Hulic Co.,Ltd.

With office building leasing accounting for approximately half of total rental income, an economic downturn or deterioration in real estate market conditions could result in delayed rent payments, requests for rent reductions, and rising vacancy rates due to tenant departures, potentially reducing rental income. While the company has built a competitive portfolio centered on properties near stations in Tokyo's 23 wards and secured many long-term stable tenants to mitigate fluctuations, the risk remains that it cannot fully respond to a sharp domestic economic downturn.

The balance of interest-bearing debt expanded from ¥1,403,894 million in FY2021 (ended December 2021) to ¥2,219,014 million in FY2025 (ended December 2025), with the interest-bearing debt ratio reaching 63.2%. Although the company has implemented hedging measures such as extending and fixing loan maturities, if interest rates rise rapidly and substantially, or depending on interest rate conditions at the time of refinancing fixed-rate borrowings, funding costs could increase and affect business performance. The company is pursuing financial control through maintaining and improving external credit ratings and diversifying funding methods, but the balance of interest-bearing debt is expected to further increase as the business expands.

The Group holds numerous business-use real estate properties, including both leasing and for-sale properties. If deteriorating real estate market conditions lead to declining rent levels or rising vacancy rates, impairment losses or valuation losses may need to be recorded, potentially affecting business performance. In addition, when selling for-sale real estate to investment corporations or third parties, there is a risk that the originally expected profit may not be secured due to economic conditions or market deterioration. The company works to strengthen the competitiveness and maintain the value of its real estate through product planning and service provision, but there are limits to addressing changes in the external environment.

In the rebuilding of existing buildings and new development projects, substantial extraordinary losses may arise from tenant relocation costs and disposal of fixtures, potentially causing significant fluctuations in profit attributable to owners of the parent. In addition, there is a risk that projects may not proceed as planned due to delays in permits and construction schedules, rising construction costs, or failure to achieve expected rent levels. While the company aims to limit the impact of extraordinary losses through measures such as considering the sale of fixed assets, profit fluctuations between fiscal years may become significant depending on the scale and timing of rebuilding projects.

The Group's owned and managed properties are concentrated in the Greater Tokyo Area, with approximately 70% of leased properties, primarily offices, located within Tokyo's 23 wards. If a major disaster such as an earthquake directly beneath Tokyo of a scale exceeding expectations were to occur, unforeseen damage to assets could significantly affect business performance. While the company has completed seismic retrofitting work on properties built under the former Building Standards Act and established a Business Continuity Basic Plan, the structural risk of geographic concentration remains.

The balance of investment securities reached ¥499,499 million in FY2025 (ended December 2025), of which ¥157,503 million consisted of listed shares. A prolonged decline in stock prices could affect financial position and business results through the recording of valuation losses, among other effects. While the company examines the impact of market trends and appropriate responses through a monthly or ad hoc Fund ALM Committee, the risk remains that it may not be able to fully respond to sudden changes in market conditions. Valuation difference on available-for-sale securities had accumulated to ¥85,176 million in FY2025 (ended December 2025), meaning the impact of a market reversal would be substantial.

The Group regards M&A and capital/business alliances as effective means of business expansion, and during the fiscal year under review it made Kouken Kogyo Co., Ltd. and Cook Deli Co., Ltd. consolidated subsidiaries. If the results anticipated at the time of an M&A transaction fail to progress as planned due to changes in the business environment, or if unforeseen business issues arise, this could affect the Group's financial position and business results. The company seeks to reduce such risks through thorough due diligence on target companies and comprehensive verification of investment effects, synergies, and cultural integration.

The Group holds a large amount of internal information, including corporate and individual customer information and management information, primarily in connection with its insurance agency business. If an information leak were to occur due to unavoidable system trouble or internal or external factors, this could damage the company's reputation and incur compensation costs, potentially affecting business performance. The company implements management and operational measures based on information-related regulations including an information security policy, provides education and training for officers and employees, and implements system-based security measures, but threats such as cyberattacks cannot be completely eliminated.

Future revisions to or new enactment of legal regulations and tax systems related to real estate, construction, insurance, and other areas could affect business operations. There is also a risk of incurring costs if obligations related to asbestos countermeasures or measures under the Soil Contamination Countermeasures Act are unexpectedly imposed. The company addresses these risks through regular regulatory management by responsible departments, education and training for officers and employees, and periodic reporting to the Risk Management Committee, but changes in the regulatory environment are an external factor that is difficult to fully control.

Due to labor market changes and difficulties in securing human resources amid a declining birthrate and aging population, there is a risk that the Group's growth could decelerate if it is unable to retain talent or continuously secure and develop human resources. The company works to reduce this risk by enhancing fringe benefits, regularly monitoring the working environment, and creating an environment where employees can work with peace of mind through appropriate evaluation and treatment. In a highly specialized business model such as real estate, the loss of talented personnel poses a risk directly linked to competitiveness.