		 	 	(0.1	) 	 				  	 	0.6		 	 	0.2	
	 Maintenance capital expenditures
	  	 	0.2		 	 	1.4		 				  	 	3.2		 	 	2.5	
	 Other capital expenditures
	  	 	2.0		 	 	0.1		 	 	 	 	  	 	8.7		 	 	3.5	
		  	$	3.4	 	 	$	1.7	 	 				  	$	15.0	 	 	$	6.8	 
						
	 Less:
	  				 				 				  				 			
	 Leasing costs related to acquisition activities
	  	 	(0.5	) 	 	 	—	 	 				  	 	(0.5	) 	 	 	—	 
	 Leasing costs related to development activities
	  	 	—	 	 	 	—	 	 				  	 	(1.9	) 	 	 	—	 
	 Capital expenditures related to property acquisitions
	  	 	(2.1	) 	 	 	(0.1	) 	 	 	 	 	  	 	(8.7	) 	 	 	(3.5	) 
	 Capital expenditures and leasing costs included in
AFFO
	  	$	0.8	 	 	$	1.6	 	 	 	 	 	  	$	3.9	 	 	$	3.3	 

  

	(1) 	 	 Tenant improvements include tenant allowances and landlord’s work. 

  
 32    Granite REIT 2020 Third
Quarter Report 

 During the three month period ended September 30, 2020, included in total capital expenditures
and leasing costs are $2.1 million of costs incurred to complete a property in Dallas, Texas and $0.5 million related to leasing commissions for one of the Midwest Portfolio properties acquired in the second quarter of 2020. 

During the nine month period ended September 30, 2020, included in total capital expenditures and leasing costs are $8.7 million of costs
incurred to complete a property in Dallas, Texas, $1.9 of leasing commissions related to the lease-up at the recently completed development in Plainfield, Indiana, and $0.5 million related to leasing
commissions for one of the Midwest Portfolio properties acquired in the second quarter of 2020. 
 The capital expenditures and leasing costs incurred
by quarter for the trailing eight quarters were as follows: 
  

	
	 Capital Expenditures and Leasing
Costs — Trailing Eight Quarters

  

																																			
	  	 	  	 	Q3’20	 	 	Q2’20	 	 	Q1’20	 	 	Q4’19	 	 	Q3’19	 	 	Q2’19	 	 	Q1’19	 	 	Q4’18	 
	 Total capital expenditures incurred
	 		 	$	2.2	 	 	$	6.2	 	 	$	3.4	 	 	$	1.0	 	 	$	1.5	 	 	$	0.6	 	 	$	3.9	 	 	$	16.5	 
	 Total leasing costs incurred
	 	 	 	 	1.2		 	 	2.0		 	 	—	 	 	 	0.8		 	 	0.2		 	 	0.4		 	 	0.2		 	 	0.6	
	 Total incurred
	 	[A]	 	$	3.4	 	 	$	8.2	 	 	$	3.4	 	 	$	1.8	 	 	$	1.7	 	 	$	1.0	 	 	$	4.1	 	 	$	17.1	 
	 Less: Capital expenditures and leasing costs related to acquisitions
and developments
	 	 	 	 	(2.6	) 	 	 	(6.1	) 	 	 	(2.4	) 	 	 	(0.2	) 	 	 	(0.1	) 	 	 	(0.4	) 	 	 	(3.0	) 	 	 	(14.3	) 
	 Capital expenditures and leasing costs included in
AFFO
	 	[B]	 	 	0.8	 	 	 	2.1	 	 	 	1.0	 	 	 	1.6	 	 	 	1.6	 	 	 	0.6	 	 	 	1.1	 	 	 	2.8	 
	 GLA, square feet
	 	[C]	 	 	45.4	 	 	 	44.3		 	 	40.0		 	 	40.0		 	 	34.9		 	 	34.5		 	 	32.8		 	 	32.2	
	 $ total incurred per square feet
	 	[A]/[C]	 	$	0.07	 	 	$	0.19	 	 	$	0.09	 	 	$	0.05	 	 	$	0.05	 	 	$	0.03	 	 	$	0.13	 	 	$	0.53	 
	 $ capital expenditures and leasing costs included in AFFO per
square feet
	 	[B]/[C]	 	$	0.00	 	 	$	0.05	 	 	$	0.03	 	 	$	0.04	 	 	$	0.05	 	 	$	0.02	 	 	$	0.03	 	 	$	0.09	 

 Development and Expansion Projects 

The attributes of Granite’s properties under development and expansion projects as at September 30, 2020 were as follows: 

 

	
	 Development and Expansion
Projects

  

																									
	  	 	Land
acreage
(in acres)	 	 	Expected
sq ft of
construction
(in millions)	 	 	Target/
actual start
date of
construction	 	 	Target
completion
date	 	 	 Actual

construction
costs as at
September 30,
2020
	 	 	Expected
total
construction
cost(1)	 
	 As at September 30, 2020
	 				 				 				 				 				 			
	 Properties under development
	 				 				 				 				 				 			
	 Houston, Texas (Phase 1 only)
	 	 	50		 	 	0.7		 	 	Q4 2019	 	 	 	Q4 2021	 	 	$	4.9	 	 	$	43.1	 
	 Altbach, Germany
	 	 	13		 	 	0.3		 	 	Q1 2021	 	 	 	Q4 2021	 	 	 	3.4	 	 	 	35.3	 
							
	 Expansion project
	 				 				 				 				 				 			
	 Tilburg, Netherlands
	 	 	—	 	 	 	0.1		 	 	Q2 2020	 	 	 	Q4 2020	 	 	 	11.6		 	 	23.4	 
	 2095 Logistics Drive, Mississauga, Ontario
	 	 	9		 	 	0.1		 	 	Q4 2019	 	 	 	Q4 2021	 	 	 	0.3	 	 	 	10.5	 
	 	 	 	72		 	 	1.2		 	 	 	 	 	 	 	 	 	$	20.2	 	 	$	112.3	 

  
  

	(1)	 	 Construction cost excludes cost of land. 

  
 Granite REIT 2020 Third Quarter
Report    33 

 During the three month period ended September 30, 2020, Granite completed the development
property in Bleiswijk, Netherlands. The total cost to acquire and complete the property was $65.7 million (€42.5 million) including the initial acquisition cost of $35.8 million (€23.2 million). This property is a build-to-suit grocery e-commerce distribution
facility situated on approximately 13 acres of land and comprises a total gross leasable area of 0.2 million square feet and offers 407 car and 147 van parking spaces, respectively. The property is located in the Prisma Business Park in the
center of the Randstad conurbation, situated next to the A12 motorway, providing access to approximately 8 million consumers within a one-hour radius. The development recently received a BREEAM “Very
Good” sustainability certification. 
 Leasing Profile 
 Magna, Granite’s Largest Tenant 
 During the quarter, and subsequent to quarter end, Granite continued to
reduce its exposure to Magna through the disposition of two Magna-tenanted properties in Canada and one in Spain (see “SIGNIFICANT MATTERS — Property Dispositions” and “SIGNIFICANT MATTERS — Subsequent
Events”). At September 30, 2020, Magna International Inc. or one of its operating subsidiaries was the tenant at 33 (December 31, 2019 — 35) of Granite’s income-producing properties and comprised 37% (December 31,
2019 — 42%) of Granite’s annualized revenue and 30% (December 31, 2019 — 35%) of Granite’s GLA. Including the impact of the disposition of the Barcelona property on October 23, 2020, Granite’s overall exposure to
Magna is 30% of total GLA and 37% of total annualized revenue. 
 According to public disclosures, Magna International Inc. has a credit rating of A3
with a “Negative Outlook” by Moody’s Investor Service, A- with a “Negative Outlook” by Standard & Poor’s and A(low) with a “Negative Trend” by DBRS Limited. As
a result of the impact of COVID-19 on Magna’s global operations, Magna’s credit ratings were recently amended by the rating agencies in June and July 2020 with negative outlooks. Magna is a global
mobility technology company with complete vehicle engineering and contract manufacturing expertise. Magna’s product capabilities include body, chassis, exteriors, seating, powertrain, active driver assistance, electronics, mechatronics,
mirrors, lighting and roof systems. 
 Granite’s relationship with Magna is an arm’s length landlord and tenant relationship governed by the
terms of Granite’s leases. Granite’s properties are generally leased to operating subsidiaries of Magna International Inc. and are not guaranteed by the parent company; however, Magna International Inc. is the tenant under certain of
Granite’s leases. The terms of the lease arrangements with Magna generally provide for the following: 
  

	 	•	 	 the obligation of Magna to pay for costs of occupancy, including operating costs, property taxes and maintenance and
repair costs; 

  

	 	•	 	 rent escalations based on either fixed-rate steps or inflation; 

 

	 	•	 	 renewal options tied to market rental rates or inflation; 

 

	 	•	 	 environmental indemnities from the tenant; and 

 

	 	•	 	 a right of first refusal in favour of Magna on the sale of a property. 

Renewal terms, rates and conditions are typically set out in Granite’s leases with Magna and form the basis for tenancies that continue beyond the
expiries of the initial lease terms. 
 According to its public disclosure, Magna’s success is primarily dependent upon the levels of North
American, European and Chinese car and light truck production by Magna’s customers. Granite expects Magna to continuously seek to optimize its global manufacturing footprint and consequently, Magna may or may not renew leases for facilities
currently under lease at their expiries. 

  
 34    Granite REIT 2020 Third
Quarter Report 

 Other Tenants 

In addition to Magna, at September 30, 2020, Granite had 79 other tenants from various industries that in aggregate comprised 60% of the
Trust’s annualized revenue. Each of these tenants accounted for less than 7% of the Trust’s annualized revenue as at September 30, 2020. 

Granite’s top 10 tenants by annualized revenue at September 30, 2020 are summarized in the table below: 

 

	
	 Top 10 Tenants
Summary

  

															
	Tenant	 	Annualized Revenue %	 	 	GLA %	 	 	WALT (years)	 	 	Credit 
Rating(1)(2)
	 Magna
	 	 	37%	 	 	 	30%	 	 	 	4.8		 	A(low)
	 Amazon
	 	 	6%	 	 	 	5%	 	 	 	18.3		 	AA(low)
	 ADESA
	 	 	3%	 	 	 	—%	 	 	 	8.8		 	NR
	 Restoration Hardware
	 	 	2%	 	 	 	3%	 	 	 	7.6		 	NR
	 Hanon Systems
	 	 	2%	 	 	 	1%	 	 	 	8.9		 	AA
	 Ingram Micro
	 	 	2%	 	 	 	2%	 	 	 	4.3		 	BB(high)
	 Cornerstone Brands
	 	 	2%	 	 	 	2%	 	 	 	4.0		 	B (high)
	 Mars Petcare
	 	 	2%	 	 	 	3%	 	 	 	1.6		 	NR
	 Wayfair
	 	 	2%	 	 	 	2%	 	 	 	5.0		 	NR
	 Ricoh
	 	 	2%	 	 	 	1%	 	 	 	4.7		 	BBB(high)
	 Top 10
Tenants
	 	 	60%	 	 	 	49%	 	 	 	6.5	 	 	 

  
  

	(1) 	 	 Credit rating is quoted on the DBRS equivalent rating scale where publicly available. NR refers to Not Rated.

	(2) 	 	 The credit rating indicated may, in some instances, apply to an affiliated company of Granite’s tenant which may not
be the guarantor of the lease. 

  
 Granite REIT 2020 Third Quarter
Report    35 

 Lease Expiration 

As at September 30, 2020, Granite’s portfolio had a weighted average lease term by square footage of 5.9 years (December 31, 2019 —
6.5 years) with lease expiries by GLA (in thousands of square feet) and any lease renewals committed adjusted accordingly, lease count and annualized revenue (calculated as rental revenue excluding tenant recoveries, recognized in accordance with
IFRS, in September 2020 multiplied by 12 months, in millions) as set out in the table below: 
  

	
	 Lease Maturity
Summary

  

																																																																																																					
	  	 	
Total
GLA
	 	 	
Total
Lease
Count
	 	 	
Total
Annualized
Revenue $
	 	 	Vacancies	 	 	  	 	 	2020	 	 	  	 	 	2021	 	 	  	 	 	2022	 	 	  	 	 	2023	 	 	  	 	 	2024	 	 	  	 	 	2025	 	 	  	 	 	2026 and Beyond	 
	Country	 	Sq Ft	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 	 	  	 	 	Sq Ft	 	 	Annualized
Revenue $	 
	 Canada
	 	 	5,891		 	 	30		 	 	52.2		 	 	—	 	 				 	 	608		 	 	5.6		 				 	 	316		 	 	2.9		 				 	 	347		 	 	2.9		 				 	 	380		 	 	2.3		 				 	 	389		 	 	2.6		 				 	 	1,136		 	 	8.5		 				 	 	2,715		 	 	27.4	
	 Canada-committed
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 				 	 	(608	) 	 	 	(5.6	) 	 				 	 	(201	) 	 	 	(2.2	) 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	253		 	 	2.8		 				 	 	314		 	 	2.2		 				 	 	242		 	 	2.8	
	 Canada — net
	 	 	5,891		 	 	30		 	 	52.2		 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	115		 	 	0.7		 				 	 	347		 	 	2.9		 				 	 	380		 	 	2.3		 				 	 	642		 	 	5.4		 				 	 	1,450		 	 	10.7		 				 	 	2,957		 	 	30.2	
	 United States
	 	 	24,533		 	 	54		 	 	141.2		 	 	402		 				 	 	1,280		 	 	8.8		 				 	 	316		 	 	1.8		 				 	 	3,843		 	 	19.1		 				 	 	3,228		 	 	15.0		 				 	 	2,822		 	 	15.1		 				 	 	1,310		 	 	6.9		 				 	 	11,332		 	 	74.5	
	 United States-committed
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 				 	 	(1,157	) 	 	 	(8.2	) 	 				 	 	(316	) 	 	 	(1.8	) 	 				 	 	—	 	 	 	—	 	 				 	 	806		 	 	4.5		 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	668		 	 	5.5	
	 United States — net
	 	 	24,533		 	 	54		 	 	141.2		 	 	402		 				 	 	123		 	 	0.6		 				 	 	—	 	 	 	—	 	 				 	 	3,843		 	 	19.1		 				 	 	4,034		 	 	19.5		 				 	 	2,822		 	 	15.1		 				 	 	1,310		 	 	6.9		 				 	 	12,000		 	 	80.0	
	 Austria
	 	 	8,100		 	 	11		 	 	64.9		 	 	100		 				 	 	—	 	 	 	—	 	 				 	 	389		 	 	2.8		 				 	 	802		 	 	10.3		 				 	 	125		 	 	1.3		 				 	 	5,349		 	 	39.5		 				 	 	111		 	 	0.7		 				 	 	1,224		 	 	10.3	
	 Austria-committed
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	(389	) 	 	 	(2.8	) 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	389		 	 	2.8	
	 Austria-net
	 	 	8,100		 	 	11		 	 	64.9		 	 	100		 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	802		 	 	10.3		 				 	 	125		 	 	1.3		 				 	 	5,349		 	 	39.5		 				 	 	111		 	 	0.7		 				 	 	1,613		 	 	13.1	
	 Germany
	 	 	3,504		 	 	11		 	 	25.7		 	 	—	 	 				 	 	195		 	 	1.4		 				 	 	548		 	 	3.8		 				 	 	283		 	 	2.3		 				 	 	1,947		 	 	14.7		 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	531		 	 	3.5	
	 Germany-committed
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 				 	 	(195	) 	 	 	(1.4	) 	 				 	 	(309	) 	 	 	(2.3	) 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	309		 	 	2.3		 				 	 	195		 	 	1.4		 				 	 	—	 	 	 	—	 
	 Germany-net
	 	 	3,504		 	 	11		 	 	25.7		 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	239		 	 	1.5		 				 	 	283		 	 	2.3		 				 	 	1,947		 	 	14.7		 				 	 	309		 	 	2.3		 				 	 	195		 	 	1.4		 				 	 	531		 	 	3.5	
	 Netherlands
	 	 	2,649		 	 	8		 	 	22.8		 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	314		 	 	2.3		 				 	 	—	 	 	 	—	 	 				 	 	628		 	 	5.1		 				 	 	1,707		 	 	15.4	
	 Europe — Other
	 	 	752		 	 	8		 	 	5.9		 	 	—	 	 				 	 	133		 	 	0.7		 				 	 	337		 	 	3.2		 				 	 	101		 	 	0.6		 				 	 	90		 	 	0.8		 				 	 	—	 	 	 	—	 	 				 	 	—	 	 	 	—	 	 				 	 	91		 	 	0.6	
	 Total
	 	 	45,429		 	 	122		 	 	312.7		 	 	502		 				 	 	2,216		 	 	16.5		 				 	 	1,906		 	 	14.5		 				 	 	5,376		 	 	35.2		 				 	 	6,084		 	 	36.4		 				 	 	8,560		 	 	57.2		 				 	 	3,185		 	 	21.2		 				 	 	17,600		 	 	131.7	
	 Total-committed
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 				 	 	(1,960	) 	 	 	(15.2	) 	 				 	 	(1,215	) 	 	 	(9.1	) 	 				 	 	—	 	 	 	—	 	 				 	 	806		 	 	4.5		 				 	 	562		 	 	5.1		 				 	 	509		 	 	3.6		 				 	 	1,299		 	 	11.1	
	 As at September 30, 2020
	 	 	45,429		 	 	122		 	 	312.7		 	 	502		 				 	 	256		 	 	1.3		 				 	 	691		 	 	5.4		 				 	 	5,376		 	 	35.2		 				 	 	6,890		 	 	40.9		 				 	 	9,122		 	 	62.3		 				 	 	3,694		 	 	24.8		 				 	 	18,899		 	 	142.8	
	 % of portfolio as at September 30, 2020:
	  
	 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 				 			
	 * by sq ft
	 	 	100%	 	 				 				 	 	1.1%	 	 				 	 	0.6%	 	 				 				 	 	1.5%	 	 				 				 	 	11.8%	 	 				 				 	 	15.2%	 	 				 				 	 	20.1%	 	 				 				 	 	8.1%	 	 				 				 	 	41.6%	 	 			
	 * by Annualized Revenue
	 	 	 	 	 	 	 	 	 	 	100%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.4%	 	 	 	 	 	 	 	 	 	 	 	1.7%	 	 	 	 	 	 	 	 	 	 	 	11.3%	 	 	 	 	 	 	 	 	 	 	 	13.1%	 	 	 	 	 	 	 	 	 	 	 	19.9%	 	 	 	 	 	 	 	 	 	 	 	7.9%	 	 	 	 	 	 	 	 	 	 	 	45.7%	 

  
 36    Granite REIT 2020 Third
Quarter Report 

 Occupancy Roll Forward 

The tables below provide a summary of occupancy changes during the three and nine month periods ended September 30, 2020. 

 

	
	 
	
Occupancy Roll Forward for Q3 2020

 

																													
	  	 	Three Months Ended September 30, 2020	 
	(in thousands, sq ft, except as noted)	 	Canada	 	 	USA	 	 	Austria	 	 	Germany	 	 	Netherlands	 	 	Europe -
Other	 	 	Total	 
	 Total portfolio size, July 1, 2020
	 	 	5,904		 	 	24,058		 	 	8,101		 	 	3,504		 	 	1,938		 	 	751		 	 	44,256	
	 Vacancy, July 1, 2020
	 	 	—	 	 	 	(402	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(402	) 
	 Occupancy, July 1, 2020
	 	 	5,904		 	 	23,656		 	 	8,101		 	 	3,504		 	 	1,938		 	 	751		 	 	43,854	
	 Occupancy %, July 1,
2020
	 	 	100.0%	 	 	 	98.3%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	99.1%	 
	 Acquired occupancy
	 	 	346		 	 	478		 	 	—	 	 	 	—	 	 	 	471		 	 	—	 	 	 	1,295	
	 Completed development (Bleiswijk, Netherlands)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	239		 	 	—	 	 	 	239	
	 Dispositions
	 	 	(359	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(359	) 
	 Expiries
	 	 	(99	) 	 	 	(144	) 	 	 	(100	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(343	) 
	 Renewals
	 	 	99		 	 	59		 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	158	
	 New Leases
	 	 	—	 	 	 	85		 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	85	
	 Occupancy, September 30, 2020
	 	 	5,891		 	 	24,134		 	 	8,001		 	 	3,504		 	 	2,648		 	 	751		 	 	44,929	
	 Total portfolio size, September 30, 2020
	 	 	5,891		 	 	24,536		 	 	8,101		 	 	3,504		 	 	2,648		 	 	751		 	 	45,431	
	 Occupancy %, September 30, 2020
	 	 	100.0%	 	 	 	98.4%	 	 	 	98.8%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	98.9%	 

  

	
	 Occupancy Roll Forward for Q3 2020
YTD
  

  

																													
	  	 	Nine Months Ended September 30, 2020	 
	(in thousands, sq ft, except as noted)	 	Canada	 	 	USA	 	 	Austria	 	 	Germany	 	 	Netherlands	 	 	Europe -
Other	 	 	Total	 
	 Total portfolio size, January 1, 2020
	 	 	5,904		 	 	20,057		 	 	8,101		 	 	3,504		 	 	1,700		 	 	751		 	 	40,017	
	 Vacancy, January 1, 2020
	 	 	—	 	 	 	(402	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(402	) 
	 Occupancy, January 1, 2020
	 	 	5,904		 	 	19,655		 	 	8,101		 	 	3,504		 	 	1,700		 	 	751		 	 	39,615	
	 Occupancy %, January 1,
2020
	 	 	100.0%	 	 	 	98.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	99.0%	 
	 Acquired occupancy
	 	 	346		 	 	3,968		 	 	—	 	 	 	—	 	 	 	709		 	 	—	 	 	 	5,023	
	 Completed developments (Plainfield, Indiana and Bleiswijk,
Netherlands)
	 	 	—	 	 	 	511		 	 	—	 	 	 	—	 	 	 	239		 	 	—	 	 	 	750	
	 Dispositions
	 	 	(359	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(359	) 
	 Expiries
	 	 	(460	) 	 	 	(924	) 	 	 	(100	) 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,484	) 
	 Renewals
	 	 	460		 	 	839		 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,299	
	 New Leases
	 	 	—	 	 	 	85		 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	85	
	 Occupancy, September 30, 2020
	 	 	5,891		 	 	24,134		 	 	8,001		 	 	3,504		 	 	2,648		 	 	751		 	 	44,929	
	 Total portfolio size, September 30, 2020
	 	 	5,891		 	 	24,536		 	 	8,101		 	 	3,504		 	 	2,648		 	 	751		 	 	45,431	
	 Occupancy %, September 30, 2020
	 	 	100.0%	 	 	 	98.4%	 	 	 	98.8%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	100.0%	 	 	 	98.9%	 

  
 Granite REIT 2020 Third Quarter
Report    37 

	
	LIQUIDITY AND CAPITAL RESOURCES

 Liquidity 
 Granite has various
sources of available liquidity including cash, cash equivalents and the unused portion of its unsecured credit facility that aggregated to $1,038.7 million as at September 30, 2020 compared to $797.7 million at December 31, 2019,
as summarized below: 
  

					
	 Sources of Available
Liquidity
  

  

									
	As at September 30, 2020 and December 31, 2019	  	2020	 	  	2019	 
	 Cash and cash equivalents
	  	 $
	 539.7
	  
	  	 $
	 298.7
	  

	 Unused portion of credit facility
	  	  
	 499.0
	 
	  	  
	 499.0
	 

	 Available liquidity
	  	 $
	 1,038.7
	  
	  	 $
	 797.7
	  

			
	 Additional sources of liquidity:
	  				  			
	 Unencumbered assets(1)
	  	 $
	 5,338.9
	  
	  	 $
	 4,457.9
	  

  

	(1)	 	 Unencumbered assets represent the carrying value of investment properties (excluding any assets held for sale) that are
not encumbered by secured debt. Granite can seek to obtain secured financing against its unencumbered assets subject to certain restrictions and financial covenant limitations in its credit facility, term loan agreements and trust indentures.

 The available liquidity is primarily due to net cash proceeds realized from the recent debenture and equity offerings completed in
June 2020. Granite intends to use and has partially used the net proceeds of the debenture and equity offerings to fund completed and potential acquisitions of properties, to finance or refinance expenditures associated with Eligible Green Projects
(as described in the Granite Green Bond Framework, which is available on Granite’s website), for commitments under existing development projects and for general trust purposes. 

Management believes that the Trust’s cash resources, cash flow from operations and available third-party borrowings will be sufficient to finance
its operations and capital expenditures program over the next year as well as to pay distributions. Granite expects to fund its ongoing operations and future growth through the use of (i) existing cash and cash equivalents, (ii) cash flow
from operating activities, (iii) cash flows from asset sales, (iv) short-term financing available from the credit facility, (v) the issuance of unsecured debentures or equity, subject to market conditions, and/or (vi) if
necessary, financing that may be obtained on its unencumbered assets. For information about the impact of COVID-19 on Granite’s liquidity, please see “SIGNIFICANT MATTERS — COVID-19 Pandemic”. 

  
 38    Granite REIT 2020 Third
Quarter Report 

 Cash Flow Components 

Components of the Trust’s cash flows were as follows: 
  

	
	 Cash Flow Components
Summary
  

  

																									
	  	  	Three Months Ended
September 30,	 	 	Nine Months Ended
September 30,	 
	  	  	2020	 	 	2019	 	 	$ change	 	 	2020	 	 	2019	 	 	$ change	 
	 Cash and cash equivalents, beginning of period
	  	$	617.2	 	 	$	496.9	 	 	 	120.3		 	$	298.7	 	 	$	658.2	 	 	 	(359.5	) 
	 Cash provided by operating activities
	  	 	66.1		 	 	42.8		 	 	23.3		 	 	185.9		 	 	133.3		 	 	52.6	
	 Cash used in investing activities
	  	 	(96.0	) 	 	 	(48.4	) 	 	 	(47.6	) 	 	 	(576.4	) 	 	 	(430.1	) 	 	 	(146.3	) 
	 Cash provided by financing activities
	  	 	(43.8	) 	 	 	(35.2	) 	 	 	(8.6	) 	 	 	627.9		 	 	104.8		 	 	523.1	
	 Effect of exchange rate changes on cash and cash
equivalents
	  	 	(3.8	) 	 	 	(0.7	) 	 	 	(3.1	) 	 	 	3.6		 	 	(10.8	) 	 	 	14.4	
	 Cash and cash equivalents, end of period
	  	$	539.7	 	 	$	455.4	 	 	 	84.3		 	$	539.7	 	 	$	455.4	 	 	 	84.3	

 Operating Activities 

During the three month period ended September 30, 2020, operating activities generated cash of $66.1 million compared to $42.8 million in
the prior year period. The increase of $23.3 million was due to various factors including, among others, the following: 
  

	 	•	 	 an increase of $16.3 million in net operating income; and 

 

	 	•	 	 an increase of $15.7 million from cash provided by working capital changes primarily due to a decrease in accounts
receivables, an increase in accounts payable and accrued liabilities and as well as an increase in deferred revenue due to the timing of rent payments, partially offset by; 

 

	 	•	 	 an increase of $2.7 million in general and administrative expenses; 

 

	 	•	 	 a decrease in interest income of $1.8 million; 

 

	 	•	 	 an increase of $1.9 million in leasing commissions paid; and 

 

	 	•	 	 an increase of $2.8 million in income taxes paid. 

In the nine month period ended September 30, 2020, operating activities generated cash of $185.9 million compared to $133.3 million in
the prior year period. The increase of $52.6 million was due to various factors including, among others, the following: 
  

	 	•	 	 an increase of $41.1 million in net operating income; 

 

	 	•	 	 a decrease in interest paid by $2.4 million due to the timing of interest payments related to debentures; and

  

	 	•	 	 an increase of $14.5 million from cash provided by working capital changes primarily due to a decrease in accounts
receivables and an increase in deferred revenue due to the timing of rent payment, partially offset by; 

  

	 	•	 	 a decrease in interest income of $6.1 million; and 

 

	 	•	 	 an increase of $1.7 million in leasing commissions paid. 

  
 Granite REIT 2020 Third Quarter
Report    39 

 Investing Activities 

Investing activities for the three month period ended September 30, 2020 used cash of $96.0 million and primarily related to the following:

  

	 	•	 	 the acquisitions of nine income-producing properties in Canada, the United States and the Netherlands for
$114.7 million and related working capital of $7.3 million acquired as part the Tilburg, Netherlands property (see “SIGNIFICANT MATTERS — Property Acquisitions”); and 

 

	 	•	 	 investment property expansion and development paid of $7.8 million relating to four properties in Indiana
and Texas, United States, as well as Bleiswijk, Netherlands and Altbach, Germany and maintenance and improvement capital expenditures paid of $1.4 million largely relating to capital expenditures at properties in Canada and the United States,
partially offset by; 

  

	 	•	 	 net proceeds of $35.5 million received from the dispositions of two income-producing properties in Canada for
$23.5 million and the receipt of a proceeds receivable related to the disposal of a property in South Carolina in September 2018 of $12.1 million. 

Investing activities for the three month period ended September 30, 2019 used cash of $48.4 million and primarily related to the following:

  

	 	•	 	 the acquisitions of two income-producing properties for $51.6 million largely consisting of one property in Born,
Netherlands for $25.7 million, one property in Horn Lake, Mississippi for $24.5 million and the associated transaction costs of $1.7 million; 

  

	 	•	 	 investment property development and expansion capital expenditures paid of $7.2 million primarily relating to the
properties under development in Altbach, Germany, Plainfield, Indiana and Houston, Texas; and 

  

	 	•	 	 a $1.3 million advance payment made to acquire an income-producing property located in the state of Georgia.
Subsequent to September 30, 2019, Granite acquired the property for total consideration of $62.4 million (US$47.5). These cash outflows are partially offset by; 

 

	 	•	 	 net proceeds of $12.6 million received from the disposition of a property in Canada. 

Investing activities for the nine months ended September 30, 2020 used cash of $576.4 million and primarily related to the following: 

 

	 	•	 	 the acquisitions of seventeen income-producing properties in Canada, the United States and the Netherlands and a parcel
of development land in the United States for $565.3 million and related working capital of $7.3 million acquired as part the Tilburg, Netherlands property (see “SIGNIFICANT MATTERS — Property Acquisitions”); and

  

	 	•	 	 investment property expansion and development paid of $33.4 million relating to four properties in Indiana
and Texas, United States and as well as Bleiswijk, Netherlands and Altbach, Germany and maintenance and improvement capital expenditures paid of $4.7 million largely relating to capital expenditures at properties in Canada and the United
States, partially offset by; 

  

	 	•	 	 net proceeds pf $35.5 million received from the dispositions of two income-producing properties in Canada for
$23.5 million and the receipt of a proceeds receivable related to the disposal of a property in South Carolina in September 2018 of $12.1 million. 

  
 40    Granite REIT 2020 Third
Quarter Report 

 Investing activities for the nine months ended September 30, 2019 used cash of
$430.1 million and primarily related to the following: 
  

	 	•	 	 the acquisitions of five income-producing properties in the United States and the Netherlands, the leasehold interest in
two properties in Canada and a parcel of development land in the United States for $469.3 million consisting of two properties in Texas for $164.2 million, the leasehold interest in two properties in Mississauga, Ontario for
$146.7 million, one property in Columbus, Ohio for $71.6 million, one property in Born, Netherlands for $25.7 million, one property in Horn Lake, Mississippi for $24.5 million, one property comprised of development land in
Houston, Texas for $33.4 million and the associated transaction costs of $3.2 million; 

  

	 	•	 	 investment property development and expansion capital expenditures paid of $11.9 million relating to properties
under development in Altbach, Germany, Plainfield, Indiana and Houston, Texas and the completed expansion at the property near Columbus, Ohio, and maintenance and improvement capital expenditures paid of $2.6 million largely relating to
improvement projects at a property in Novi, Michigan, a multi-tenanted property in Olive Branch, Mississippi and a property located in the Netherlands; and 

  

	 	•	 	 a $1.3 million advance payment to acquire an income-producing property located in the state of Georgia as noted
above. These cash outflows are partially offset by; 

  

	 	•	 	 net proceeds of $38.2 million received from the dispositions of seven properties in Canada and the United States;
and 

  

	 	•	 	 the receipt of a $16.8 million vendor take-back mortgage relating to the sale of four properties in Iowa in
February 2019. 

 Financing Activities 

Cash used by financing activities for the three month period ended September 30, 2020 of $43.8 million largely comprised distribution payments
of $42.0 million and $1.0 million of deferred financing costs paid in connection with the insurance of the 2027 Debentures. 
 Cash used by
financing activities for the three month period ended September 30, 2019 of $35.2 million comprised $34.6 million of distribution payments and $0.7 million related to the payment of lease obligations. 

Cash provided by financing activities for the nine month period ended September 30, 2020 of $627.9 million largely comprised
$496.9 million of proceeds from the June 2020 debenture offering, net of issuance costs and $276.9 million of proceeds from the June 2020 stapled unit offering, net of issuance costs, partially offset by $120.1 million of distribution
payments and $25.0 million relating to the repurchase of stapled units under the normal course issuer bid. 
 Cash provided by financing
activities for the nine months ended September 30, 2019 of $104.8 million comprised $220.4 million of proceeds from the stapled unit offering completed in April 2019, net of issuance costs, partially offset by $100.2 million of
monthly distribution payments, $13.7 million relating to a special distribution payment and $1.5 million relating to the payment of lease obligations. 

  
 Granite REIT 2020 Third Quarter
Report    41 

 Debt Structure 

Granite’s debt structure and key debt metrics as at September 30, 2020 and December 31, 2019 were as follows: 

 

	
	 
	
Summary Debt Structure and Debt Metrics

  

											
	As at September 30, 2020 and December 31, 2019	 	  	    	2020	 	  	2019	 
	 Unsecured debt, net
	 		    	$	1,691.3	 	  	$	1,187.0	 
	 Cross currency interest rate swaps, net
	 		    	 	89.5	 	  	 	30.3	 
	 Lease obligations
	 	 	    	 	34.0	 	  	 	33.0	 
	 Total debt
	 	        [A]        	    	$	1,814.8	 	  	$	1,250.3	 
	 Less: cash and cash equivalents
	 	 	    	 	539.7	 	  	 	298.7	 
	 Net debt
	 	[B]	    	$	1,275.1	 	  	$	951.6	 
	 Investment properties, all unencumbered by secured
debt
	 	[C]	    	$	5,338.9	 	  	$	4,457.9	 
	 Trailing 12-month adjusted EBITDA(1)
	 	[D]	    	$	249.6	 	  	$	204.4	 
	 Interest expense
	 		    	$	32.0	 	  	$	29.9	 
	 Interest income
	 	 	    	 	(3.5	) 	  	 	(9.6	) 
	 Trailing 12-month interest expense, net
	 	[E]	    	$	28.5	 	  	$	20.3	 
	 Debt metrics
	 		    				  			
	 Leverage ratio(1)
	 	[A]/[C]	    	 	34%	 	  	 	28%	 
	 Net leverage ratio(1)
	 	[B]/[C]	    	 	24%	 	  	 	21%	 
	 Interest coverage ratio(1)
	 	[D]/[E]	    	 	8.8x	 	  	 	10.1x	 
	 Unencumbered asset coverage ratio(1)
	 	[C]/[A]	    	 	2.9x	 	  	 	3.6x	 
	 Indebtedness ratio(1)
	 	[A]/[D]	    	 	7.3x	 	  	 	6.1x	 
	 Weighted average cost of debt(2)
	 		    	 	2.16%	 	  	 	1.83%	 
	 Weighted average debt
term-to-maturity, in years(2)
	 		    	 	4.5	 	  	 	4.4	 
	 Ratings and outlook
	 		    				  			
	 DBRS
	 		    	 	BBB stable	 	  	 	BBB stable	 
	 Moody’s
	 	 	    	 	Baa2 stable	 	  	 	Baa2 stable	 

  

	(1)	 	 Represents a non-IFRS measure. For definitions of Granite’s non-IFRS measures, refer to the section “NON-IFRS PERFORMANCE MEASURES”. 

	(2)	 	 Excludes lease obligations noted above. 

Unsecured Debt and Cross Currency Interest Rate Swaps 

2027 Debentures and Cross Currency Interest Rate Swap 
 On
June 4, 2020, Granite REIT Holdings Limited Partnership (“Granite LP”) issued $500.0 million aggregate principal amount of 3.062% Series 4 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. At September 30, 2020, all of the 2027 Debentures remained outstanding and the balance, net of deferred financing costs, was
$497.0 million. 
 On June 4, 2020, Granite 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. As at September 30, 2020, the fair value of the cross currency interest rate
swap was a net financial liability of $3.6 million. 

  
 42    Granite REIT 2020 Third
Quarter Report 

 2026 Term Loan and Cross Currency Interest Rate Swap 

On December 12, 2018, Granite LP entered into and fully drew down a $300.0 million senior unsecured
non-revolving term facility that originally matured on December 12, 2025. On November 27, 2019, Granite refinanced the $300.0 million term facility and extended the maturity date one year to
December 11, 2026 (the “2026 Term Loan”). The 2026 Term Loan is fully prepayable without penalty. Any amount repaid may not be re-borrowed. Interest on drawn amounts is calculated based on the
Canadian Dollar Offered Rate (“CDOR”) plus an applicable margin determined by reference to the external credit rating of Granite LP and is payable monthly in advance. At September 30, 2020, the full $300.0 million remained
outstanding and the balance, net of deferred financing costs and debt modification losses, was $299.5 million. 
 On December 12, 2018,
Granite entered into a cross currency interest rate swap to exchange the CDOR plus margin interest payments from the term loan that originally matured in 2025 for Euro denominated payments at a 2.202% fixed interest rate. As a result of the term
loan extension on November 27, 2019, the previously existing cross currency interest rate swap was settled for $6.8 million and a new cross currency interest rate swap was entered into. The new cross currency interest rate swap exchanges
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. As at September 30, 2020, the fair value of the cross currency interest rate swap was a net
financial liability of $25.1 million. 
 2024 Term Loan and Cross Currency Interest Rate Swap 

On December 19, 2018, Granite LP entered into and fully drew down a US$185.0 million senior unsecured
non-revolving term facility that originally matured on December 19, 2022. On October 10, 2019, Granite refinanced the US$185.0 million term facility and extended the maturity date two years to
December 19, 2024 (the “2024 Term Loan”). The 2024 Term Loan is fully prepayable without penalty. Any amount repaid may not be re-borrowed. Interest on drawn amounts is calculated based on LIBOR
plus an applicable margin determined by reference to the external credit rating of Granite LP and is payable monthly in arrears. At September 30, 2020, the full US$185.0 million remained outstanding and the balance, net of deferred
financing costs and debt modification losses, was $245.9 million. 
 On December 19, 2018, Granite entered into a cross currency interest
rate swap to exchange the LIBOR plus margin interest payments from the term loan that originally matured in 2022 for Euro denominated payments at a 1.225% fixed interest rate. On September 24, 2019, in conjunction with the term loan
refinancing, the Trust entered into a new cross currency interest rate swap (the “2024 Cross Currency Interest Rate Swap”). The 2024 Cross Currency Interest Rate Swap exchanges 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 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. As at September 30, 2020, the fair value of the cross currency interest rate swap was a net financial liability of $14.8 million. 

2023 Debentures and Cross Currency Interest Rate Swap 
 On
December 20, 2016, Granite LP issued $400.0 million aggregate principal amount of 3.873% Series 3 senior debentures due November 30, 2023 (the “2023 Debentures”). Interest on the 2023 Debentures is payable semi-annually in
arrears on May 30 and November 30 of each year. At September 30, 2020, all of the 2023 Debentures remained outstanding and the balance, net of deferred financing costs, was $399.0 million. 

  
 Granite REIT 2020 Third Quarter
Report    43 

 On December 20, 2016, Granite entered into a cross currency interest rate swap to exchange the
3.873% interest payments from the 2023 Debentures for Euro denominated payments at a 2.43% fixed interest rate. 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. As at September 30, 2020, the fair value of the cross currency interest rate swap was
a net financial liability of $35.6 million. 
 2021 Debentures and Cross Currency Interest Rate Swap 

In July 2014, Granite LP issued $250.0 million aggregate principal amount of 3.788% Series 2 senior debentures due July 5, 2021 (the “2021
Debentures”). Interest on the 2021 Debentures is payable semi-annually in arrears on January 5 and July 5 of each year. At September 30, 2020, all of the 2021 Debentures remained outstanding and the balance, net of deferred
financing costs, was $249.8 million. 
 In July 2014, Granite entered into a cross currency interest rate swap to exchange the 3.788% interest
payments from the 2021 Debentures for Euro denominated payments at a 2.68% fixed interest rate. 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. As at September 30, 2020, the fair value of the cross currency interest rate swap was a net financial liability of $17.6 million. 

The 2021 Debentures, 2023 Debentures, 2027 Debentures, 2024 Term Loan and 2026 Term Loan rank pari passu with all of the Trust’s other existing and
future senior unsecured indebtedness and are guaranteed by Granite REIT and Granite GP. The fair values of the cross currency interest rate swaps are dependent upon a number of assumptions including the Euro exchange rate against the Canadian or US
dollars, the US dollar exchange rate against the Canadian dollar and the Euro, Canadian and US government benchmark interest rates. 

Credit Facility 
 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 662/3% 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. Interest on drawn amounts is calculated based on an applicable margin determined by reference to the external credit rating of Granite REIT and Granite GP, as is a
commitment fee in respect of undrawn amounts. As at September 30, 2020, the Trust had no amounts drawn from the credit facility and $1.0 million in letters of credit issued against the facility. 

Debt Metrics and Financial Covenants 
 Granite uses the debt
metrics noted above to assess its borrowing capacity and the ability to meet its current and future financing obligations. At September 30, 2020, there were no significant changes in the debt ratios other than the increase in the leverage ratio
and indebtedness ratio arising from the debenture issuance completed on June 4, 2020. The debt ratios remain relatively favourable and provide financial flexibility for future growth. 

Granite’s unsecured debentures, term loans and credit facility agreements contain financial and
non-financial covenants that include maintaining certain leverage and debt service ratios. As at September 30, 2020, Granite was in compliance with all of these covenants. 

  
 44    Granite REIT 2020 Third
Quarter Report 

 Credit Ratings 

On issuance of the 2027 Debentures, Moody’s Investors Service, Inc. (“Moody’s”) assigned a credit rating of Baa2 with a stable
outlook and DBRS assigned a credit rating of BBB with a stable trend to the 2027 Debentures. On March 13, 2020, Moody’s confirmed its credit rating on the 2021 Debentures and the 2023 Debentures of Baa2 with a stable outlook. On
April 2, 2020, DBRS confirmed the BBB rating on the 2021 and the 2023 Debentures with a stable trend. Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. A rating accorded to
any security is not a recommendation to buy, sell or hold such securities and may be subject to revision or withdrawal at any time by the rating organization which granted such ratings. 

Unitholders’ Equity 
 Outstanding Stapled
Units 
 As at November 4, 2020, the Trust had 57,847,189 stapled units issued and outstanding. 

As at November 4, 2020, the Trust had 75,797 restricted stapled units (representing the right to receive 75,797 stapled units) and 57,501
performance stapled units (representing the right to receive a maximum of 115,002 stapled units) outstanding under the Trust’s Executive Deferred Stapled Unit Plan. The Executive Deferred Stapled Unit Plan is designed to provide equity-based
compensation to employees of Granite who are, by the nature of their position or job, in a position to contribute to the success of Granite. 

Distributions 
 On
November 4, 2020, the Trust increased its targeted annualized distribution by 3.4% to $3.00 ($0.25 cents per month) per stapled unit from $2.90 per stapled unit to be effective upon the declaration of the distribution in respect of the month of
December 2020 and payable in mid-January 2021. 
 Granite REIT’s monthly distribution to unitholders is
currently 24.2 cents per stapled unit. For 2020, based on this current monthly rate, Granite expects to make total annual distributions of $2.90 per stapled unit. Monthly distributions declared to stapled unitholders in the three month periods ended
September 30, 2020 and 2019 were $42.0 million or 72.6 cents per stapled unit and $34.6 million or 69.9 cents per stapled unit, respectively. Total distributions declared to stapled unitholders in the nine month periods ended
September 30, 2020 and 2019 were $121.1 million or $2.18 per stapled unit and $101.1 million or $2.10 per stapled unit, respectively. 

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.

 Pursuant to the requirement of National Policy 41-201, Income Trusts and Other Indirect Offerings
(“NP 41-201”), the following table outlines the differences between cash flow from operating activities and cash distributions as well as the differences between net income and cash
distributions, in accordance with the guidelines under NP 41-201. 

  
 Granite REIT 2020 Third Quarter
Report    45 

	
	 
	
Cash Flows from Operating Activities in Excess of Distributions Paid and Payable

  

																					
	  	  	Three Months Ended
September 30,	 	 	  	 	  	Nine Months Ended
September 30,	 
	  	  	2020	 	 	2019	 	 	  	 	  	2020	 	 	2019	 
	 Net income
	  	$	105.2	 	 	$	114.6	 	 	 	 	 	  	$	262.3		 	$	291.6	 
	 Cash flows provided by operating activities
	  	 	66.1	 	 	 	42.8	 	 				  	 	185.9	 	 	 	133.3	 
	 Monthly cash distributions paid and payable
	  	 	(42.0	) 	 	 	(34.6	) 	 	 	 	 	  	 	(121.1	) 	 	 	(101.1	) 
	 Cash flows from operating activities in excess (shortfall) of
distributions paid and payable
	  	$	24.1	 	 	$	8.2	 	 	 	 	 	  	$	64.8	 	 	$	32.2	 

 Monthly distributions for the three and nine month periods ended September 30, 2020 and 2019 were funded with cash
flows from operating activities. 
 Net income prepared in accordance with IFRS recognizes revenue and expenses at time intervals that do not
necessarily match the receipt or payment of cash. Therefore, when establishing cash distributions to unitholders, consideration is given to factors such as FFO, AFFO, cash generated from and required for operating activities and forward-looking cash
flow information, including forecasts and budgets. Management does not expect current or potential future commitments to replace or maintain its investment properties to adversely affect cash distributions. 

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 for total consideration of
$25.0 million at an average stapled unit cost of $50.95 per unit, significantly below its net asset value. During the nine months ended September 30, 2019, Granite purchased 700 stapled units for consideration of less than
$0.1 million, representing an average purchase price of $52.96 per unit. 
  

	
	COMMITMENTS, CONTRACTUAL OBLIGATIONS, CONTINGENCIES AND OFF-BALANCE SHEET
ARRANGEMENTS

 The Trust is subject to various legal proceedings and claims that arise in the ordinary course of business. Management
believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Trust. However, actual outcomes may differ from management’s expectations. 

  
 46    Granite REIT 2020 Third
Quarter Report 

 Off-balance sheet arrangements consist of outstanding letters
of credit to support certain contractual obligations, property purchase commitments, construction and development project commitments and certain operating agreements. At September 30, 2020, the Trust’s contractual commitments totaled
$65.9 million and comprised of construction and development projects of $54.3 million, and the remaining construction costs of $11.8 million (€7.6 million) associated with the
property in Tilburg, Netherlands acquired in July 2020. Granite expects to fund these commitments over the next year through the use of cash on hand, cash from operations and/or Granite’s credit facility. 

For further discussion of commitments, contractual obligations, contingencies and off-balance sheet arrangements,
refer to notes 8, 10 and 18 to the unaudited condensed combined financial statements for the three and nine month periods ended September 30, 2020. 
  

	
	NON-IFRS PERFORMANCE MEASURES

 Funds from operations 
 FFO is
a non-IFRS performance measure that is widely used by the real estate industry in evaluating the operating performance of real estate entities. Granite calculates FFO as net income attributable to stapled
unitholders excluding fair value gains (losses) on investment properties and financial instruments, gains (losses) on sale of investment properties including the associated current income tax, deferred income taxes and certain other items, net of non-controlling interests in such items. The Trust’s determination of FFO follows the definition prescribed by the Real Estate Property Association of Canada (“REALPAC”) White Paper on Funds From
Operations & Adjusted Funds From Operations for IFRS dated February 2019 and as subsequently amended (“White Paper”). Granite considers FFO to be a meaningful supplemental measure that can be used to determine the Trust’s
ability to service debt, fund capital expenditures and provide distributions to stapled unitholders. FFO is reconciled to net income, which is the most directly comparable IFRS measure (see “RESULTS OF OPERATIONS — Funds From Operations
and Adjusted Funds From Operations”). FFO should not be construed as an alternative to net income or cash flow generated from operating activities determined in accordance with IFRS. 

Adjusted funds from operations 
 AFFO is a non-IFRS performance measure that is widely used by the real estate industry in evaluating the recurring economic earnings performance of real estate entities after considering certain costs associated with
sustaining such earnings. Granite calculates AFFO as net income attributable to stapled unitholders including all adjustments used to calculate FFO and further adjusts for actual maintenance capital expenditures that are required to sustain
Granite’s productive capacity, leasing costs such as leasing commissions and tenant allowances incurred and non-cash straight-line rent and tenant incentive amortization, net of non-controlling interests in such items. The Trust’s determination of AFFO follows the definition prescribed by REALPAC’s White Paper. Granite considers AFFO to be a meaningful supplemental measure that
can be used to determine the Trust’s ability to service debt, fund expansion capital expenditures, fund property development and provide distributions to stapled unitholders after considering costs associated with sustaining operating earnings.
AFFO is also reconciled to net income, which is the most directly comparable IFRS measure (see “RESULTS OF OPERATIONS — Funds From Operations and Adjusted Funds From Operations”). AFFO should not be construed as an alternative
to net income or cash flow generated from operating activities determined in accordance with IFRS. 

  
 Granite REIT 2020 Third Quarter
Report    47 

 FFO and AFFO payout ratios 

The FFO and AFFO payout ratios are calculated as monthly distributions, which exclude the special distribution, declared to unitholders divided by FFO
and AFFO, respectively, in a period. FFO payout ratio and AFFO payout ratio may exclude revenue or expenses incurred during a period that can be a source of variance between periods. The FFO payout ratio and AFFO payout ratio are supplemental
measures widely used by analysts and investors in evaluating the sustainability of the Trust’s monthly distributions to stapled unitholders. 
  

	
	 FFO and AFFO Payout
Ratios

  

																			
	  	  	  	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 
	  	  	  	  	2020	 	  	2019	 	  	2020	 	  	2019	 
						
	 (in millions, except as noted)
	  		  				  				  				  			
	 Monthly distributions declared to unitholders
	  	[A]	  	$	42.0	 	  	$	34.6	 	  	$	121.1	 	  	$	101.1	 
	 FFO
	  		  	 	55.5	 	  	 	45.8	 	  	 	165.8	 	  	 	129.6	 
	 Add (deduct):
	  		  				  				  				  			
	 Lease termination and
close-out fees
	  	 	  	 	—	 	  	 	—	 	  	 	—	 	  	 	(0.9	) 
	 FFO adjusted for the above
	  	[B]	  	$	55.5	 	  	$	45.8	 	  	$	165.8	 	  	$	128.7	 
	 AFFO
	  		  	 	52.7	 	  	 	44.4	 	  	 	158.8	 	  	 	126.5	 
	 Add (deduct):
	  		  				  				  				  			
	 Lease termination and
close-out fees
	  	 	  	 	—	 	  	 	—	 	  	 	—	 	  	 	(0.9	) 
	 AFFO adjusted for the above
	  	[C]	  	$	52.7	 	  	$	44.4	 	  	$	158.8	 	  	$	125.6	 
	 FFO payout ratio
	  	[A]/[B]	  	 	76%	 	  	 	76%	 	  	 	73%	 	  	 	79%	 
	 AFFO payout ratio
	  	[A]/[C]	  	 	80%	 	  	 	78%	 	  	 	76%	 	  	 	80%	 

 Net operating income — cash basis 

Granite uses NOI on a cash basis, which adjusts NOI to exclude lease termination and close-out fees, and the non-cash impact from straight-line rent and tenant incentive amortization recognized during the period (see “RESULTS OF OPERATIONS — Net Operating Income”). NOI — cash basis is a commonly
used measure by the real estate industry and Granite believes it is a useful supplementary measure of the income generated by and operating performance of income-producing properties in addition to the most comparable IFRS measure, which Granite
believes is NOI. NOI — cash basis is also a key input in Granite’s determination of the fair value of its investment property portfolio. 
 Same property
net operating income — cash basis 
 Same property NOI — cash basis refers to the NOI — cash basis for those properties owned by
Granite throughout the entire current and prior year periods under comparison. Same property NOI — cash basis excludes properties that were acquired, disposed of, classified as properties under or held for development or assets held for sale
during the periods under comparison (see “RESULTS OF OPERATIONS — Net Operating Income”). Granite believes that same property NOI — cash basis is a useful supplementary measure in understanding period-over-period
organic changes in NOI — cash basis from the same stock of properties owned. 

  
 48    Granite REIT 2020 Third
Quarter Report 

 Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”)

 Adjusted EBITDA is calculated as net income before lease termination and close-out fees, interest
expense, interest income, income tax expense, depreciation and amortization expense, fair value gains (losses) on investment properties and financial instruments, other expense relating to real estate transfer tax and loss on the sale of investment
properties. Adjusted EBITDA represents an operating cash flow measure that Granite uses in calculating the interest coverage ratio and indebtedness ratio noted below. Adjusted EBITDA is also defined in Granite’s debt agreements and used in
calculating the Trust’s debt covenants. 
  

	
	 Adjusted EBITDA
Reconciliation

  

									
	For the 12-months ended September 30, 2020 and December 31, 
2019	  	2020	 	    	2019	 
	 Net income
	  	$	352.9		    	$	382.3	 
	 Add (deduct):
	  				    			
	 Lease termination and close-out fees
	  	 	—	 	    	 	(0.9	) 
	 Interest expense and other financing costs
	  	 	32.0	 	    	 	29.9	 
	 Interest income
	  	 	(3.5	) 	    	 	(9.6	) 
	 Income tax expense
	  	 	39.8	 	    	 	42.7	 
	 Depreciation and amortization
	  	 	1.0	 	    	 	0.9	 
	 Fair value gains on investment properties, net
	  	 	(180.2	) 	    	 	(245.4	) 
	 Fair value (gains) losses on financial instruments
	  	 	3.7		    	 	(1.2	) 
	 Loss on sale of investment properties
	  	 	1.2		    	 	3.0	
	 Other expense
	  	 	2.7		    	 	2.7	 
	 Adjusted EBITDA
	  	$	249.6	 	    	$	204.4	 

 Interest coverage ratio 
 The
interest coverage ratio is calculated on a 12-month trailing basis using Adjusted EBITDA divided by net interest expense. Granite believes the interest coverage ratio is useful in evaluating the Trust’s
ability to meet its interest expense obligations (see “LIQUIDITY AND CAPITAL RESOURCES — Debt Structure”). 
 Indebtedness ratio 

The indebtedness ratio is calculated as total debt divided by Adjusted EBITDA and Granite believes it is useful in evaluating the Trust’s ability to
repay outstanding debt using its operating cash flows (see “LIQUIDITY AND CAPITAL RESOURCES — Debt Structure”). 
 Leverage and net leverage
ratios 
 The leverage ratio is calculated as the carrying value of total debt divided by the fair value of investment properties while the net
leverage ratio subtracts cash and cash equivalents from total debt. The leverage ratio and net leverage ratio are supplemental measures that Granite believes are useful in evaluating the Trust’s degree of financial leverage, borrowing capacity
and the relative strength of its balance sheet (see “LIQUIDITY AND CAPITAL RESOURCES — Debt Structure”). 

  
 Granite REIT 2020 Third Quarter
Report    49 

 Unencumbered asset coverage ratio 

The unencumbered asset coverage ratio is calculated as the carrying value of investment properties (excluding assets held for sale) that are not
encumbered by secured debt divided by the carrying value of total unsecured debt and is a supplemental measure that Granite believes is useful in evaluating the Trust’s degree of asset coverage provided by its unencumbered investment properties
to total unsecured debt (see “LIQUIDITY AND CAPITAL RESOURCES — Debt Structure”). 
  

	
	SIGNIFICANT ACCOUNTING ESTIMATES

 The preparation of financial statements in conformity with IFRS requires management to apply judgment and make estimates
that affect the amounts reported and disclosed in the combined financial statements. Management bases estimates on historical experience and various other assumptions that are believed to be reasonable in the circumstances, the results of which form
the basis for making judgments about the values of assets and liabilities. On an ongoing basis, management evaluates its estimates. However, actual results could differ from those estimates. 

The Trust’s significant accounting policies that involve the most judgment and estimates are as follows: 

Judgments 
 Leases 

The Trust’s policy for revenue recognition is described in note 2(k) of the audited combined financial statements for the year ended
December 31, 2019. The Trust makes judgments in determining whether certain leases are operating or finance leases, in particular tenant leases with long contractual terms and leases where the property is a large square-footage and/or
architecturally specialized. 
 Investment properties 

The Trust’s policy relating to investment properties is described in note 2(d) of the audited combined financial statements for the year ended
December 31, 2019. In applying this policy, judgment is used in determining whether certain costs incurred for tenant improvements are additions to the carrying amount of the property or represent incentives, identifying the point at which
practical completion of properties under development occurs and determining borrowing costs to be capitalized to the carrying value of properties under development. Judgment is also applied in determining the use, extent and frequency of independent
appraisals. 
 Income taxes 

The Trust applies judgment in determining whether it will continue to qualify as a REIT for both Canadian and United States tax purposes for the
foreseeable future. However, should it at some point no longer qualify, the Trust would be subject to income tax which could materially affect future distributions to unitholders and would also be required to recognize additional current and/or
deferred income taxes. 
 Estimates and Assumptions 

Valuation of investment properties 

The fair value of investment properties is determined by management using primarily the discounted cash flow method in which the income and expenses are
projected over the 

  
 50    Granite REIT 2020 Third
Quarter Report 

 
anticipated term of the investment plus a terminal value discounted using an appropriate discount rate. The Trust obtains, from time to time, appraisals from independent qualified real estate
valuation experts. However, the Trust does not measure its investment properties based on these appraisals but uses them 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 used during the three and nine month periods ended September 30, 2020. The critical assumptions relating to the Trust’s estimates
of fair values of investment properties include the receipt of contractual rents, contractual renewal terms, expected future market rental rates, discount rates that reflect current market uncertainties, capitalization rates and recent investment
property prices. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of investment properties may change materially. Refer to the “Investment Properties” section and
note 4 of the unaudited condensed combined financial statements for the three and nine month periods ended September 30, 2020 for further information on the estimates and assumptions made by management in connection with the fair values of
investment properties. 
 Fair value of financial instruments 

Where the fair value of financial assets or liabilities recorded on the balance sheet or disclosed in the notes cannot be derived from active markets, it
is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible but, where this is not feasible, a degree of judgment is required in establishing fair
values. The judgments include considerations of inputs such as credit risk and volatility. Changes in assumptions about these factors could materially affect the reported fair value of financial instruments. 

Income taxes 
 The Trust
operates in a number of countries and is subject to the income tax laws and related tax treaties in each of its operating jurisdictions. These laws and treaties can be subject to different interpretations by relevant taxation authorities.
Significant judgment is required in the estimation of Granite’s income tax expense, interpretation and application of the relevant tax laws and treaties and the provision for any exposure that may arise from tax positions that are under audit
by relevant taxation authorities. 
 The recognition and measurement of deferred tax assets or liabilities is dependent on management’s estimate
of future taxable profits and income tax rates that are expected to be in effect in the period the asset is realized or the liability is settled. Any changes in management’s estimates can result in changes in deferred tax assets or liabilities
as reported in the combined balance sheets and also the deferred income tax expense in the combined statements of net income. 
  

	
	NEW ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

 The accounting policies adopted in the preparation of the accompanying condensed combined financial statements for the
three and nine month periods ended September 30, 2020 are consistent with those followed in the preparation of the Trust’s annual combined financial statements for the year ended December 31, 2019. 

  
 Granite REIT 2020 Third Quarter
Report    51 

 Future Accounting Policy Changes 

New accounting standards issued but not yet adopted in the condensed combined financial statements for the three and nine month periods ended
September 30, 2020 are described below. 
 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. 

 

	
	INTERNAL CONTROLS OVER FINANCIAL REPORTING

 During the third quarter of 2020, there were no changes in the Trust’s internal controls over financial reporting
that had materially affected or are reasonably likely to materially affect the internal controls over financial reporting. As a result of COVID-19, all of Granite’s employees began working remotely in
March 2020 and most employees continue to work remotely. These changes to the working environment did not have a material effect on Granite’s internal controls over financial reporting during the most recent quarter. 

 

	
	RISKS AND UNCERTAINTIES

 Investing in the Trust’s stapled units involves a high degree of risk. There are a number of risk factors that
could have a material adverse effect on Granite’s business, financial condition, operating results and prospects. These risks and uncertainties are discussed in Granite’s AIF filed with securities regulators in Canada and available online
at www.sedar.com and Annual Report on Form 40-F filed with the SEC and available online on EDGAR at www.sec.gov, each in respect of the year ended December 31, 2019, and remain substantially
unchanged in respect of the three and nine month periods ended September 30, 2020 except for the following addition: 

COVID-19 Pandemic 
 On
March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The transmission of COVID-19 and efforts to contain its spread have resulted in
international, national and local border closings; travel restrictions; significant disruptions to business operations, supply chains and customer activity and demand; cancellations, reductions and other changes to services; and quarantines; as well
as considerable general concern and uncertainty. 
 The economic downturn resulting from the COVID-19 pandemic
and government measures to contain it may materially adversely impact Granite’s operations and financial performance. Such impacts may include: reductions in tenants’ ability to pay rent in full or at all; reductions in demand for
tenants’ products or services; temporary or long-term suspension of development projects; temporary or long-term labour shortages or disruptions; further
disruptions to local and global supply chains; increased risks to Granite’s information technology systems and internal control systems as a result of the need to increase remote work arrangements; and continued or further deterioration of
worldwide credit and financial markets that could limit Granite’s ability to obtain external financing to fund operations and capital expenditures, or result in losses on Granite’s holdings of cash and investments due to failures of
financial institutions and other parties. 

  
 52    Granite REIT 2020 Third
Quarter Report 

 Granite has already taken and will continue to take actions to mitigate the effects of COVID-19, while considering the interests of its employees, tenants, suppliers and other stakeholders. Management has implemented appropriate procedures aimed at ensuring Granite is conducting business in a
safe and effective manner, including work-from-home protocols for Granite’s employees, and Granite is working diligently with its service providers to remain operational during this pandemic.

Granite remains in active dialogue with tenants, especially those more significantly affected by COVID-19
disruptions and has implemented enhanced monitoring of their operational and financial metrics. Granite also continues to assess and attempts to mitigate the risk of temporary or longer-term labour
shortages or interruptions, and disruptions in local and global supply chains, including the potential impact of these on Granite’s ongoing development projects.

Granite’s response to the COVID-19 pandemic is guided by local public health authorities and governments in
each of its markets. Granite continues to closely monitor business operations and may take further actions that respond to directives of governments and public health authorities or that are in the best interests of employees, tenants, suppliers or
other stakeholders, as necessary. These changes and any additional changes in operations in response to COVID-19 could materially impact the financial results of Granite. 

The spread of COVID-19 has caused an economic slowdown and increased volatility in financial markets. Governments
and central banks across the globe have responded with monetary and fiscal interventions intended to stabilize economic conditions. However, it is not currently known how these interventions will impact debt and equity markets or the economy
generally. Although the ultimate impact of COVID-19 on the global economy and its duration remains uncertain, disruptions caused by COVID-19 may materially adversely
affect Granite’s performance. Uncertain economic conditions resulting from the COVID-19 outbreak may, in the long term, materially adversely impact Granite’s tenants and/or the debt and equity
markets, either of which could materially adversely affect Granite’s operations and financial performance. 

  
 Granite REIT 2020 Third Quarter
Report    53 

	
	QUARTERLY FINANCIAL DATA (UNAUDITED)

  

																																	
	(in millions, except as noted)	 	Q3’20	 	 	Q2’20	 	 	Q1’20	 	 	Q4’19	 	 	Q3’19	 	 	Q2’19	 	 	Q1’19	 	 	Q4’18	 
	 Operating
highlights(1)(2)
	 				 				 				 				 				 				 				 			
	 Revenue
	 	$	87.9	 	 	$	81.0	 	 	$	78.1	 	 	$	73.6	 	 	$	68.8	 	 	$	67.9	 	 	$	63.4	 	 	$	59.9	 
	 NOI — cash basis(1)
	 	$	74.5	 	 	$	71.0	 	 	$	67.8	 	 	$	63.8	 	 	$	60.3	 	 	$	58.3	 	 	$	55.1	 	 	$	52.9	 
	 Fair value gain on investment properties, net
	 	$	62.1	 	 	$	34.5	 	 	$	36.0	 	 	$	47.5	 	 	$	78.2	 	 	$	69.6	 	 	$	50.1	 	 	$	52.9	 
	 Net income attributable to stapled unitholders
	 	$	105.2	 	 	$	75.7	 	 	$	81.3	 	 	$	90.6	 	 	$	114.5	 	 	$	98.7	 	 	$	78.3	 	 	$	85.9	 
	 Cash provided by operating activities
	 	$	66.1	 	 	$	0.1	 	 	$	54.6	 	 	$	50.1	 	 	$	42.8	 	 	$	50.1	 	 	$	40.4	 	 	$	34.7	 
	 FFO(1)
	 	$	55.5	 	 	$	53.5	 	 	$	56.8	 	 	$	47.9	 	 	$	45.8	 	 	$	43.1	 	 	$	40.7	 	 	$	40.9	 
	 AFFO(1)(3)
	 	$	52.7	 	 	$	51.3	 	 	$	55.6	 	 	$	46.2	 	 	$	44.4	 	 	$	42.3	 	 	$	39.8	 	 	$	38.6	 
	 FFO payout ratio(1)
	 	 	76%	 	 	 	75%	 	 	 	69%	 	 	 	80%	 	 	 	76%	 	 	 	81%	 	 	 	79%	 	 	 	77%	 
	 AFFO payout ratio(1)(3)
	 	 	80%	 	 	 	78%	 	 	 	70%	 	 	 	83%	 	 	 	78%	 	 	 	83%	 	 	 	81%	 	 	 	81%	 
									
	 Per unit amounts
	 				 				 				 				 				 				 				 			
	 Diluted FFO(1)
	 	$	0.96	 	 	$	0.97	 	 	$	1.05	 	 	$	0.91	 	 	$	0.93	 	 	$	0.89	 	 	$	0.89	 	 	$	0.90	 
	 Diluted AFFO(1)(3)
	 	$	0.91	 	 	$	0.93	 	 	$	1.03	 	 	$	0.88	 	 	$	0.90	 	 	$	0.88	 	 	$	0.87	 	 	$	0.84	 
	 Monthly distributions paid
	 	$	0.73	 	 	$	0.73	 	 	$	0.73	 	 	$	0.70	 	 	$	0.70	 	 	$	0.70	 	 	$	0.70	 	 	$	0.68	 
	 Special distribution paid
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	$	0.30	 	 	 	—	 
	 Diluted weighted average number of units
	 	 	57.9	 	 	 	54.9	 	 	 	54.1	 	 	 	52.6	 	 	 	49.5	 	 	 	48.3	 	 	 	45.7	 	 	 	45.7	 
									
	 Financial highlights
	 				 				 				 				 				 				 				 			
	 Investment properties(4)
	 	$	5,338.9	 	 	$	5,097.3	 	 	$	4,810.0	 	 	$	4,457.9	 	 	$	3,938.3	 	 	$	3,799.1	 	 	$	3,532.8	 	 	$	3,425.0	 
	 Assets held for sale
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	$	48.3	 	 	$	50.5	 	 	$	38.7	 	 	$	44.2	 
	 Cash and cash equivalents
	 	$	539.7	 	 	$	617.2	 	 	$	242.1	 	 	$	298.7	 	 	$	455.4	 	 	$	496.9	 	 	$	501.0	 	 	$	658.2	 
	 Total debt(5)
	 	$	1,814.8	 	 	$	1,800.5	 	 	$	1,309.8	 	 	$	1,250.3	 	 	$	1,253.2	 	 	$	1,285.6	 	 	$	1,261.6	 	 	$	1,303.2	 
	 Total capital expenditures incurred
	 	$	2.2	 	 	$	6.2	 	 	$	3.4	 	 	$	1.0	 	 	$	1.5	 	 	$	0.6	 	 	$	3.9	 	 	$	16.5	 
	 Total leasing costs incurred
	 	$	1.2	 	 	$	2.0	 	 	 	—	 	 	$	0.8	 	 	$	0.2	 	 	$	0.4	 	 	$	0.2	 	 	$	0.6	 
									
	 Property
metrics(4)
	 				 				 				 				 				 				 				 			
	 Number of income-producing properties
	 	 	102		 	 	94		 	 	85		 	 	85		 	 	80		 	 	79		 	 	77		 	 	80	
	 GLA, square feet
	 	 	45.4		 	 	44.3		 	 	40.0		 	 	40.0		 	 	34.9		 	 	34.5		 	 	32.8		 	 	32.2	
	 Occupancy, by GLA
	 	 	98.9%	 	 	 	99.1%	 	 	 	99.0%	 	 	 	99.0%	 	 	 	99.7%	 	 	 	98.9%	 	 	 	98.8%	 	 	 	99.1%	 
	 Weighted average lease term, years
	 	 	5.9		 	 	6.1		 	 	6.3		 	 	6.5		 	 	6.0		 	 	6.0		 	 	6.1		 	 	6.0	

  

	(1)	 	 For definitions of Granite’s non-IFRS measures, refer to the section
“NON-IFRS PERFORMANCE MEASURES”. 

	(2)	 	 The quarterly financial data reflects fluctuations in revenue, FFO, AFFO, investment properties and total debt primarily
from the timing of leasing and development activities, property sales, acquisitions and foreign exchange. Investment properties also fluctuate from the effect of measuring properties at fair value under IFRS. Net income attributable to unitholders
primarily fluctuates from fair value gains/losses on investment properties. Explanations for specific changes in the quarterly financial data table above are as follows: 

	 	•	 	 Q3’20 — Fair value gains on investment properties of $62.1 million were largely attributable to
favourable changes in leasing assumptions associated with fair market rent increases as well as compression in discount and terminal capitalization rates for properties located in the GTA, Canada and across the United States as well as compression
in discount and terminal capitalization rates for certain of the Trust’s modern warehouse properties in Germany and the Netherlands. 

	 	•	 	 Q2’20 — Fair value gains on investment properties of $34.5 million were largely attributable to
(i) the favourable changes in leasing assumptions associated with fair market rent increases for properties located in Canada and (ii) the increase in fair value of the recently developed property in Plainfield, Indiana as a result of
executing a full building 10-year lease with a new tenant, marginally offset by an increase in discount rates for certain properties located in Austria due to market conditions and the nature of the tenants
and properties in this jurisdiction. 

  
 54    Granite REIT 2020 Third
Quarter Report 

	 	•	 	 Q1’20 — Fair value gains on investment properties of $36.0 million were attributable to various
factors including an increase in fair value for the recently acquired property in Dallas, Texas as a result of market confirmation of capitalization rates favourable to initial acquisition metrics of the forward purchase for this modern e-commerce facility, partially offset by an increase in discount rates for properties located in Austria and Germany due to market conditions and the nature of the properties across these jurisdictions.

	 	•	 	 Q4’19 — Net income attributable to unitholders, cash provided by operating activities and FFO included a
net $2.0 million ($0.04 per unit) real estate transfer tax ($2.7 million) and related tax recovery ($0.7 million) which resulted from an internal reorganization. 

	 	•	 	 Q3’19 — Fair value gains on investment properties of $78.2 million were largely attributable to
(i) a compression in discount or terminal capitalization rates for certain properties primarily located in Canada and the United States and, to a lesser extent, in Europe, which resulted from the continued market demand for industrial real
estate and (ii) the favourable changes in leasing assumptions associated with fair market rent increases for certain properties located in North America. 

	 	•	 	 Q2’19 — Revenue, net income attributable to unitholders, cash provided by operating activities and FFO
included a $0.6 million lease termination and close-out fee in revenue in connection with a tenant having vacated a property. FFO used to calculate FFO payout ratio and AFFO payout ratio excludes the
$0.6 million lease termination and close-out fee as this revenue can be a source of variance between periods. 

	 	•	 	 Q1’19 — Revenue, net income attributable to unitholders, cash provided by operating activities and FFO
included $0.3 million of lease termination and close-out fee in revenue in connection with a tenant having vacated a property. FFO used to calculate FFO payout ratio and AFFO payout ratio excludes the
$0.3 million lease termination and close-out fee as this revenue can be a source of variance between periods. 

	 	•	 	 Q4’18 — Fair value gains on investment properties of $52.9 million were largely attributable to a
compression in discount and terminal capitalization rates for properties located in Canada, the United States and the Netherlands that resulted from a greater market demand for industrial real estate properties and, to a lesser extent, the increase
in fair value to the expected sale price for the multi-purpose properties sold in 2019 and the positive changes in leasing assumptions associated with new leases and lease renewals. 

	(3)	 	 In the current year periods AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing
commissions and tenant allowances incurred whereas in prior year periods AFFO was calculated by deducting maintenance or improvement capital expenditures, leasing commissions and tenant allowances paid. The AFFO metrics in the comparative periods
have been updated to conform to the current year’s presentation. AFFO as well as basic and diluted AFFO per unit for the three months ended September 30, 2019 were previously reported as $44.6 million and $0.90 per unit, respectively.
AFFO as well as basic and diluted AFFO per unit for the nine months ended September 30, 2019 were previously reported as $126.2 million and $2.64 per unit, respectively. Both methods of calculation are in accordance with the REALPAC White
Paper (see “NON-IFRS PERFORMANCE MEASURES”). AFFO for the three and nine month periods ended September 30, 2020 have been adjusted to exclude leasing commissions incurred on the lease-up of new development properties in accordance with the REALPAC White Paper (see “NON-IFRS PERFORMANCE MEASURES”). Leasing commissions incurred in the
three month periods ended September 30, 2020 exclude $0.5 million of leasing commissions incurred on the lease-up of a recently acquired property in Groveport, Ohio. Leasing commissions incurred in
the nine month period ended September 30, 2020 exclude $1.9 million of leasing commissions incurred on the lease-up of a recently completed development property in Plainfield, Indiana in the second
quarter of 2020. 

	(4)	 	 Excludes properties held for sale which are classified as assets held for sale on the combined balance sheet as at the
respective quarter-end. 

	(5)	 	 Total debt includes lease obligations recognized under IFRS 16, Leases. 

 

	
	FORWARD-LOOKING STATEMENTS

 This MD&A may contain statements that, to the extent they are not recitations of historical fact, constitute
“forward-looking statements” or “forward-looking information” within the meaning of applicable securities legislation, including the United States Securities Act of 1933, as amended, the United States Securities Exchange Act of
1934, as amended, and applicable Canadian securities legislation. Forward-looking statements and forward-looking information may include, among others, statements regarding Granite’s future plans, goals, strategies, intentions, beliefs,
estimates, costs, objectives, capital structure, cost of capital, tenant base, tax consequences, economic performance or expectations, or the assumptions underlying any of the foregoing. Words such as “outlook”, “may”,
“would”, “could”, “should”, “will”, “likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”,
“estimate”, “seek” and similar expressions are used to identify forward-looking statements and forward-looking information. Forward-looking statements and forward-looking information should not be read as guarantees of future
events, performance or results and will not necessarily be accurate indications of whether or the times at or by which such future performance will be achieved. Undue reliance should not 

  
 Granite REIT 2020 Third Quarter
Report    55 

 
be placed on such statements. There can also be no assurance that: Granite’s expectations regarding the impact of the COVID-19 pandemic and government
measures to contain it, including with respect to Granite’s ability to weather the impact of COVID-19, the effectiveness of measures intended to mitigate such impact, and Granite’s ability to deliver
cash flow stability and growth and create long-term value for unitholders; the expansion and diversification of Granite’s real estate portfolio and the reduction in Granite’s exposure to Magna and the special purpose properties; the
ability of Granite to accelerate growth and to grow its net asset value and FFO and AFFO per unit; the ability of Granite to find and integrate satisfactory acquisition, joint venture and development opportunities and to strategically deploy the
proceeds from recently sold properties and financing initiatives; Granite’s intended use of the net proceeds of its equity and debenture offerings to fund potential acquisitions and for the other purposes described previously; the anticipated
closing of Granite’s acquisition of the 8500 Tatum Road property in Atlanta, Georgia; the potential for expansion and rental growth at the properties in Mississauga, Ontario and Ajax, Ontario and the expected enhancement to the yields of such
properties from such potential expansion and rental growth; the expected construction on and development yield of the acquired greenfield site in Houston, Texas; the expected development and construction of an
e-commerce and logistics warehouse on recently acquired land in Fort Worth, Texas; the expected construction of the distribution/light industrial facility on the 13-acre
site in Altbach, Germany; the completion of construction at the property in Dallas, Texas; and the 0.1 million square foot expansion at the Tilburg, Netherlands property and the timing of payment of associated unpaid construction costs and
holdbacks; Granite’s ability to dispose of any non-core assets on satisfactory terms; Granite’s ability to meet its target occupancy goals; Granite’s ability to secure sustainability or other
certifications for any of its properties, including the receipt and timing of a BREEAM sustainability certification in respect of the Tilburg, Netherlands property; the expected impact of the refinancing of the term loans on Granite’s returns
and cash flow; and the expected amount of any distributions and distribution increase, can be achieved in a timely manner, with the expected impact or at all. Forward-looking statements and forward-looking information are based on information
available at the time and/or management’s good faith assumptions and analyses made in light of Granite’s perception of historical trends, current conditions and expected future developments, as well as other factors Granite believes are
appropriate in the circumstances. Given the impact of the COVID-19 pandemic and government measures to contain it, there is inherently more uncertainty associated with our assumptions as compared to prior
periods. Forward-looking statements and forward-looking information are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond Granite’s control, that could cause actual events or results to
differ materially from such forward-looking statements and forward-looking information. Important factors that could cause such differences include, but are not limited to, the impact of the COVID-19 pandemic
and government measures to contain it, and the resulting economic downturn, on Granite’s business, operations and financial condition; the risk that the pandemic or such measures intensify; the duration of the pandemic and related impacts; the
risk of changes to tax or other laws and treaties that may adversely affect Granite REIT’s mutual fund trust status under the Income Tax Act (Canada) or the effective tax rate in other jurisdictions in which Granite operates; economic, market
and competitive conditions and other risks that may adversely affect Granite’s ability to expand and diversify its real estate portfolio and dispose of any non-core assets on satisfactory terms; and the
risks set forth in the “Risk Factors” section in Granite’s AIF for 2019 dated March 4, 2020, filed on SEDAR at www.sedar.com and attached as Exhibit 1 to the Trust’s Annual Report on Form
40-F for the year ended December 31, 2019 filed with the SEC and available online on EDGAR at www.sec.gov, all of which investors are strongly advised to review. The “Risk Factors” section also
contains information about the material factors or assumptions underlying such forward-looking statements and forward-looking information. Forward-looking statements and forward-looking information speak only as of the date the statements and
information were made and unless otherwise required by applicable securities laws, Granite expressly disclaims any intention and undertakes no obligation to update or revise any forward-looking statements or forward-looking information contained in
this MD&A to reflect subsequent information, events or circumstances or otherwise. 

  
 56    Granite REIT 2020 Third
Quarter ReportDocument

Exhibit 10.1

SUBORDINATED NOTE PURCHASE AGREEMENT
This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of November 30, 2020, and is made by and among MVB Financial Corp., a West Virginia corporation (the “Company”), and the several purchasers of the Subordinated Notes (as defined herein) identified on the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”).
RECITALS
WHEREAS, the Company has requested that the Purchasers purchase from the Company up to $40 million in aggregate principal amount of Subordinated Notes, which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein);
WHEREAS, the Company has engaged Raymond James & Associates as lead placement agent, and Piper Sandler & Co. as co-placement agent (collectively, the “Placement Agents”), for the offering of the Subordinated Notes;
WHEREAS, each of the Purchasers is an institutional accredited investor as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or a QIB (as defined herein);
WHEREAS, the offer and sale of the Subordinated Notes by the Company is being made in reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D; and
WHEREAS, each Purchaser is willing to purchase from the Company a Subordinated Note in the principal amount set forth on such Purchaser’s respective signature page hereto (the “Subordinated Note Amount”) in accordance with the terms, subject to the conditions and in reliance on, the recitals, representations, warranties, covenants and agreements set forth herein and in the Subordinated Notes.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. DEFINITIONS.

1.1 Defined Terms. The following capitalized terms used in this Agreement and in the Subordinated Notes have the meanings defined or referenced below. Certain other capitalized terms used only in specific sections of this Agreement may be defined in such sections.
“Affiliate(s)” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly 

or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.
“Agreement” has the meaning set forth in the preamble hereto.
“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Subordinated Note represented by a global certificate, the rules and procedures of DTC that apply to such transfer or exchange.
“Articles of Incorporation” has the meaning set forth in Section 3.2.1.2(a).
“Bank” means MVB Bank, Inc., a West Virginia state bank and wholly owned subsidiary of the Company.
“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of West Virginia are permitted or required by any applicable law or executive order to close.
“Bylaws” has the meaning set forth in Section 3.2.1.2(c).
“Class A Common Stock” has the meaning set forth in Section 4.1.2.
“Closing” has the meaning set forth in Section 2.2.
“Closing Date” means November 30, 2020.
“Common Stock” has the meaning set forth in Section 4.1.2.
“Company” has the meaning set forth in the preamble hereto and shall include any successors to the Company.
“Company Covered Person” has the meaning set forth in Section 4.2.4.
“Company’s Reports” means (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC, including the audited financial statements contained therein; (ii) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, as filed with the SEC, including the unaudited financial statements contained therein; and (iii) the Company’s public reports for the year ended December 31, 2019, and the periods ended March 31, 2020 and June 30, 2020, as filed with the FRB as required by regulations of the FRB.
“Disbursement” has the meaning set forth in Section 3.1.
“Disqualification Event” has the meaning set forth in Section 4.2.4.
“DTC” means The Depository Trust Company.
2

“Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants, options or other rights to purchase any of the foregoing.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FDIC” means the Federal Deposit Insurance Corporation.
“FRB” means the Board of Governors of the Federal Reserve System.
“GAAP” means generally accepted accounting principles in effect from time to time in the United States of America.
“Global Note” has the meaning set forth in Section 3.1.
“Governmental Agency(ies)” means, individually or collectively, any federal, state, county or local governmental department, commission, board, regulatory authority or agency (including each applicable Regulatory Agency) with jurisdiction over the Company or a Subsidiary of the Company.
“Governmental Licenses” has the meaning set forth in Section 4.3.
“Hazardous Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.
“Hazardous Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection, preservation, conservation or regulation of the environment which relates to real property, including: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.
“Indebtedness” means: (i) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would be included in determining total liabilities as 
3

shown on the consolidated balance sheet of the Company; and (ii) all obligations secured by any lien in property owned by the Company or any Subsidiary whether or not such obligations shall have been assumed; provided, however, Indebtedness shall not include deposits or other indebtedness created, incurred or maintained in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by the Company or the Bank and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.
“Leases” means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate agreements relating thereto.
“Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be material and adverse to the financial condition, results of operations or business of such Person, or (ii) would materially impair the ability of such Person to perform its respective obligations under any of the Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (3) changes after the date of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices generally and not specifically related to the Company, the Bank or the Purchasers, (4) direct effects of compliance with this Agreement on the operating performance of the Company, the Bank or the Purchasers, including expenses incurred by the Company, the Bank or the Purchasers in consummating the transactions contemplated by this Agreement, (5) the effects of any action or omission taken by the Company with the prior written consent of the Purchasers, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes, and (6) changes in global, national, or regional political conditions, including the outbreak or escalation of war or acts of terrorism, except in the case of (1), (2), (3) or (6) to the extent such fact, event, change, condition, occurrence, development, circumstance or effect, has a disproportionate impact on the business, assets, financial condition or results of operations of the Company and its Subsidiaries taken as a whole compared to other comparable companies within the banking industry, in which case the disproportionate effect will be taken into account;.
“Maturity Date” means December 1, 2030.
“Person” means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental Agency) or any other entity or organization.
“Placement Agents” has the meaning set forth in the Recitals.
4

“Preferred Stock” has the meaning set forth in Section 4.1.2.
“Property” means any real property owned or leased by the Company or any Subsidiary of the Company.
“Purchaser” or “Purchasers” has the meaning set forth in the preamble hereto.
“QIB” means a “qualified institutional buyer” as defined in Rule 144A of the Securities Act.
“Regulation D” has the meaning set forth in the Recitals.
“Regulatory Agency” means any federal or state agency charged with the supervision or regulation of depository institutions or holding companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, administrative agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to the Company, the Bank or any of their Subsidiaries.
“SEC” means the United States Securities and Exchange Commission.
“Secondary Market Transaction” has the meaning set forth in Section 5.5.
“Securities Act” has the meaning set forth in the Recitals.
“Significant Subsidiary” has the meaning given in Rule 1-02 of Regulation S-X under the Exchange Act.
“Subordinated Note” means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached as an Exhibit A to this Agreement, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered in substitution or exchange for such Subordinated Note.
“Subordinated Note Amount” has the meaning set forth in the Recitals.
“Subsidiary” means, with respect to any Person, any corporation or entity in which a majority of the outstanding Equity Interest is directly or indirectly owned by such Person.
“Tier 2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 217 and 12 C.F.R. Part 250, as amended, modified and supplemented and in effect from time to time or any replacement thereof.
“Transaction Documents” has the meaning set forth in Section 3.2.1.1.
1.2 Interpretations. The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof”, “herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “including” when used in this Agreement 
5

without the phrase “without limitation,” shall mean “including, without limitation.” All references to time of day herein are references to Eastern Time unless otherwise specifically provided. All references to this Agreement and the Subordinated Notes shall be deemed to be to such documents as amended, modified or restated from time to time. With respect to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document, instrument or agreement, then it shall also include any amendment, replacement, extension or other modification thereof.
1.3 Exhibits Incorporated. All Exhibits attached hereto are hereby incorporated into this Agreement.
2. SUBORDINATED DEBT.
2.1 Certain Terms. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers, severally and not jointly, Subordinated Notes, in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts. The Purchasers, severally and not jointly, each agree to purchase the Subordinated Notes from the Company on the Closing Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated Notes. The Subordinated Note Amounts shall be disbursed in accordance with Section 3.1.
2.2 The Closing. The closing of the sale and purchase of the Subordinated Notes (the “Closing”) shall occur at the offices of the Company at 10:00 a.m. (local time) on the Closing Date, or at such other place or time or on such other date as the parties hereto may agree.
2.3 No Right of Offset. Each Purchaser hereby expressly waives any right of offset it may have against the Company or any of its Subsidiaries.
2.4 Use of Proceeds. The Company shall use the net proceeds from the sale of Subordinated Notes for the repurchase of Common Stock and for other general corporate purposes.
3. DISBURSEMENT.
3.1 Disbursement. On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by the Company and the Company has executed and delivered to each of the Purchasers this Agreement and any other related documents in form and substance reasonably satisfactory to the Purchasers, each Purchaser shall disburse to the Company in immediately available funds the Subordinated Note Amount set forth on each Purchaser’s respective signature page hereto in exchange for an electronic securities entitlement through the facilities of DTC in accordance with the Applicable Procedures with a principal amount equal to such Subordinated Note Amount (the “Disbursement”). The Company will deliver to DTC a global certificate representing the Subordinated Notes (the “Global Note”) registered in the name of Cede & Co., as nominee for DTC.
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3.2 Conditions Precedent to Disbursement.
3.2.1 Conditions to the Purchasers’ Obligation. The obligation of each Purchaser to consummate the purchase of the Subordinated Notes to be purchased by such Purchaser at Closing and to effect the Disbursement is subject to delivery by or at the direction of the Company to such Purchaser (or, with respect to the opinions of counsel, to such Purchaser and the Placement Agents) of each of the following (or written waiver by such Purchaser prior to the Closing of such delivery):
3.2.1.1 Transaction Documents. This Agreement and such Purchaser’s Subordinated Note (collectively, the “Transaction Documents”), each duly authorized and executed by the Company.
3.2.1.2 Authority Documents:
(a)A copy, certified by the Secretary or Assistant Secretary of the Company, of the Articles of Incorporation of the Company, as amended to date (the “Articles of Incorporation”);

(b)A Certificate of Existence of the Company issued by the Secretary of State of the State of West Virginia; and a Certificate of Existence of the Bank issued by the Secretary of State of the State of West Virginia, in each case dated as of a recent date;

(c)A copy, certified by the Secretary or Assistant Secretary of the Company, of the Second Amended and Restated Bylaws of the Company, as amended to date (the “Bylaws”);

(d)A copy, certified by the Secretary or Assistant Secretary of the Company, of the resolutions of the board of directors of the Company, and any committee thereof, authorizing the issuance of the Subordinated Notes and the execution, delivery and performance of the Transaction Documents;

(e)An incumbency certificate of the Secretary or Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign the Transaction Documents and the other documents provided for in this Agreement; and

(f)The opinion of Squire Patton Boggs (US) LLP, counsel to the Company, and Camille M. Currey, the Company’s Vice President and Corporate Counsel, each dated as of the Closing Date, substantially in the form set forth at Exhibits B-1 and B-2 attached hereto, each addressed to the Purchasers and the Placement Agents.

3.2.1.3 Other Documents. Such other certificates, affidavits, schedules, resolutions, notes and/or other documents which are provided for hereunder or as a Purchaser may reasonably request.
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3.2.1.4 Aggregate Investments. Prior to, or contemporaneously with the Closing, each Purchaser shall have actually subscribed for the Subordinated Note Amount set forth on such Purchaser’s signature page to this Agreement.
3.2.2 Conditions to the Company’s Obligation. With respect to a given Purchaser, the obligation of the Company to consummate the sale of the Subordinated Notes and to effect the Closing is subject to delivery by or at the direction of such Purchaser to the Company of this Agreement, duly authorized and executed by such Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser that as follows:
4.1 Organization and Authority.
4.1.1 Organization Matters of the Company and Its Subsidiaries.
4.1.1.1 The Company is a duly incorporated corporation, is validly existing and in good standing under the laws of the State of West Virginia and has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform its obligations under the Transaction Documents. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.
4.1.1.2 The Bank is the only Significant Subsidiary of the Company. The Bank, has been duly chartered and is validly existing as a West Virginia state bank and each other Subsidiary has been duly organized and is validly existing under the jurisdiction of its organization, in each case in good standing under the laws of the jurisdiction of its organization, has corporate, trust or limited liability company power, as applicable, and authority to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. All of the issued and outstanding shares of capital stock or other Equity Interests in each Significant Subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable (to the extent such concepts apply to entities other than corporations) and are owned by the Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim except as disclosed in the Company’s Reports; none of the outstanding shares of capital stock of, or other Equity Interests in, any Significant Subsidiary of the Company were issued in violation of the preemptive or similar rights of any security holder of such Significant Subsidiary of the Company or any other entity.
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4.1.1.3 The deposit accounts of the Bank are insured by the FDIC up to applicable limits. The Bank has not received any written notice or other information indicating that the Bank is not an “insured depository institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred which could reasonably be expected to materially and adversely affect the status of the Bank as an FDIC-insured institution.
4.1.2 Capital Stock and Related Matters. The Articles of Incorporation of the Company authorize the Company to issue (i) 20,000,000 shares of common stock, par value $1.00 per share (“Common Stock”), (ii) 20,000,000 shares of Class A Common Stock, par value $1.00 per share and (iii) 20,000 shares of preferred stock, par value $1,000 per share (“Preferred Stock”). As of November 5, 2020, 11,792,599 shares of the Company’s Common Stock, no shares of Class A Common Stock and 732.999 shares of the Company’s Preferred Stock, were issued and outstanding. All of the outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable. Other than pursuant to the Company’s equity incentive plans duly adopted by the Company’s board of directors, there are, as of the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such agreement or commitment to any Person other than the Company.

4.2 No Impediment to Transactions.
4.2.1 Transaction is Legal and Authorized. The issuance of the Subordinated Notes, the borrowing of the aggregate of the Subordinated Note Amounts, the execution of the Transaction Documents and compliance by the Company with all of the provisions of the Transaction Documents are within the corporate and other powers of the Company.
4.2.2 Agreement. This Agreement has been duly authorized, executed and delivered by the Company, and, assuming due authorization, execution and delivery by the other parties hereto, constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles
4.2.3 Subordinated Notes. The Subordinated Notes have been duly authorized by the Company and when executed by the Company and completed, authenticated, issued and delivered to and paid for by the Purchasers in accordance with the terms of this Agreement, will have been duly issued and will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.
4.2.4 Exemption from Registration; No Disqualification Event. Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, 
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has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Subordinated Notes. Assuming the accuracy of the representations and warranties of each Purchaser set forth in this Agreement, the Subordinated Notes will be issued in a transaction exempt from the registration requirements of the Securities Act. No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Person described in Rule 506(d)(1) (each, a “Company Covered Person”). To the Company’s knowledge after exercising reasonable care, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e).
4.2.5 No Defaults or Restrictions. Neither the execution and delivery of the Transaction Documents by the Company nor compliance by the Company with their respective terms and conditions will (whether with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result in a breach of, or constitute a default under: (1) the Articles of Incorporation or Bylaws; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to which the Company or the Bank, as applicable, is now a party or by which it or any of its properties is now bound; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency applicable to the Company or the Bank; or (4) any statute, rule or regulation applicable to the Company or the Bank, except, (A) in the case of items (2), (3) and (4), for such violations, conflicts, breaches, and defaults that would not, singularly or in the aggregate, result in a Material Adverse Effect on the Company, or (B) in the case of item (2), have otherwise been consented to or waived; or (ii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of the Company. Neither the Company nor the Bank is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing Indebtedness or pursuant to which any such Indebtedness is issued, or any other agreement or instrument to which the Company or the Bank, as applicable, is a party or by which the Company or the Bank, as applicable, or any of its properties is now bound, except, in each case, only such defaults that would not, singularly or in the aggregate, result in a Material Adverse Effect on the Company.
4.2.6 Governmental Consent. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by the Company that have not been obtained, and no registrations or declarations are required to be filed by the Company that have not been filed in connection with, or, in contemplation of, the execution and delivery of, and performance under, the Transaction Documents, except as may be required pursuant to the Securities Act, the Exchange Act, Regulation D, any applicable state securities laws or “blue sky” laws of the various states and any applicable federal or state banking laws and regulations.
4.3 Possession of Licenses and Permits. The Company and each Significant Subsidiary possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business now operated by them except where the failure to possess such 
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Governmental Licenses would not, singularly or in the aggregate, have a Material Adverse Effect on the Company. The Company and each Significant Subsidiary is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, individually or in the aggregate, have a Material Adverse Effect on the Company. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect on the Company. Neither the Company nor any Significant Subsidiary has received any written notice of proceedings relating to the revocation or modification of any such Governmental Licenses except where such proceedings would not have a Material Adverse Effect on the Company or such Significant Subsidiary.
4.4 Financial Condition.
4.4.1 Company Financial Statements. The financial statements of the Company included in the Company’s Reports (including the related notes, where applicable), which have been made available to the Purchasers (i) have been prepared from, and are in accordance with, the books and records of the Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’ equity and financial position of the Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective dates of filing in all material respects with applicable accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, (x) as indicated in such statements or in the notes thereto, (y) for any statement therein or omission therefrom that was corrected, amended, or supplemented or otherwise disclosed or updated in a subsequent Company’s Report, and (z) to the extent that any unaudited interim financial statements do not contain the footnotes required by GAAP, and were or are subject to normal and recurring year-end adjustments, which were not or are not expected to be material in amount, either individually or in the aggregate. The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements. The Company does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company contained in the Company’s Reports for the Company’s most recently completed quarterly or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent with past practice or in connection with the Transaction Documents and the transactions contemplated hereby and thereby.
4.4.2 Absence of Default. Since the end of the Company’s last fiscal year ended December 31, 2019, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company. The Company is not in default under any Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance of which would reasonably be expected to result in a Material Adverse Effect on the Company.
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4.4.3 Solvency. After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature. No transfer of property is being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any Subsidiary of the Company.
4.4.4 Ownership of Property. The Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good title to all assets and properties owned by the Company and such Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained in the Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by the Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith, (iii) such as do not, individually or in the aggregate, materially and adversely affect the value of such property and do not materially and adversely interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries, or (iv) as disclosed in the Company’s Reports. The Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real and personal properties that are material to the Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it.
4.5 No Material Adverse Effect. Since the end of the Company’s last fiscal year ended December 31, 2019, there has been no Material Adverse Effect on the Company.
4.6 Legal Matters.
4.6.1 Compliance with Law. The Company and each of its Subsidiaries (i) has complied with and (ii) to the Company’s knowledge, is not under investigation with respect to, and, to the Company’s knowledge, has not been threatened to be charged with or given any written notice of any material violation of any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries, taken as a whole. The Company and each of its Subsidiaries is in compliance with, and at all times since December 31, 2016, has been in compliance with, (x) all statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any Governmental Agency applicable to it, and (y) its own privacy policies and written commitments to customers, consumers and employees, concerning data protection, the privacy and security of personal data, and the nonpublic personal information of its customers, consumers and employees, in each case except where any such failure to comply would not result, either individually or in the aggregate, in a Material Adverse Effect. At 
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no time during the two years prior to the date hereof has the Company or any of its Subsidiaries received any written notice asserting any violations of any of the foregoing. 
4.6.2 Regulatory Enforcement Actions. The Company, the Bank and its other Subsidiaries are in compliance in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them, except where the failure to comply would not have a Material Adverse Effect. None of the Company, the Bank, the Company’s or the Bank’s Subsidiaries nor any of their officers or directors is now operating under any material restrictions, written agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence, or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to the Company’s knowledge, (a) any such restrictions threatened, (b) any agreements, memoranda or commitments being sought by any Governmental Agency, or (c) any legal or regulatory violations previously identified by, or penalties or other remedial action previously imposed by, any Governmental Agency remains unresolved.
4.6.3 Pending Litigation. There are no actions, suits, proceedings or written agreements pending, or, to the Company’s knowledge, threatened or proposed, against the Company or any of its Subsidiaries at law or in equity before or by any Governmental Agency, that would reasonably be expected to have a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole, or materially and adversely affect the issuance or payment of the Subordinated Notes; the aggregate of all pending legal or governmental proceedings to which the Company or any Subsidiary is a party or of which any of their respective properties or assets is the subject, including ordinary routine litigation incidental to the business, would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company and any of its Subsidiaries taken as a whole.
4.6.4 Environmental. No Property is or, to the Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither the Company nor any of its Subsidiaries has engaged in such activities. There are no claims or actions pending or, to the Company’s knowledge threatened, against the Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials or pursuant to any Hazardous Materials Law.
4.6.5 Brokerage Commissions. Except for commissions paid to the Placement Agents, neither the Company nor any Affiliate of the Company is obligated to pay any brokerage commission or finder’s fee to any Person in connection with the transactions contemplated by this Agreement.
4.6.6 Investment Company Act. Neither the Company nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
4.7 No Misstatement. None of the representations, warranties, covenants and agreements made by the Company in this Agreement or in any certificate delivered to the Purchasers, when viewed together as a whole, by or on behalf of the Company pursuant to this Agreement contains 
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any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances when made or furnished to the Purchasers, as of the date of this Agreement.
4.8 Internal Accounting Controls and Disclosure Controls.
4.8.1 The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with the management’s general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (C) access to assets is permitted only in accordance with the management’s general or specific authorization, and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s internal control over financial reporting is effective, and the Company is not aware of any material weaknesses in its internal control. Since the date of the Company’s latest audited financial statements filed with the SEC, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
4.8.2 The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act). Such disclosure controls and procedures (A) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s Chief Executive Officer and its Chief Financial Officer by others within those entities, and (B) are effective to perform the functions for which they were established. The Company’s auditors and the Audit Committee of the board of directors of the Company have not been advised that there is (1) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls, or (2) any material weaknesses in internal controls. Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to material weaknesses. The principal executive officer (or the equivalents) and principal financial officer (or the equivalent) of the Company have made all certifications required by the Sarbanes-Oxley Act, and the statements made in each such certification are accurate; the Company, its subsidiaries and to the Company’s knowledge, its directors and officers, are each in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.
4.9 Tax Matters. The Company, the Bank and each Subsidiary of the Company have (i) filed all material foreign, U.S. federal, state and local tax returns, information returns and similar reports that are required to be filed by them prior to the date hereof, or requests for extensions to file such returns have been timely filed, and all such tax returns were true, correct and complete in all material respects, and (ii) paid all material taxes required to be paid by them, other than taxes (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate proceedings.
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4.10 Exempt Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Subordinated Notes by the Company to the Purchasers.
4.11 Representations and Warranties Generally. The representations and warranties of the Company set forth in this Agreement or in any other agreement delivered to the Purchasers by the Company pursuant to the requirements of this Agreement are true and correct as of the date hereof and as otherwise specifically provided herein or therein. Any certificate signed by a duly authorized representative of the Company and delivered to a Purchaser or to counsel for a Purchaser shall be deemed to be a representation and warranty by the Company to such Purchaser as to the matters set forth therein.
5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.
The Company hereby further covenants and agrees with each Purchaser as follows:
5.1 Compliance with Transaction Documents. The Company shall comply with, observe and timely perform each and every one of the covenants, agreements and obligations of the Company under the Transaction Documents.
5.2 Affiliate Transactions. The Company shall not itself, nor shall it cause, permit or allow any of its Subsidiaries to, enter into any material transaction, including, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of the Company except in the ordinary course of business and pursuant to reasonable requirements of the Company’s or such Affiliate’s business and upon terms consistent with applicable laws and regulations and reasonably found by the appropriate board(s) of directors to be fair and reasonable and no less favorable to the Company or such Affiliate than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate.
5.3 Compliance with Laws.
5.3.1 Generally. The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company.
5.3.2 Regulated Activities. The Company shall not itself, nor shall it cause, permit or allow the Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be expected to have a Material Adverse Effect on the Company, the Bank and/or such of its Subsidiaries or (ii) make any loan or advance secured by the capital stock of another bank or depository institution, or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution, in each case other than in accordance with applicable laws and regulations and safe and sound banking practices.
5.3.3 Taxes. The Company shall and shall cause the Bank and any other of its Subsidiaries to promptly pay and discharge all material taxes, assessments and other 
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governmental charges imposed upon the Company, the Bank or any other of its Subsidiaries or upon the income, profits, or property of the Company or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of the Company, the Bank or any other of its Subsidiaries. Notwithstanding the foregoing, none of the Company, the Bank or any other of the Company’s Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof is being contested in good faith by appropriate proceedings, and appropriate reserves therefor are being maintained on the books of the Company, the Bank and such other Subsidiary.
5.3.4 Corporate Existence. The Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and that of the Bank and its and the Bank’s rights and franchises; provided, however, that the Company may consummate a merger that is permitted under the terms of the Subordinated Notes.
5.3.5 Tier 2 Capital. If all or any portion of the Subordinated Notes ceases to be deemed Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Notes, the Company will as promptly as reasonably practicable notify the Holder (as defined in the Subordinated Note) of the Subordinated Notes, and thereafter, the Company and the Holder (as defined in the Subordinated Note) of the Subordinated Notes will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event, as described in the Subordinated Notes.
5.4 Absence of Control. It is the intent of the parties to this Agreement that in no event shall the Purchasers, by reason of any of the Transaction Documents, be deemed to control, directly or indirectly, the Company, and the Purchasers shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of the Company.
5.5 Secondary Market Transactions. To the extent and so long as not in violation of Section 6.4 hereof, each Purchaser shall have the right at any time and from time to time to securitize its Subordinated Notes or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities secured by or evidencing ownership interests in the Subordinated Notes (each such securitization is referred to herein as a “Secondary Market Transaction”). In connection with any such Secondary Market Transaction, the Company shall reasonably cooperate with the Purchasers and otherwise reasonably assist the Purchasers in satisfying the market standards to which the Purchasers customarily adhere or which may be reasonably required in the marketplace or by applicable rating agencies in connection with any such Secondary Market Transaction, but in no event shall the Company be required to incur any costs or expenses in excess of $7,500 in connection therewith. Subject to any written confidentiality obligation, including the terms of any non-disclosure agreements between the Purchasers and the Company, all information regarding the Company may be furnished, without liability except in the case of gross negligence or willful misconduct, to any 
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Purchaser and to any Person reasonably deemed necessary by the Purchaser in connection with participation in such Secondary Market Transaction. The Purchaser shall cause any Person to whom the Purchaser wishes to deliver confidential Company information related to the Secondary Market Transaction to execute and deliver to the Company a non-disclosure agreement reasonably acceptable to the Company unless such Person is a party to a commercially reasonable non-disclosure agreement to which the Company is a third party beneficiary. All documents, financial statements, appraisals and other data relevant to the Company or the Subordinated Notes may be retained by any such Person, subject to the terms of any applicable nondisclosure agreement.
5.6 Bloomberg. The Company shall use commercially reasonable efforts to cause the Subordinated Notes to be quoted on Bloomberg.
5.7 Rule 144A Information. While any Subordinated Notes remain “restricted securities” within the meaning of the Securities Act, the Company will make available, upon the request of any Purchaser or subsequent holder of any Subordinated Notes the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act.
5.8 Redemption.  For purposes of clarity and pursuant to (and as further described in) the terms of the Subordinated Notes, any redemption made pursuant to the terms of the Subordinated Notes shall be made on a pro rata basis, and, for purposes of a partial redemption processed through DTC and treated by DTC, in accordance with its rules and procedures, on a “Pro Rata Pass-Through Distribution of Principal” basis, among all of the Subordinated Notes outstanding at the time thereof.
5.9 NRSRO Rating. The Company will use commercially reasonable efforts to maintain a rating by a nationally recognized statistical rating organization (“NRSRO”) while any Subordinated Notes remain outstanding.
5.9 Insurance. At its sole cost and expense, the Company shall maintain, and shall cause each Subsidiary to maintain, bonds and insurance to such extent, covering such risks as is required by law or as is usual and customary for owners of similar businesses and properties in the same general area in which the Company or any of its Subsidiaries operates.  All such bonds and policies of insurance shall be in a form, in an amount and with insurers recognized as adequate by prudent business persons.

6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company, and covenants with the Company, severally and not jointly, solely with respect to such Purchaser and no other Purchaser as follows:
6.1 Legal Power and Authority. The Purchaser has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the 
17

transactions contemplated hereby. The Purchaser is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.
6.2 Authorization and Execution. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of such Purchaser, and, assuming due authorization, execution and delivery by the other parties thereto, this Agreement is a legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.
6.3 No Conflicts. Neither the execution or delivery of or performance under the Transaction Documents nor the consummation of any of the transactions contemplated thereby will conflict with, violate, or constitute a breach of or a default under (whether with or without the giving of notice or lapse of time or both) (i) the Purchaser’s organizational documents, (ii) any agreement to which the Purchaser is party, (iii) any law applicable to the Purchaser or (iv) any order, writ, judgment, injunction, decree, determination or award binding upon or affecting the Purchaser.
6.4 Purchase for Investment. The Purchaser is purchasing the Subordinated Notes for its own account and not with a view to distribution and with no present intention of reselling, distributing or otherwise disposing of the same. The Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated Notes in any manner.
6.5 Institutional Accredited Investor. The Purchaser is and will be on the Closing Date either (i) an institutional “accredited investor” as such term is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3) and (7) of Rule 501(a) of Regulation D, and has no less than $5,000,000 in total assets, or (ii) a QIB.
6.6 Financial and Business Sophistication. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment in the Subordinated Notes. The Purchaser has relied solely upon its own knowledge of, and/or the advice of its own legal, financial or other advisors with regard to, the legal, financial, tax and other considerations involved in deciding to invest in the Subordinated Notes.
6.7 Ability to Bear Economic Risk of Investment. The Purchaser recognizes that an investment in the Subordinated Notes involves substantial risk. The Purchaser has the ability to bear the economic risk of the prospective investment in the Subordinated Notes, including the ability to hold the Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of the Purchaser’s investment in the Company.
6.8 Information. The Purchaser acknowledges that: (i) the Purchaser is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Notes were registered under the Securities Act, nor is the Purchaser being provided with any offering circular or prospectus prepared in connection with the offer and sale of the Subordinated Notes; (ii) the Purchaser has conducted its own examination of the Company and the terms of the 
18

Subordinated Notes to the extent the Purchaser deems necessary to make its decision to invest in the Subordinated Notes; (iii) the Purchaser has availed itself of publicly available financial and other information concerning the Company to the extent the Purchaser deems necessary to its decision to purchase the Subordinated Notes, including, but not limited to, information appearing under the heading “Item 1A:  Risk Factors” in each of the Company Reports; and (iv) the Purchaser has not received nor relied on any form of general solicitation or general advertising (within the meaning of Regulation D) from the Company in connection with the offer or sale of the Subordinated Notes. The Purchaser has reviewed the information set forth in the Company’s Reports and the exhibits hereto and the information contained in the data room established by the Company in connection with the transactions contemplated by this Agreement.
6.9 Access to Information. The Purchaser acknowledges that the Purchaser and its advisors have been furnished with all materials relating to the business, finances and operations of the Company that have been requested by the Purchaser or its advisors and have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of the Company concerning the terms and conditions of the transactions contemplated by this Agreement in order to make an informed and voluntary decision to enter into this Agreement.
6.10 Investment Decision. The Purchaser has made its own investment decision based upon its own judgment, due diligence and advice from such advisors as it has deemed necessary and not upon any view expressed by any other Person, including the Placement Agents. Neither any inquiries nor any other due diligence investigations conducted by it or its advisors or representatives, if any, shall modify, amend or affect its right to rely on the Company’s representations and warranties contained herein. The Purchaser is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf of the Company, including the Placement Agents, except for the express statements, representations and warranties of the Company made or contained in this Agreement. Furthermore, the Purchaser acknowledges that (i) the Placement Agents have not performed any due diligence review on behalf of it and (ii) nothing in this Agreement or any other materials presented by or on behalf of the Company to the Purchaser in connection with the purchase of the Subordinated Notes constitutes legal, tax, accounting, or investment advice.
6.11 Private Placement; No Registration; Restricted Legends. The Purchaser understands and acknowledges that the Subordinated Notes are being sold by the Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and, accordingly, may be resold, pledged or otherwise transferred only if exemptions from the Securities Act and applicable state securities laws are available to it. The Purchaser is not subscribing for Subordinated Notes as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting. The Purchaser further acknowledges and agrees that all certificates or other instruments representing the Subordinated Notes will bear the restrictive legend set forth in the form of Subordinated Note. The Purchaser further acknowledges its primary responsibilities under the Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Notes or any interest therein without complying 
19

with the requirements of the Securities Act and the rules and regulations promulgated thereunder and the requirements set forth in this Agreement.  
6.12 Placement Agents. The Purchaser will purchase the Subordinated Note(s) directly from the Company and not from the Placement Agents and understands that neither the Placement Agents nor any other broker or dealer have any obligation to make a market in the Subordinated Notes.
6.13 Tier 2 Capital. If the Company provides notice as contemplated in Section 5.3.5 that all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, thereafter the Company and the Purchasers will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes so that the Subordinated Notes qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.
6.14 Foreign Investors. If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), the Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Subordinated Notes or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Subordinated Notes (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Subordinated Notes. The Purchaser’s subscription and payment for and continued beneficial ownership of the Subordinated Notes will not violate any applicable securities or other laws of the Purchaser’s jurisdiction.
6.15 Accuracy of Representations. The Purchaser understands that the Placement Agents and the Company will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements in connection with the transactions contemplated by this Agreement.
6.16 Representations and Warranties Generally. The representations and warranties of the Purchaser set forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein. Any certificate signed by a duly authorized representative of the Purchaser and delivered to the Company or to counsel for the Company shall be deemed to be a representation and warranty by the Purchaser to the Company as to the matters set forth therein.
7. MISCELLANEOUS.
7.1 Prohibition on Assignment by the Company. Except as described in Sections 5 and 14 of the Global Note, the Company may not assign, transfer or delegate any of its rights or obligations under this Agreement or the Subordinated Notes without the prior written consent of the Purchasers.
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7.2 Time of the Essence. Time is of the essence for this Agreement.
7.3 Waiver or Amendment. No waiver or amendment of any term, provision, condition, covenant or agreement herein shall be effective unless in writing and signed by all of the parties hereto. No failure to exercise or delay in exercising, by a Purchaser or any Holder of the Subordinated Notes (as defined therein), any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity.
7.4 Severability. Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid portion had never been included herein. Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the application thereof are held invalid or unenforceable only as to particular Persons or situations, the remainder of this Agreement, and the application of such provision to Persons or situations other than those to which it shall have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.
7.5 Notices. Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested, or if delivered by a responsible overnight commercial courier promising next Business Day delivery, addressed:
																											
									
	if to the Company:		MVB Financial Corp.
3000 Swiss Pine Way
Suite 100
Morgantown, WV  26501
Attention: Don Robinson, CFO
Email: drobinson@mvbbanking.com

		
	with a copy to:		Squire Patton Boggs (US) LLP
221 E. Fourth St., Suite 2900
Cincinnati, Ohio 45202
Attention: James J. Barresi
Email:  James.Barresi@squirepb.com

		
	if to the Purchasers:		To the address indicated on such Purchaser’s signature page.

21

or to such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the giving of notice; provided that no change in address shall be effective until five (5) Business Days after being given to the other party in the manner provided for above. Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the United States mail as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next Business Day delivery was requested).
7.6 Successors and Assigns. This Agreement shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; except that, unless a Purchaser consents in writing, no assignment made by the Company in violation of this Agreement shall be effective or confer any rights on any purported assignee of the Company. The term “successors and assigns” will not include a purchaser of any of the Subordinated Notes from any Purchaser merely because of such purchase.
7.7 No Joint Venture. Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of a Purchaser, shall be deemed to make a Purchaser a partner or joint venturer with the Company.
7.8 Documentation. All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to a Purchaser shall be in form and substance satisfactory to such Purchaser.
7.9 Entire Agreement. This Agreement, the Subordinated Notes, the nondisclosure agreement between the Purchaser and the Company relating to the transactions contemplated by this Agreement, along with the exhibits thereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof. No party, in entering into this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in this Agreement, or the Subordinated Notes.
7.10 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its laws or principles of conflict of laws. Nothing herein shall be deemed to limit any rights, powers or privileges which a Purchaser may have pursuant to any law of the United States of America or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.
7.11 No Third Party Beneficiary. This Agreement is made for the sole benefit of the Company and the Purchasers, and no other Person shall be deemed to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any other Person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder; provided, that the Placement Agents may rely on the representations and warranties contained herein to the same extent as if they were a party to this Agreement.
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7.12 Legal Tender of United States. All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in the United States of America for public and private debts.
7.13 Captions; Counterparts. Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
7.14 Knowledge; Discretion. All references herein to a Purchaser’s or the Company’s knowledge shall be deemed to mean the knowledge of such party based on the actual knowledge of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding equivalent offices. Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by a Purchaser, to the making of a determination or designation by a Purchaser, to the application of a Purchaser’s discretion or opinion, to the granting or withholding of a Purchaser’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to a Purchaser, or otherwise involving the decision making of a Purchaser, shall be deemed to mean that such Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.
7.15 Waiver of Right to Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASERS. THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL. THE PARTIES HERETO FURTHER ACKNOWLEDGE THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES HERETO AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.
7.16 Expenses. Except as otherwise provided in this Agreement, each of the parties hereto will bear and pay all costs and expenses, including attorneys’ fees, incurred by it or on its behalf in connection with the transactions contemplated by this Agreement.
7.17 Survival. Each of the representations and warranties set forth in this Agreement shall survive the Closing for a period of one year after the date hereof. Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, by their 
23

respective terms, they are no longer operative, other than those which by their terms are to be performed in whole or in part prior to or on the Closing Date, which shall terminate as of the Closing Date.
[Signature Pages Follow]

24

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized representative as of the date first above written.
																											
									
			
	COMPANY:
	
	MVB FINANCIAL CORP.
		
	By:		
			Name: Donald T. Robinson
			Title:   Executive Vice President and Chief Financial Officer

[Company Signature Page to Subordinated Note Purchase Agreement]

IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be executed by its duly authorized representative as of the date first above written.

																		
						
		PURCHASER:

By: _____________________________
Name: 
Title: 

Address of Purchaser:

Principal Amount of Purchased Subordinated Note:

$_______________________________

CUSIP: _________________________

																														
			
		By:		
				Name: 
				Title: 
								
		Address of Purchaser:	
										
										
										
										
		Principal Amount of Purchased Subordinated Note:
										
		$		
										
		CUSIP:		
										

[Purchaser Signature Page to Subordinated Note Purchase Agreement]

EXHIBIT A

Form of Subordinated Note

EXHIBIT B-1

Form of Opinion of Squire Patton Boggs (US) LLP
1.The Company is a registered financial holding company under the Bank Holding Company Act of 1956, as amended.
2.The Agreement constitutes a legal valid and binding obligation of the Company, enforceable against Company in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors generally, (ii) the application of general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether enforcement is considered in proceedings at law or in equity) and the discretion of the court before which any proceeding therefor may be brought, and (iii) applicable law and public policy with respect to rights to indemnity and contribution.
3.When duly executed, authenticated, issued and delivered to and paid for by the Purchasers in accordance with the terms of this Agreement, the Subordinated Notes will constitute valid and legally binding obligations of the Company, and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors generally, (ii) the application of general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether enforcement is considered in proceedings at law or in equity) and the discretion of the court before which any proceeding therefor may be brought, and (iii) applicable law and public policy with respect to rights to indemnity and contribution.
4.Assuming (i) the accuracy of the representations and warranties of the Company set forth in the Agreements, (ii) the due performance by the Company and the Purchasers of the covenants and agreements set forth in the Agreement, and (iii) the accuracy of the representations and warranties of the Purchasers set forth in the Agreement, the offer and sale of the Subordinated Notes by the Company, in the manner contemplated by the Agreement, do not require registration under the Securities Act of 1933, as amended, but we express no opinion as to any subsequent resale or other transfer of the Subordinated Notes.

* * * *

EXHIBIT B-2

Form of Opinion of Camille M. Curry, 
Vice President and Corporate Counsel of the Company

1.    The Company is a corporation validly existing under the laws of the State of West Virginia.  The opinion in the immediately preceding sentence is based solely upon review of copies of certificates issued by the Secretary of State of the State of West Virginia for the Company and is limited to the meaning ascribed to such certificates by the State of West Virginia and to the status of the Company on the date of the certificate relating to it.  Further the Company has all requisite corporate power to carry out its business as currently conducted. 
2.    The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents to which it is a party and to consummate the transactions contemplated by the Transaction Documents. 
3.    The Agreement and the Subordinated Notes have been duly authorized, executed and delivered by the Company.
4.    The execution and delivery by the Company of, and the performance by the Company on the date hereof of its agreements and obligations under, the Transaction Documents do not (i) violate any applicable provisions of the West Virginia Business Corporation Act, or (ii) violate the Articles of Incorporation or Bylaws, each as currently in effect.

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