Letter to the
Shareholders

HIAG's focus on the real estate business and the strengthening of its organisation over the last 18 months are showing pleasing results. With a net profit of CHF 41.9 million, HIAG recorded its best half-year result since its listing on the Swiss Stock Exchange in May 2014.

HIAG continues on its growth path
All business units met or exceeded targets in the first half of the year. Property income as well as portfolio value and revaluation gains increased significantly, especially in the yielding portfolio. The occupancy rate of the portfolio was further increased thanks to numerous new rental agreements and the acquisitions in the first half of the year. The four acquisitions in the yielding and development portfolio as well as targeted property sales as part of the continuous optimisation of the real estate portfolio also contributed to the positive result.

As expected, the half-year result was only slightly impacted by the subsequent effects of the exit from the HIAG Data cloud service project in the amount of CHF -0.2 million. The former Rohner AG Pratteln site made a positive contribution of CHF 1.7 million to the operating result (H1 2020: CHF -2.7 million) with the proceeds from the sale of the entire production facility including its building.

Minor impact of the Corona pandemic
As in fiscal 2020, the impact of the Corona pandemic on the result was low thanks to good portfolio and tenant diversification and active portfolio management. In the first half of fiscal 2021, HIAG again granted rent reductions totalling CHF 0.2 million to individual tenants in the gastronomy and leisure sectors that were particularly affected by the lockdown.

Acquisitions strengthen positive development of property income
Annualised property income rose significantly by 9.4% to CHF 65.7 million (31 December 2020: 60.0 million). The marked increase is explained by new rentals and the completion of projects as well as, in particular, the acquisitions in the first half of 2021. At CHF 30.6 million, the collected property income exceeded the previous year's figure by 4.0% (H1 2020: CHF 29.5 million), mainly due to rental agreements concluded in the reporting period, subsequent effects from new rentals in the second half of the fiscal 2020 and property income from completed development projects in Niederhasli and Goldach. The property income received from the properties acquired in the reporting period compensated for the loss of the building right income from the property in St. Margrethen, which was sold in the second half of fiscal 2020.

Good marketing results and another significant reduction in vacancies
In recent months, HIAG concluded a large number of rental agreement extensions as well as new rental agreements, primarily for commercial and warehouse/logistics space. Rental agreements with a lease term of up to ten years were agreed, as well as rent increases in some cases. In May, an approximately 11,000 m2 logistics property in Brunegg was leased early and seamlessly to a leading Swiss company in the delivery wholesale business for ten years upon the departure of the previous tenant. The new tenant will become one of the five largest tenants in HIAG's portfolio.

With dedicated marketing and the acquisition of new properties, some with long-term rental agreements, it was possible to further reduce the vacancy rate across the entire portfolio by 2.4 percentage points from 13.2% to 10.8%, the best value since the IPO in 2014. In the yielding portfolio, the vacancy rate was 9.7% (31 December 2020: 13.0%). New lettings at various locations, the completion of the project in Niederhasli and the acquisition of fully let properties in Buchs (AG) Winterthur and Solothurn contributed to this very pleasing development.

HIAG continues to have a comfortable weighted average remaining lease term (WAULT) of 8.1 years (31.12.2020: 7.9 years).

Significant increase in portfolio value
At the end of June 2021, the total portfolio consisted of 118 properties. The portfolio value increased by 8.7% to CHF 1.78 billion (31 December 2020: 1.64 billion) during the reporting period. In the first half of 2021, investments in real estate projects and refurbishments of CHF 27.3 million (H1 2020: CHF 30.4 million), real estate acquisitions of CHF 87.6 million, changes in value from these acquisitions of CHF 10.8 million (H1 2020: CHF 3.0 million) and net changes in value of the yielding and development portfolio of CHF 21.4 million (H1 2020: CHF 14.7 million) contributed to the considerable increase in value of CHF 142.8 million. The weighted average discount rate of the overall portfolio decreased slightly to 3.64% (31 December 2020: 3.73%). In addition, a property in Aathal and a partial property in Wetzikon with an original carrying amount of CHF 2.8 million and a profit of CHF 1.7 million were sold in the first half of the year.

Successful acquisition activity
The yielding portfolio was expanded by the acquisition of a fully let logistics centre in Buchs (AG) with around 21,000 m2 of usable space. And the long-term triple-net rental agreement with a current contract term of 6.8 years positively impacts HIAG's cash flow and dividend potential in the long term.

Furthermore, HIAG expanded its development pipeline with the purchase of three properties in Winterthur and Solothurn at the end of March as part of a sale-and-lease-back transaction. The former owner will remain a long-term tenant at both locations.

Property pipeline strengthened
At the end of June 2021, HIAG's development portfolio consisted of around 60 projects with usable space of approximately 756,000 m² (31.12.2020: 727,000 m2). The expected investment volume excluding further acquisitions is approximately CHF 2.86 billion, of which around CHF 2.48 billion is to be realised in the next ten years. The expansion of the project pipeline compared to the end of fiscal 2020 is primarily due to the purchase of the properties in Winterthur and Solothurn. The substantial utilisation potential of commercial and residential space at these two locations enables a sustainable increase in property income.

In the next three to four years, twelve development projects with a usable floor space of 102,000 m2 and an expected investment volume of around CHF 340 million are to be initiated. After completion and full occupancy, these projects are expected to generate annualised property income of around CHF 20 million and sales proceeds from promotion projects of CHF 72 million. Currently, two fully let properties with an annualised property income after completion of CHF 5.4 million and an average contract term of 15 years are under construction.

Solid capital structure and good cash position
Notwithstanding the distribution of a dividend for fiscal 2020 of CHF 19.3 million, equity increased by CHF 23.9 million and amounted to CHF 785.0 million on 30 June 2021 (31 December 2020: CHF 761.1 million). The equity ratio corresponded to 42.7% (31 December 2020: 45.0%). At CHF 93.51 per share, the NAV after deferred taxes exceeded the value as at 31 December 2020 by 3.1%.

The loan-to-value ratio (LTV) increased to 51.0% as at 30 June 2021 (31 December 2020: 48.7%). The increase is mainly explained by the acquisitions in the first half of fiscal 2021 and the dividend payment in April 2021.

With cash and committed credit facilities of over CHF 89 million as at the end of July 2021, as well as the possibility to take out mortgages on properties not yet mortgaged if required, the financing of current business activities and planned investments in the real estate portfolio is secured. In addition, HIAG intends to strengthen the Group's financing structure with targeted property divestments as part of the continuous optimisation of the real estate portfolio.

Average lease term of financial liabilities significantly extended
The weighted average lease term of the financial liabilities was 1.3 years at the end of June 2021 (31 December 2020: 2.0 years) and increased to 2.4 years with the seamless refinancing of the fixed-rate bond at the beginning of July 2021. The successful refinancing significantly optimised HIAG's financing structure and the lease term of the financial liabilities was substantially extended. The average interest rate for financial liabilities remained unchanged at a low level of 0.9% (H1 2020: 0.9%). The comparison between the cost of debt capital of 0.9% and the net return of 3.7% achieved on the yielding portfolio shows a still attractive interest spread of 2.8%.

Building projects developing according to plan
All building projects have developed according to plan in recent months. The delivery delays and higher prices for individual building materials that are having an impact on the market have not had any relevant influence on HIAG's building projects to date.

In mid-May, the new office building with around 2,700 m² of rental space was handed over to Doka Schweiz on time. This completes the site development in Niederhasli for Doka Schweiz on around 28,000 m² of site area and with almost 8,000 m² of rental space in the commercial halls and the office building as well as 23,000 m² of outdoor space. The annual property income over the contract period of 18.5 years amounts to CHF 2.3 million.

The construction of the new headquarters of the listed electrical components manufacturer LEM on the campus 'The Hive' in Geneva-Meyrin with a rental area of around 7,400 m² is progressing according to plan. Completion of the project, with expected construction costs of around CHF 33 million, remains scheduled for early 2022.

The construction of the new furniture store for XXXLutz on the retail site in Dietikon with a rental area of 17,800 m² is also proceeding according to plan. The completion date for the building remains unchanged at May 2022. The projected building costs are around CHF 26 million. The annual property income over the contract period of 15 years will amount to CHF 3.1 million.

Dynamic site development
During the reporting period, site development was also successfully pursued.

Among other things, a building permit application was submitted in June for the former Floos spinning mill site in Wetzikon, which should ensure the long-term usability of the historic buildings. The start of construction is expected in early 2022 and completion in spring 2023.

In Niederhasli, the development of the centre zone was completed by means of a two-stage urban planning competition and in cooperation with SBB Immobilien. The former Doka Schweiz commercial halls still existing on the site were rented out for temporary use.

In Dornach, the further opening of the former Metalli site enabled a large number of new temporary users to move in. In addition, the municipal authorities submitted HIAG's partial zoning plan for the future "Wydeneck" neighbourhood to the canton for preliminary examination. In parallel, HIAG is planning the site infrastructure and the SBB is responsible for planning the future "Apfelsee" S-Bahn stop.

In Biberist, the conceptual work for the second step of opening up the former Papieri site was completed. The site, which is already largely rented out, will thus be expanded to include additional temporary uses. At the same time, the planning work for the demolition of existing industrial halls and a corresponding new building was started. The marketing of these industrial sites has met with lively interest.

A design plan for the site in Hausen/Lupfig (AG) has been drawn up and is now open to the public. It is expected to become legally effective in the first half of 2022. In the meantime, marketing is already underway for the establishment of businesses in the future "Reichhold Campus".

Sustainable operations
In the medium term, HIAG aims to maintain sustainable operations (Environmental Social Governance) that are above average for the industry. Already today, the Company is consistently exploiting the technological possibilities for realising energy-efficient buildings and reducing CO2 emissions in its real estate portfolio. In parallel, the production capacities for renewable energies will be increased in a targeted manner across the entire real estate portfolio. The joint venture HIAG Solar, launched at the beginning of 2021, will have three newly installed photovoltaic systems in operation on HIAG properties in Brunegg, Goldach and Niederhasli by the end of the year with a total output of 1 MWp.

The Sustainability Report, published for the first time in fiscal 2020, will be continuously expanded and be based on the Global Reporting Initiative (GRI) standard from the 2021 reporting year. HIAG will increase the quantitative information as well as the transparency and comparability of the sustainability data step by step. The United Nations Sustainable Development Goals (SDGs), which are already recognisable in many of HIAG's developments today, also remain important points of reference.

Planned capital increase
Subject to the approval of the Extraordinary General Meeting of Shareholders on 29 September 2021, the Board of Directors of HIAG Immobilien Holding AG intends to carry out a capital increase with subscription rights offer for existing shareholders, which is expected to take place in the fourth quarter of 2021. Further information will be communicated with the invitation to the Extraordinary General Meeting. The proceeds of the planned capital increase will be used to finance projects, to reduce financial liabilities and to realise favourable purchase opportunities for properties that enhance HIAG's portfolio with long-term cash flow and value enhancement potential.

Election of new BoD member and handover in the Executive Board
The Board of Directors of HIAG Immobilien Holding AG will propose to the Extraordinary General Meeting of Shareholders on 29 September 2021 to elect real estate specialist Anja Meyer (CH) as an additional member to the Board of Directors. Anja Meyer (*1967) is owner and delegate of the Board of Directors of smeyers Holding AG (www.smeyer.ch), which is active in real estate consulting and site development. She holds the diploma "Intensivstudium KMU-HSG" and a degree in commerce from the Kantonsschule Luzern.

As already communicated, Rico Müller will take over his new role as Chief Financial Officer and member of the Executive Board from Laurent Spindler on 1 September 2021, who will leave HIAG after the induction of his successor. The Board of Directors and Executive Board would like to thank Laurent Spindler for his valuable commitment over the past ten years and wish him all the best for the future.

Market and outlook
The Swiss real estate market has proven to be highly robust in the turbulence of the past months. Against the backdrop of persistently low interest rates and massive capital injections by the central banks to support the economy, the price level for real estate has remained stable or even once again risen noticeably, depending on the segment of use.

The independent Swiss economic research and consulting institute BAK Economics considers the emerging fears of inflation to be exaggerated, at least in the short term and especially for Switzerland. Mortgage interest rates remain at a low level. However, price increases for certain building materials are noticeable due to the high global demand and pandemic-related production and delivery delays. However, the construction industry expects prices and delivery times to normalise in the medium term.

Investor demand for residential properties, office properties in prime locations or special properties such as logistics properties has remained high in recent months. The continuing economic recovery, especially in the second sector, has also led to additional demand for commercial and logistics space. Letting retail properties in the non-food sector or pure office properties in more peripheral locations remains a challenge.

Overall, interest in the "real estate" asset class is likely to remain high in the foreseeable future. Real estate usually delivers stable cash flows and has comparatively good returns. The past has also shown that commercial real estate offers a certain degree of inflation hedging due to the indexed rental agreements.

Assuming that the market environment remains good, HIAG anticipates a generally pleasing fiscal 2021. Due to the business model with a focus on logistics, industrial and commercial properties as well as a broadly diversified tenant structure and the long, weighted average remaining lease term, the management expects a stable earnings situation and a continuous increase in profits in the long term. At the same time, the first-class project pipeline offers long-term potential for above-average profitable growth compared to the industry.

HIAG also expects an increase in property income in the second half of the year. This will be mainly due to follow-up effects from new leases, the properties acquired in the first half of the year and rental agreements that have already been concluded. In addition, there is potential for positive revaluation effects at various locations due to significant progress in development projects. Furthermore, HIAG intends to use the current market environment for targeted divestments of non-strategic properties with corresponding surpluses in the course of its continuous portfolio optimisation.