Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

Securities Act (Ontario), s.74(1) -- real estate investment trust and corporation want relief from the prospectus requirement in respect of certain trades and/or distributions and possible trades and/or distributions in their securities -- relief required in connection with proposed reorganization -- relief granted but conditional upon each unit of real estate investment trust being stapled to a unit of the corporation and to trade as a stapled unit -- the first trade of any security acquired as a result of any such trade shall be deemed to be a distribution under the legislation of the jurisdiction where the trade takes place unless applicable resale conditions in National Instrument 45-102 Resale of Securities are satisfied -- relief will terminate if units of real estate investment trust are not stapled to units of corporation and vice versa.

Securities Act (Ontario), s.1(11)(b) -- application related to conversion transaction -- units of both real estate investment trust and corporation will be "stapled units" trading together on the TSX -- each issuer requesting to be deemed a reporting issuer by virtue of its units being stapled and units of each trading together as stapled units on the TSX -- relief granted.

NI 51-102 Continuous Disclosure Obligations, s.13.1 -- real estate investment trust and corporation want relief from Parts 4 and 5 of NI 51-102 in order to prepare, file and deliver combined financial statements -- corporation wants relief from Parts 4 and 5 of NI 51-102 -- corporation wants relief from Parts 6 and sections 9.1(1), 9.1(2)(a) and 11.6 of NI 51-102 -- corporation analogous to credit support issuer (because continuous disclosure required under stapled structure similar to continuous disclosure required in credit supporter structure) -- similar statutory exemptions are available to credit support issuers under section 13.4 of NI 51-102 -- exemption granted subject to conditions substantially similar to conditions in section 13.4(2) of NI 51-102 -- real estate investment trust and corporation want relief from sections 8.4 and 8.4 of NI 51-102 in order to assess significance based on, and file as part of business acquisition report, combined financial statements -- exemption granted subject to conditions.

NI 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, s. 8.6 -- real estate investment trust and corporation want relief from certification requirements -- exemption granted subject to conditions.

NI 58-101 Corporate Governance, s. 3.1 -- corporation wants relief from reporting obligations -- exemption granted subject to conditions including that real estate investment trust and corporation continue to comply with conditions of continuous disclosure relief.

NI 44-101 Short Form Prospectus Distributions, s.8.1 -- real estate investment trust and corporation want relief from basic qualification criteria -- exemption granted subject to conditions including that real estate investment trust and corporation continue to comply with conditions of continuous disclosure relief.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 1(11)(b), 74(1).

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, s. 8.6.

National Instrument 58-101 Corporate Governance, s. 3.1.

National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1.

December 21, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction),

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GRANITE REAL ESTATE INC. (the Filer)

ON ITS OWN BEHALF AND ON BEHALF OF

GRANITE REAL ESTATE INVESTMENT TRUST

(Granite REIT) AND GRANITE REIT INC.

(Granite GP)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on its own behalf and on behalf of Granite REIT, a new real estate investment trust, and Granite GP, a new corporation, each formed in connection with the proposed reorganization of the Filer by way of a plan of arrangement under section 414 of the Business Corporations Act (Québec) (the QBCA) to form a "stapled unit" real estate investment trust structure (the Conversion Transaction), for a decision under the securities legislation of the Jurisdiction (the Legislation) for the following relief (the Exemption Sought):

(a) pursuant to section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), that Granite REIT be exempted from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim management's discussion and analysis (MD&A), on a stand-alone basis, and relating to the delivery of the same to the holders (the Granite REIT Unitholders) of trust units (Granite REIT Units) of Granite REIT (the Granite REIT Financial Disclosure Requirements);

(b) pursuant to section 13.1 of NI 51-102, that Granite GP be exempted from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements and MD&A, respectively, on a stand-alone basis, and relating to the delivery of the same to the holders (Granite GP Shareholders) of common shares (Granite GP Common Shares) of Granite GP (the Granite GP Financial Disclosure Requirements);

(c) pursuant to section 13.1 of NI 51-102, that Granite GP be exempted from: (i) the disclosure obligations in Parts 6 and 7 of NI 51-102 relating to annual information forms (AlFs) and material change reports respectively; and (ii) the disclosure obligations in sections 9.1(2)(a) and 11.6 of NI 51-102 relating to disclosure in management information circulars (collectively, the Specified Continuous Disclosure Requirements);

(d) pursuant to section 3.1 of National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101), that Granite GP be exempted from the corporate governance disclosure requirements of NI 58-101 (the Corporate Governance Disclosure Requirements);

(e) pursuant to section 13.1 of NI 51-102, that Granite REIT and Granite GP be exempted from the requirements of Part 8 of NI 51-102 to (i) determine whether an acquisition or probable acquisition is a significant acquisition with reference to stand-alone financial statements, and (ii) present stand-alone historical and pro forma financial statements in a business acquisition report (the BAR Requirements);

(f) pursuant to section 8.6 of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), that Granite REIT and Granite GP be exempted from the requirements of sections 4.2 and 5.2 of NI 52-109 in respect of filing the chief executive officer (CEO) and chief financial officer (CFO) certificates that Granite REIT and Granite GP would normally have to file if they prepared annual and interim financial statements and MD&A on a stand-alone basis and if Granite GP prepared its own AIF (theCertificate Form Requirement);

(g) pursuant to section 8.1 of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101), that Granite REIT be exempted from certain of the basic qualification criteria contained in sections 2.2(d)(i) and 2.2(e) of NI 44-101 for eligibility to file a short form prospectus, in particular the requirement that Granite REIT have current annual financial statements for any period for which Granite REIT files Combined Financial Statements (as defined below) and that Granite REIT have equity securities listed and posted for trading on a short form eligible exchange (collectively, the Granite REIT Short Form Criteria);

(h) pursuant to section 8.1 of NI 44-101, that Granite GP be exempted from certain of the basic qualification criteria contained in sections 2.2(d) and 2.2(e) of NI 44-101 for eligibility to file a short form prospectus, in particular the requirements that Granite GP have current annual financial statements, a current annual information form (AIF) and equity securities listed and posted for trading on a short form eligible exchange (the Granite GP Short Form Criteria); and

(i) that Granite GP and Granite REIT be exempted from the requirement under the Legislation to file a prospectus in connection with the distribution of Stapled Units (as defined below), and rights, options or other securities that confer the right to acquire Stapled Units or are convertible into or exercisable or exchangeable for Stapled Units, to a director, trustee, officer, employee or consultant (or a former director, trustee, officer, employee or consultant) of Granite GP, Granite REIT or a related entity (as defined under National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106")) or to a permitted assign (as defined under NI 45-106) thereof (including under the Filer's executive share unit plan, as amended from time to time (which is anticipated to become a plan of Granite GP and/or Granite REIT following completion of the Conversion Transaction)) (the Prospectus Requirements).

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of Granite REIT and Granite GP, for a decision under the Legislation that Granite REIT and Granite GP be designated, as of the effective time of the Conversion Transaction, as a reporting issuer in the Jurisdiction (the Reporting Issuer Designation).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the Application;

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is currently a corporation continued under the laws of the Province of Québec. The head office of the Filer is located in Toronto, Ontario. On June 13, 2012, the Filer changed its name from MI Developments Inc. to Granite Real Estate Inc. following approval of the name change by the holders (Granite Common Shareholders) of common shares (Granite Common Shares) of the Filer. The Filer has called and held a special meeting of Granite Common Shareholders (the Granite Special Meeting) on November 15, 2012 for the purpose of voting on a special resolution to approve the Conversion Transaction. At the Granite Special Meeting, the special resolution to approve the Conversion Transaction was approved by the Granite Common Shareholders.

2. The Filer is a reporting issuer or the equivalent under the securities legislation of each of the provinces and territories of Canada and is not in default of securities legislation of any such jurisdiction.

3. The Filer also has securities registered under section 12 of the U.S. Securities Exchange Act of 1934, as amended (the 1934 Act). As such, the Filer is an "SEC issuer" as that term is defined under NI 51-102 and National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107).

4. The Granite Common Shares are listed on the Toronto Stock Exchange (TSX) under the symbol "GRT" and on the New York Stock Exchange (NYSE) under the symbol "GRP".

5. The Filer is a Canadian-based real estate company engaged, directly and through its subsidiaries, primarily in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe.

6. As at November 7, 2012, there were approximately 46,832,908 Granite Common Shares outstanding.

7. The Filer is also the issuer of $265 million of 6.05% Senior Unsecured Debentures Series 1 due December 22, 2016 (the Debentures), which were issued in Canada under a base shelf prospectus dated March 19, 2004 and a prospectus supplement dated December 16, 2004.

The Conversion Transaction

8. On June 30, 2011, the Filer completed a reorganization (the 2011 Reorganization) pursuant to a plan of arrangement under the Business Corporations Act (Ontario) that resulted in (i) the transfer to the Filer's former controlling shareholder (a company controlled by the Stronach Trust) of the horseracing, gaming and certain related assets formerly held by the Filer, in return for the purchase and cancellation of the shares of the Filer held by such shareholder, and (ii) the elimination of the Filer's former dual-class share structure. Following the 2011 Reorganization, an entirely new board of directors took office and new senior management (including the chief executive officer and chief financial officer) was appointed.

9. On October 25, 2011 the Filer announced that, as part of its newly developed strategic plan following the 2011 Reorganization, it intends to convert to a real estate investment trust (a REIT). The purpose of the Conversion Transaction is to complete the conversion of the Filer from a corporate structure to a REIT. The Conversion Transaction will adopt the "stapled unit structure" described below in order to avoid an acquisition of control of the Filer for Canadian income tax purposes.

10. In connection with or as part of the Conversion Transaction, the Filer formed Granite GP as a new corporation under the Business Corporations Act (British Columbia) and Granite REIT as a new trust under the laws of Ontario, and it is proposed that, among other things, the following transactions will occur:

(a) Granite GP (as general partner) and the Filer (as initial limited partner) have formed a new limited partnership, Granite REIT Holdings Limited Partnership (Granite LP) under the laws of Québec;

(b) the Filer will transfer the equity of its Canadian and United States subsidiaries, and indebtedness owed to it by one or more United States subsidiaries (the U.S. Debtor Subsidiaries) to Granite LP, and will transfer indebtedness owed to it by certain European subsidiaries (the Euro Debtor Subsidiaries) to Granite Europe Limited Partnership (Finance LP), a limited partnership that will be controlled indirectly by the Filer, in which the Filer will own the general partner (having a 0.01% economic interest) and an approximate 19.99% voting limited partnership interest, and Granite LP will own an approximate 80% non-voting limited partnership interest;

(c) (i) Granite LP and Finance LP will agree to be bound by the terms of the trust indenture and of the Debentures as co-principal debtors in place of the Filer, and the Filer will guarantee all amounts payable under the Debentures, in accordance with the trust indenture, and Granite LP will (except as otherwise agreed with the Filer) assume substantially all of the other indebtedness and liabilities of the Filer, (ii) the Filer will agree to remain bound by the trust indenture and the Debentures as co-principal debtor, as permitted by the trust indenture, and (iii) each of Granite GP and Granite REIT will provide guarantees of all amounts payable under the Debentures, as permitted by the trust indenture;

(d) through a series of steps, Granite Common Shareholders will exchange their Granite Common Shares for Granite REIT Units and Granite GP Common Shares on a one-for-one basis;

(e) all of the Granite Common Shares will become owned by Granite LP; and

(f) all of the limited partnership units of Granite LP (which will represent approximately 99.99% of the economic entitlement in Granite LP) will become held by Granite REIT, with the general partnership interest (which will represent not more than approximately 0.01% of the economic entitlement in Granite LP) remaining held by Granite GP.

11. Subject to required approvals and satisfaction of closing conditions, it is expected that the Conversion Transaction will be completed in late December 2012 or early January 2013.

12. At the conclusion of the Conversion Transaction, each Granite REIT Unit will be stapled to a Granite GP Common Share (together, a Stapled Unit) and the two securities will, subject to listing approval, trade together as a Stapled Unit on the TSX and the NYSE (the Stapled Structure). Assuming listing approval is granted, it is expected that the Stapled Units will be listed and posted for trading in substitution for the Granite Common Shares, which are currently listed and posted for trading. The Filer anticipates that the Granite REIT Units and Granite GP Common Shares forming the Stapled Units will be separately listed, but not separately posted for trading, on the TSX, as is the case with other stapled unit structures.

13. Upon completion of the Conversion Transaction, Granite REIT and Granite GP will enter into an agreement (the Support Agreement) that will facilitate the Stapled Structure, including providing for the simultaneous issue of Granite REIT Units and Granite GP Common Shares, coordination of the declaration and payment of dividends and distributions, and other relevant matters.

14. The Granite REIT Units and the Granite GP Common Shares will only become unstapled (a) in the event that holders of Granite REIT Units vote in favour of the unstapling of Granite REIT Units and Granite GP Common Shares, such that the two securities will trade separately, or (b) at the sole discretion of the trustees of Granite REIT or the directors of Granite GP upon an event of bankruptcy or insolvency of either Granite REIT or Granite GP.

15. Immediately following completion of the Conversion Transaction, the authorized capital of Granite GP will include an unlimited number of Granite GP Common Shares, and all of the issued Granite GP Common Shares will be held by the former Granite Common Shareholders in the form of Stapled Units.

16. Immediately following completion of the Conversion Transaction, the authorized capital of Granite REIT will be an unlimited number of Granite REIT Units, and all of the issued Granite REIT Units will be held by the former Granite Common Shareholders in the form of Stapled Units.

17. Immediately upon completion of the Conversion Transaction, (a) the only material assets of Granite REIT will be the limited partnership interests in Granite LP, (b) the only significant asset of Granite GP will be its relatively nominal general partner interest in Granite LP, and (c) Granite REIT will not own any equity securities of Granite GP and Granite GP will not own any equity securities of Granite REIT.

18. Pursuant to the QBCA, the Granite Common Shareholders are required to approve the Conversion Transaction by at least two-thirds of the votes cast by Granite Common Shareholders at the Granite Special Meeting and such approval was obtained at the Granite Special Meeting held on November 15, 2012.

Governance and Management

19. Immediately upon completion of the Conversion Transaction, the initial directors of Granite GP are expected to be the individuals who are the directors of the Filer at the time of completion of the Conversion Transaction. Immediately upon completion of the Conversion Transaction, the initial trustees of Granite REIT are expected to be the individuals who are the directors of Granite GP or a smaller group of individuals, all of whom will be directors of Granite GP. Thereafter, the directors of Granite GP and the trustees of Granite REIT will be elected or appointed by the holders of Granite GP Common Shares and the holders of Granite REIT Units, respectively. It is expected that the chief executive officer and chief financial officer of Granite REIT will be the same as the chief executive officer and chief financial officer of Granite GP, and will initially be the individuals who are the chief executive officer and chief financial officer of the Filer at the time of completion of the Conversion Transaction.

20. Following the Conversion Transaction, the business and interests of Granite REIT and Granite GP (carried on through Granite LP and its subsidiaries) will effectively be one and the same. The economic interest of a holder of Stapled Units will be in Granite REIT and Granite GP together. Granite GP will have authority to act as the general partner of Granite LP, and Granite REIT and Granite GP will together own all of the partnership interests in Granite LP, which will own, directly and indirectly, all the shares of the (reorganized) Filer and all of the subsidiaries, business and assets previously held by the Filer. The Conversion Transaction does not contemplate the acquisition of any additional operating assets from third parties or the disposition of any existing operating assets to third parties.

Financial Reporting

21. Granite REIT and Granite GP: (i) will become reporting issuers by operation of law in all provinces and territories other than Ontario following the completion of the Conversion Transaction; (ii) have applied to be designated as reporting issuers in Ontario following the completion of the Conversion Transaction; and (ii) expect to register securities under section 12 of the 1934 Act following the Conversion Transaction and as such will be "SEC issuers" as that term is defined under NI 51-102 and NI 52-107.

22. The Filer has determined, in consultation with its auditors Ernst & Young LLP, that under both United States generally accepted accounting principles and International Financial Reporting Standards (Canadian GAAP applicable to publicly accountable enterprises, as set forth in Part 1 of the Handbook of the Canadian Institute of Chartered Accountants), (a) the financial statements of Granite REIT would consolidate the financial position and results of Granite LP and its subsidiaries, (b) in its own, stand-alone, financial statements, Granite GP would equity account for its relatively nominal general partner interest in Granite LP, and (c) Granite REIT and Granite GP will be able to prepare combined financial statements, so long as the Stapled Structure exists. If the Conversion Transaction is completed, Granite REIT and Granite GP will account for the transaction on a continuity of interests basis from the Filer.

23. Following completion of the Conversion Transaction, so long as the Stapled Units are not unstapled, the financial information most relevant to holders of Stapled Units will be that of Granite REIT and Granite GP together, on a combined basis.

Auditors and Audit Committee

24. It is anticipated that, initially, the auditors of Granite REIT will be the same as the auditors of Granite GP. Thereafter, auditors will be appointed by Granite REIT Unitholders and Granite GP Shareholders, respectively, but it would be expected that the same firm of auditors would be nominated and appointed for both while the Stapled Structure exists. Granite REIT and Granite GP will each appoint an audit committee consisting of at least three independent trustees or directors, as applicable, in compliance with NI 52-110.

Raising of Additional Capital

25. If Granite REIT wishes to raise capital following the Conversion Transaction, including pursuant to a public offering qualified by a short form prospectus or a shelf prospectus, Granite GP will be required, under the Support Agreement, to issue the same number of Granite GP Common Shares as the number of Granite REIT Units issued in connection with such financing concurrently with the issue of such Granite REIT Units. Any such Granite REIT Units and Granite GP Common Shares will trade as Stapled Units except in the circumstances described in paragraph 14. The net proceeds of any offering of Stapled Units will be allocated between Granite REIT and Granite GP pro rata in proportion to the relative values of Granite REIT and Granite GP at the time of the offering.

26. If Granite REIT and Granite GP rely on the requested relief from the Granite REIT Short Form Criteria and the Granite GP Short Form Criteria to distribute Stapled Units, they will file a single short form prospectus qualifying the distribution of securities of each issuer (a Joint Prospectus), which will incorporate by reference the following documents:

(a) Granite REIT's then current AIF (Granite REIT's Current AIF);

(b) the then most recent audited annual Combined Financial Statements (as defined below), together with the related MD&A;

(c) if, at the date of the Joint Prospectus, Granite REIT or Granite GP have filed or have been required to file interim Combined Financial Statements (as defined below) for a period subsequent to the then most recent financial year-end, such interim financial statements together with the related interim MD&A;

(d) any applicable segmented financial information referred to in Section 2(a)(iv), below;

(e) the content of any news release or other public communication that is disseminated by Granite REIT or Granite GP prior to the filing of the Joint Prospectus and that contains historical financial information about one or both of Granite REIT and Granite GP for a period more recent than the end of the most recent period for which financial statements are required under paragraphs (b) and (c) above;

(f) any material change report of Granite REIT or Granite GP, other than a confidential material change report, filed by Granite REIT under Part 7 of NI 51-102 or by Granite GP in accordance with this decision since the end of the financial year in respect of which Granite REIT's Current AIF is filed;

(g) any business acquisition report filed by Granite REIT or Granite GP under Part 8 of NI 51-102 and in accordance with this decision for acquisitions completed since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed, unless:

(i) the business acquisition report is incorporated by reference in an AIF that is itself incorporated by reference in the Joint Prospectus; or

(ii) at least nine months of the relevant business operations are reflected in annual financial statements that are incorporated by reference in the Joint Prospectus;

(h) any information circular filed by Granite REIT under Part 9 of NI 51-102, or by Granite GP in accordance with this decision, since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed, other than an information circular prepared in connection with an annual general meeting of either Granite REIT or Granite GP if it has filed and incorporated by reference in the Joint Prospectus an information circular for a later annual general meeting; and

(i) any other disclosure document which Granite REIT or Granite GP has filed pursuant to an undertaking to a provincial and territorial securities regulatory authority, or pursuant to an exemption from any requirement of securities legislation of a Canadian jurisdiction, since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed.

Decision

1. The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

2. The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that the Conversion Transaction is implemented in substantially the manner contemplated by the representations set forth above in this Decision, and subject to the further conditions specified below:

(a) in respect of the Granite REIT Financial Disclosure Requirements and the Granite GP Financial Disclosure Requirements:

(i) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (b) of this section 2;

(ii) Granite REIT files, under its profile on the System for Electronic Document Analysis and Retrieval (SEDAR), one set of financial statements prepared on a combined basis (Combined Financial Statements) using the accounting principles applicable to Granite REIT and Granite GP pursuant to the securities legislation of the Jurisdiction (Applicable Accounting Principles) to reflect the financial position and results of Granite REIT and Granite GP on a combined basis;

(iii) any Combined Financial Statements filed by Granite REIT include the components specified in sections 4.1(1) of NI 51-102 (for annual financial reporting periods) and 4.3(2) of NI 51-102 (for interim financial reporting periods);

(iv) the Combined Financial Statements filed by Granite REIT provide in the notes thereto segmented financial information for each of Granite GP and Granite REIT if and to the extent required under Applicable Accounting Principles;

(v) the annual Combined Financial Statements filed by Granite REIT are audited;

(vi) prior to filing its unaudited Combined Financial Statements for each interim period during its financial year ending December 31, 2013 Granite REIT and its auditor have concluded that the preparation of Combined Financial Statements is acceptable under Applicable Accounting Principles;

(vii) the Combined Financial Statements filed by Granite REIT are accompanied by the fee, if any, applicable to filings of annual financial statements;

(viii) the MD&A of Granite REIT is prepared with reference to the Combined Financial Statements;

(ix) Granite GP files a notice under its SEDAR profile indicating that it is relying on the financial statements and related MD&A filed by Granite REIT and directing readers to refer to Granite REIT's SEDAR profile;

(x) Granite REIT and Granite GP continue to satisfy the requirements set out in NI 52-110;

(xi) the audit committee of Granite REIT and Granite GP is responsible for:

(A) overseeing the work of the external auditors engaged for the purposes of auditing the Combined Financial Statements under Applicable Accounting Principles; and

(B) resolving disputes between the external auditors and management of both Granite REIT and Granite GP regarding financial reporting; and

(xii) Granite REIT continues to satisfy the requirements of section 4.6 of NI 51-102, except that for each financial reporting period in respect of which Combined Financial Statements are prepared, Granite REIT shall only be required to send to Granite REIT Unitholders copies of the Combined Financial Statements and related MD&A;

(b) in respect of the Specified Continuous Disclosure Requirements and the Corporate Governance Disclosure Requirements:

(i) Granite REIT is a reporting issuer in a designated Canadian jurisdiction (as defined in section 13.4 of NI 51-102), complies with NI 51-102 or the conditions of any exemptions therefrom and is an electronic filer under National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) that has filed all documents it is required to file under NI 51-102 or under the conditions of any exemptions therefrom

(ii) Granite GP does not issue, and has no outstanding, securities other than the Granite GP Common Shares, debt securities that are stapled to debt securities of Granite REIT, securities issued to or held by directors, trustees, officers, employees or consultants (or former directors, trustees, officers, employees or consultants) of Granite GP, Granite REIT or a related entity (as defined under NI 45-106)) or a permitted assign (as defined under NI 45-106), including options, rights or other securities under equity compensation plans that are convertible into or exercisable or exchangeable for Granite GP Common Shares and/or Granite REIT Units that will form Stapled Units, and the securities listed in sections 13.4(2)(c)(iii) and (iv) of NI 51-102;

(iii) an AIF, management information circular or statement of executive compensation filed by Granite REIT contains all information that would be required in an AIF, management information circular or statement of executive compensation, as applicable, filed by Granite GP for the same reporting period;

(iv) Granite GP files a notice under its SEDAR profile indicating that it is relying on the AIF, management information circular, material change reports and statements of executive compensation (if applicable) filed by Granite REIT and directing readers to refer to Granite REIT's SEDAR profile;

(v) Granite GP issues a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of Granite GP that is not also a material change in the affairs of Granite REIT;

(vi) Granite REIT continues to satisfy the requirements set out in NI 58-101;

(vii) each Granite GP Common Share is stapled to a Granite REIT Unit and they trade together as a Stapled Unit; and

(viii) if the Granite GP Common Shares and the Granite REIT Units become unstapled and trade separately, Granite GP will comply with the requirements of sections 9.1(1) and 9.1(2)(a) of NI 51-102 in respect of any meeting for which it gives notice to any registered holder of securities of Granite GP;

(c) in respect of the Certificate Form Requirement:

(i) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (a) of this section 2;

(ii) the certificates filed by Granite REIT and Granite GP in accordance with section 4.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under Applicable Accounting Principles for each annual financial reporting period in respect of which the Granite GP Common Shares are stapled to the Granite REIT Units, are substantially in the form required by section 4.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of Granite REIT's AIF and the Combined Financial Statements and related MD&A; and

(iii) the certificates filed by Granite REIT and Granite GP in accordance with section 5.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under Applicable Accounting Principles for each interim financial reporting period in respect of which the Granite GP Common Shares are stapled to the Granite REIT Units, are substantially in the form required by section 5.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of Combined Financial Statements and related MD&A;

(d) in respect of the BAR Requirements:

(i) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (a) of this section 2;

(ii) Granite REIT and Granite GP apply the significance tests under Part 8 of NI 51-102 with reference to the Combined Financial Statements; and

(iii) if a BAR is required to be filed, the BAR includes, with respect to Granite REIT and Granite GP, pro forma combined financial statements, prepared using the Applicable Accounting Principles used in the Combined Financial Statements of Granite REIT and Granite GP;

(e) in respect of the Granite REIT Short Form Criteria:

(i) each Granite GP Common Share is stapled to a Granite REIT Unit and they trade together as a Stapled Unit

(ii) each Stapled Unit is listed and posted for trading on a short form eligible exchange, as defined in NI 44-101 (an Exchange);

(iii) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (a) of this section 2; and

(iv) each Joint Prospectus filed by Granite REIT and Granite GP incorporates by reference any applicable documents listed in paragraph 26 above; and

(f) in respect of the Granite GP Short Form Criteria:

(i) each Granite GP Common Share is stapled to a Granite REIT Unit and they trade together as a Stapled Unit;

(ii) each Stapled Unit is listed and posted for trading on an Exchange;

(iii) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (a) of this section 2; and

(iv) each Joint Prospectus filed by Granite REIT and Granite GP incorporates by reference any applicable documents listed in paragraph 26 above.

As to the Exemption Sought (other than from the Prospectus Requirements):

"Jo-Anne Matear"
Manager, Corporate Finance
Ontario Securities Commission

As to the Prospectus Requirements and the Reporting Issuer Designation, provided that, in respect of the Prospectus Requirements:

(i) each Stapled Unit is listed and posted for trading on an Exchange; and

(ii) the first trade of any Granite REIT Unit acquired as a result of any such trade shall be deemed to be a distribution under the securities legislation of the Canadian jurisdictions where the trade takes place unless the conditions in section 2.6(3) of National Instrument 45-102 Resale of Securities are satisfied.

"Christopher Portner"
Commissioner
Ontario Securities Commission
 
"Judith Robertson"
Commissioner
Ontario Securities Commission