Form 8937  Report of Organizational Actions Affecting Basis of Securities (regarding Granite REIT’s conversion to a stapled unit structure on January 3, 2013)

Exchange of Granite Common Shares for Stapled Units and Class X Shares

Note:  Capitalized terms are defined in the Management Information Circular/Proxy Statement dated October 11, 2012.

On January 3, 2013, under a series of steps pursuant to the Arrangement, Granite Shareholders received Stapled Units in exchange for their Granite Common Shares. For U.S. Unitholders, part of this exchange will be considered taxable, and part of it should not be subject to U.S. tax.

For U.S. federal income tax purposes, the initial receipt of Stapled Units in exchange for Granite Common Shares is treated as a distribution by Granite of Stapled Units and is taxable to U.S. Unitholders, first as a dividend to the extent of Granite’s current and accumulated earnings and profits. As at the conversion date, January 3, 2013, CAD $1 per unit was considered to be a deemed dividend received and was based on management’s estimate of Granite’s current and accumulated earnings and profits. The remaining allocation of fair value related to the initial distribution of Stapled Units is then treated as a non-taxable return of capital to the extent of each U.S. Unitholder’s basis and then as a taxable exchange of Granite Common Shares for Stapled Units.

The receipt of Class X Shares in exchange for Granite Common Shares and subsequent contribution of those Class X Shares to Granite REIT in exchange for additional Granite REIT Units should not be considered taxable to U.S. Unitholders.

Information relevant in assessing U.S. Unitholders’ tax implications, on a per unit basis, is provided below:

* As at the conversion date, January 3, 2013, this amount was considered to be a deemed dividend to which a 28% backup withholding tax would apply to individual U.S. Unitholders who did not file an Internal Revenue Service Form W-9 prior to the Effective Time.  We note the amount represents management’s estimate of current and accumulated “earnings and profits” of Granite at that time and amounts were finalized after Granite’s 2013 year end.

U.S. Unitholders are strongly encouraged to refer to the October 2012 Management Information Circular/Proxy Statement, specifically pages 67 to 69 for more information on this topic.