TASUKI Holdings Inc.

Changes in economic conditions such as business trends, interest rate trends, land price trends, and construction cost trends may hinder the development and sale of IoT Residence properties. A decline in rental market rates, deterioration in occupancy rates leading to reduced rental income, rising construction costs, and worsening supply-demand balance may affect the Group's financial position and results of operations. In the real estate-secured lending business of consolidated subsidiary Tasuki Pros, a downturn in the real estate market could lead to a decline in collateral property values, reducing new loan originations.

The Group relies on borrowings from financial institutions for business funds such as property acquisitions, construction work, and lending, resulting in a tendency toward a high dependence on interest-bearing debt. In phases of rising market interest rates or increasing risk premiums, interest expenses may increase, potentially affecting business performance. If the Group's creditworthiness declines and it becomes unable to secure stable financing, this could hinder property acquisitions and the placement of construction orders.

There is a risk that personal information acquired through the operation of each business may be leaked due to computer viruses, unauthorized external intrusion, errors by officers or employees, natural disasters, and other causes. If personal information is leaked, damages such as claims for compensation and loss of social credibility may occur, potentially affecting the financial position, results of operations, and future business development. While the Group has established a privacy policy and strives to build a management framework in compliance with the Act on the Protection of Personal Information, responding to external threats such as cyberattacks remains an ongoing challenge.

There is a risk that impairment losses or valuation losses may be recognized on inventories, property and equipment, securities, and other held assets due to declines in fair value. In particular, if sales of real estate for sale do not proceed as planned due to a sharp economic downturn, rising interest rates, or the impact of real estate-related tax systems, delays in development and the accumulation of completed inventory may occur, worsening cash flow. Based on the "Accounting Standard for Measurement of Inventories," if fair value falls below acquisition cost, a valuation loss is recognized, which affects the financial position and results of operations.

Since the Group acquires development sites primarily in Tokyo's 23 wards, there is a risk that it may not be able to acquire favorable sites as planned due to sharp increases in land prices or intensifying competition with other companies for site acquisition. Additionally, if economic conditions change abruptly after a purchase and sale agreement is concluded, it may become necessary to change business plans or cancel contracts, potentially resulting in forfeiture of deposits or payment of penalties. While the Group strives to obtain information by building good relationships with real estate brokers and other parties, the concentration of business development in Tokyo's 23 wards heightens regional risk.

While aggressive M&A-driven inorganic growth is a core strategic pillar, if unexpected circumstances or significant shifts in market trends occur after an acquisition, the acquired business may not perform as originally targeted. This could result in impairment of goodwill and other assets, potentially having a material impact on business performance and financial position. Although sufficient due diligence and valuation are conducted prior to acquisitions, future uncertainties cannot be completely eliminated.

Since design and construction work are outsourced to external contractors, there is a risk that business operations may be affected by factors such as poor management performance of subcontractors, delayed responses during busy periods causing construction delays, and rising subcontracting costs due to sharp increases in material prices. If a construction company goes bankrupt after completion of work, defect repair obligations may not be fulfilled, and the Group may be required to assume repair obligations, resulting in unexpected costs. While the Group strives to secure a sufficient number of subcontractors and manage progress to avoid over-reliance on specific companies, the risk remains if it cannot secure enough subcontractors that meet its selection criteria.

In the construction of IoT Residence and other properties, disputes with neighboring residents may arise due to concerns over noise, sunlight obstruction, privacy considerations, and other factors. If construction delays or additional work become necessary to resolve such issues, plans may need to be suspended or changed, potentially affecting the financial position and results of operations. While the Group conducts development with an emphasis on relationships with neighboring residents, including holding prior explanatory meetings, the likelihood of such occurrences is recognized as high.

Amendments to laws or the enactment of new regulations, such as the Building Lots and Buildings Transaction Business Act, the Financial Instruments and Exchange Act, the Act on Specified Joint Real Estate Ventures, and the Money Lending Business Act, may result in changes to business operations or the incurrence of new costs. If Tasuki, Shin Nihon Tatemono, Aura, or Tasuki Pros encounters circumstances that constitute grounds for disqualification or revocation with respect to their real estate transaction business licenses, financial instruments business registration, specified joint real estate venture business permits, or money lending business registration, this could seriously impede business continuity. While the Group currently recognizes no facts constituting grounds for disqualification or revocation, the risk of future changes in legal interpretation cannot be ruled out.

The Group is investing in new businesses and its SaaS business with the aim of achieving continuous growth and diversifying revenue, but it will take a certain amount of time before these investments contribute stably to earnings, and additional upfront spending on systems and personnel costs may lower overall profit margins. If business expansion and growth do not proceed as originally anticipated due to future changes in the business environment, or if invested funds cannot be recovered, this may affect business performance and financial position. While the likelihood of occurrence is assessed as low, the degree of impact is recognized as moderate.