Ichigo Inc.

If leasing demand declines due to a deterioration in the economic environment, there is a risk that owned real estate cannot be sold at the anticipated timing or price, and revenue may decrease due to lower rents, including performance-linked rents. On the other hand, this is also viewed as an opportunity to acquire inexpensive assets, and the Company seeks to minimize the impact through resilience testing against market fluctuations and periodic portfolio restructuring.

Some borrowings are subject to financial covenants, and if these are breached, the Company may be required to provide additional collateral or repay part of the borrowings, and may also lose the benefit of the grace period, requiring lump-sum repayment of the borrowings. This is a risk with a significant impact on financial position and business results, and is managed through risk mitigation via covenant negotiations at the time of borrowing, simulation of potential breach scenarios when investment real estate changes, and close information sharing with lenders.

If an earthquake, typhoon, heavy rain, terrorism, fire, or other event occurs in the region where owned real estate or power generation facilities are located, asset value may be impaired, potentially reducing rental income or fee income. In addition to setting PML value standards, checking hazard maps, and verifying disaster prevention equipment at the time of acquisition, the Company has established a disaster information network utilizing IT, an immediate response flow with local partner companies, and a phased recovery system based on its business continuity plan.

A significant decline in hotel accommodation demand and deteriorating tenant business conditions continue, and if rent arrears or reductions occur extensively, valuation losses or impairment losses may arise due to a decline in the profitability of owned real estate. There is also a risk that an in-house cluster outbreak could delay business operations, leading to lower revenue. As countermeasures, the low-cost-basis method was applied to some assets in FY2020 (ended March 2020), with valuation losses already recorded, and business continuity has been secured through the continuation of the telework system and enhanced hygiene management.

Competition to acquire income-producing real estate deals with other companies has intensified, and if the Company cannot secure investment target deals, its financial position and business results may be affected. The Company seeks to maintain its competitive advantage by leveraging the comprehensive strength of Shinchiku and its unique, extensive customer network to secure potential deals.

Launching non-asset-type new businesses involves various uncertainties, and the likelihood of incurring losses is higher compared to existing businesses, which may affect financial position and business results. The Company manages this risk by limiting initial costs and human resources to within an acceptable range and establishing a progress oversight department at the head office to enable prompt withdrawal decisions.

Human capital based on advanced knowledge and experience is fundamental to the business, and if officers or key employees resign or suffer illness, causing business disruption, or if it becomes difficult to secure personnel with the necessary capabilities, this may adversely affect revenue and financial position. The Company strives to ensure a favorable working environment through the promotion of health management (health checkups and vaccinations exceeding statutory requirements), the establishment of an internal whistleblowing system, and the operation of an appropriate personnel evaluation system.

In the Shinchiku and Clean Energy businesses, funding is raised through borrowings from financial institutions, and if interest rate levels rise, there is a possibility of increased funding costs and declines in real estate prices. In the Asset Management business, there is also a risk that rising expected yields required by investors could make it difficult to form new funds. The Company addresses this through hedging via interest rate swaps and interest rate cap transactions, and through a competitive fund formation system leveraging its extensive track record.

In business operations based on the feed-in tariff system (a 20-year guaranteed electricity sale price), if power companies fail to purchase electricity as contracted, or if power generation volume declines significantly due to weather conditions, natural disasters, fire, or other causes, this may affect financial position and business results. The Company seeks to stabilize its business through monitoring regulatory changes and verifying profitability lines, considering diversification of electricity wholesale destinations, diversifying into renewable energy sources such as wind and biomass, and establishing continuous monitoring systems and disaster prevention equipment.

If various regulations such as the Financial Instruments and Exchange Act, the Building Lots and Buildings Transaction Business Act, or the Act on Specified Joint Real Estate Ventures are changed, or if licenses or registrations are revoked, business activities may be hindered, potentially having a material impact on financial position and business results. The Company monitors regulatory changes from before their finalization and takes measures to minimize the impact, and at present, no event leading to license revocation has occurred.