Letter to the
Shareholders

Pleasing growth in real estate business
Adjusted for the impact of the pandemic of CHF 0.5 million and the acquisition in Zurich Altstetten in the second half of 2019, the collected property income rose to CHF 29.8 million ( first half of 2019: CHF 29.7 million), an increase of 0.7%. Income from the property in Zurich Altstetten acquired in the second half of 2019 and from completed development projects compensated for the shortfallsdue to the bankruptcy of Rohner AG Pratteln and the move of Decathlon in Dietikon. Annualised property income increased slightly by 0.3% to CHF 58.9 million (31.12.2019: 58.7 million). The vacancy rate was reduced to 15.5% (31.12.2019: 16.2%). HIAG also has a comfortable weighted average remaining lease term (WAULT) of 8.7 years (31.12.2019: 8.9 years). At the end of June 2020, the total portfolio consisted of 118 properties. The portfolio value increased by 3.2% to CHF 1.62 billion (31.12.2019: 1.57 billion). During the reporting period, a new development site of around 22,300 m2 was acquired in the industrial area of Bussigny (VD) with potential for commercial, logistics and office use. As a result of new signed rental agreements and progress of development projects, the effects of revaluations in the first half of 2020 amounted to CHF 17.7 million, compared with CHF -26.0 million in the previous year, mainly due to the bankruptcy of Rohner AG Pratteln. The weighted average discount rate for the entire portfolio decreased slightly to 3.90% (31.12.2019: 3.94%). As expected, the real estate result was burdened by subsequent operating costs totalling CHF 6.2 million for HIAG Data and the Rohner site in Pratteln.

Impact of the Corona crisis in the first half of 2020
The corona pandemic had a significant social and economic impact, particularly in the second quarter of 2020. Thanks to good portfolio and tenant diversification and active portfolio management, the impact on the collected property income was low at 0.8% of annualised property income. In total, lease waivers of CHF 0.1 million were agreed and as of 30 June 2020, CHF 0.4 million were recognised in the income statement in connection with the COVID-19 Business Rental Act, which is in preparation, for unpaid (CHF 0.05 million) or already paid lease receivables (CHF 0.35 million). HIAG also granted less than CHF 0.1 million in lease deferrals. The outstanding rent receivables in connection with the lockdown amounted to CHF 0.8 million as of the reporting date and are secured by lease guarantees.

Sound financial structure
On 30 June 2020, HIAG Immobilien Holding AG had an equity ratio on an EPRA basis of 45.5% (31.12.2019: 45.6%). The weighted average term of debt capital was 2.2 years (31.12.2019: 2.7 years). The average interest rate for financial liabilities remained low at 0.9% (first half of 2019: 0.9%). The loan-to-value ratio (LTV) remained stable at 51.4% (31.12.2019: 51.4%).

Successful letting and marketing activities
Despite the lack of marketing opportunities during the lockdown, the vacancy rate across the entire portfolio was reduced by a pleasing 0.7 percentage points to 15.5%. The vacancy rate in the yielding portfolio was 15.2% (31.12.2019: 16.6%). In the first half of 2020, new lettings took place primarily in Aigle, Cham, Frauenfeld, Klingnau and Kleindöttingen. Further new leases were concluded in the second half of the year. Rental negotiations are underway at various locations.

The remaining lease term is still very comfortable at 8.7 years. This figure does not include long-term rental agreements already concluded in connection with existing construction projects.

Following the launch of the sale of the eight loft houses on the Walzmühle site in Frauenfeld (TG) in February 2020, six loft houses had already been sold by the end of June and the notary appointment for the last two units was already held in August.

Further progress in site development
During the lockdown, work continued on all existing HIAG construction sites with the exception of Meyrin (GE). Although work on the campus 'The Hive' had to be suspended for two months due to the closure measures ordered by the Canton of Geneva, the pavilion has now been handed over to the Swiss restaurant group Luigia, and the restaurant with cooking school is scheduled to open in November 2020. The completion of the new headquarters of the electrical components manufacturer LEM is scheduled for early 2022. Furthermore, all 17 flats of the 'Avellana' residential project in Wetzikon (ZH) were occupied in July 2020. The construction projects in Kleindöttingen (AG), with a machine hall for Brugg Rohrsystem and the expansion of the production infrastructure for Amcor Flexibles Rorschach, are also scheduled for handover in the second half of 2020.

In Niederhasli (ZH), the relocation of Doka Schweiz was completed with the commissioning of the commercial halls and outdoor areas. The construction of the new administration building started in March 2020 and the move is planned for April 2021. This will enable the redevelopment of the central zone and the interim use of the existing buildings near Niederhasli railway station to be tackled.

In Dietikon (ZH), the legally binding building permit of the new XXXLutz furniture store has been obtained. The start of construction is scheduled for autumn 2020.

In Cham (ZG), the project processing for Cham Nord has been completed, the building application for the first stage will be submitted in the second half of 2020.

In Dornach (SO), the concept for the interim use of the Metalli Wideneck site was completed. The first investments are currently in realisation and the first tenants have already moved in.

A design plan for the site in Hausen/Lupfig (AG) will be drawn up by summer 2021.

In Pratteln (BL), the demolition of the first buildings on the site of the former Rohner chemical factory began in the first half of the year, and chemical clearance of the entire site is scheduled for completion in autumn 2020. The complete dismantling work should be completed in summer 2021. Various planning teams are currently working on a study contract for the subsequent site development using a neighbourhood plan. Results are already expected this autumn.

Outstanding real estate pipeline
As of 30 June 2020, HIAG's development portfolio consisted of more than 60 projects with a usable space of around 740,000 m2 (31.12.2019: 707,000 m2). The expected investment volume without further acquisitions is around CHF 2.7 billion, of which around CHF 2.0 billion is expected to be invested in the next ten years. Five fully let projects with annualised property income of around CHF 4.3 million upon completion are already under construction. In addition, a further 13 development projects with a usable space of around 120,000 m2 and remaining investments of approximately CHF 339 million are to be realised in the next three years. The expected annualised property income after completion and full occupancy of these projects amounts to approximately CHF 23.3 million and sales proceeds to around CHF 73 million.

Outlook
Based on the current letting successes achieved, a further reduction of at least 1 percentage point in the vacancy rate in the yielding portfolio is targeted compared with the first half of the year. The announced goal of increasing annualised property income for fiscal 2020 remains unchanged.

HIAG assumes that in the second half of 2020 the operating result in the real estate segment will exceed the comparable figure for the first half of the year. The negative effect on the 2020 annual result from the subsequent operating costs of HIAG Data and the redevelopment of the site in Pratteln should be in line with expectations.

Now that the first plant equipment and raw materials of the former chemical company in Pratteln have already been sold, further proceeds from the sale of assets are expected in fiscal 2021. In addition, the basis for a forecast of possible revenues from 2021 onwards from the exploitation of the infrastructure of HIAG Data should be available in the second half of 2020.

Following the decision not to pay a dividend for fiscal 2019, the Board of Directors has decided that the dividend proposal for fiscal 2020 should be based on the Group's operating profit for 2020.