# Granite REIT



## Seahawk (Jan 6, 2017)

Granite REIT announced a special distribution of $1.20 per share, payable in .30 cash, .90 in stapled shares. The shares will then be consolidated so that each shareholder holds the same number of shares after the distribution.

Perhaps a dumb question but how do shareholders benefit from this (besides the obvious cash payment) if we still own the same proportion of the company as we did prior to the distribution?

Why does the company bother making the distribution in shares only to immediately consolidate them? To me it looks like a share issue followed by immediate cancellation. But I must be missing something.

Thanks if anyone can provide a better explanation of this move.


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## john.cray (Dec 7, 2016)

I am curious to hear the opinion of someone who's more knowledgable and can enlighten us but in the meantime I found this in their press release (https://www.granitereit.com/wp-content/uploads/2018/12/Dec-17-18-final.pdf)



> This issuance of stapled units in satisfaction of the unit portion of the distribution will add to the aggregate tax cost basis of Canadian Resident unitholders’ units, and such aggregate basis will not change as a result of the consolidation.


They way I understand this is that you should increase your cost basis by 0.90 per unit. And as a result pay less capital gains upon disposition.

Now in my case I keep them GRT.UN in a TFSA, so I wonder if I benefit from the 0.90 at all? An automatically higher stock price maybe?


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## Eclectic12 (Oct 20, 2010)

Putting together Granite's comment that the cash part is to all or part of any non-resident withholding taxes or other income tax with the bit about adding to the cost base, this sounds like the re-invested distributions that Canadian ETFs pay at times. These are also known as phantom distributions.
https://www.adjustedcostbase.ca/blog/phantom-distributions-and-their-effect-on-adjusted-cost-base/

I seem to recall one of the articles about the ETF version saying this was capital gains generated internally that had to be assigned to the owner. I have not heard of a REIT doing this.


Cheers


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