GRANITE REAL ESTATE INVESTMENT TRUST

Development Risk

Granite currently develops properties and intends to develop properties in the future as suitable opportunities arise. Real estate development includes risks associated with:

• construction delays or cost overruns that may increase project costs;

• failure to receive zoning, occupancy and other required governmental permits and authorizations;

• development costs incurred for projects that are not pursued to completion;

• natural disasters, such as earthquakes, floods or fires, that could adversely impact a project; and

• governmental restrictions on the nature, use or size of a project.

Granite’s development projects may not be completed on time or within budget, and in cases of speculative development there may be difficulty in securing tenants for the development or leasing may not be executed in a timely manner or at expected lease rates, which could all adversely affect Granite’s operating results.