PROPERST CO.,LTD.

Deterioration in economic conditions such as land price declines, weakening demand, and interest rate fluctuations directly affects the performance of the condominium development business, rental development business, and value-up business. Rising land prices and construction costs may further increase new condominium sales prices, while there are also concerns about demand declines associated with rising interest rates. As countermeasures, the Company cultivates market insight through the collection of information from various economic indicators, financial institutions, and industry peers, strengthens investment judgment capabilities, and carefully selects properties based on location and price.

Since property sales are recognized as revenue based on delivery to customers, revenue and earnings may become concentrated in specific periods due to concentration of delivery timing. In addition, expected sales and earnings may be pushed back to the following fiscal year, potentially affecting business performance and financial position. Due to the structural nature of the real estate development business, this risk is persistent.

The Company holds multiple real estate properties for sale, and if changes occur in buyer/tenant demand trends, fluctuations in the economy, interest rates, or land prices, declines in rent levels, or increases in vacancy rates before such properties are sold, valuation losses or losses on sale may occur, affecting business performance. This is a structural risk whereby deterioration in the real estate market directly leads to impairment of the value of held assets.

Fund procurement for land acquisition, property acquisition, construction costs, etc. is conducted on a project-by-project basis by approaching financial institutions for loans, without relying on any specific financial institution; however, if newly planned fund procurement fails to materialize, it may affect business performance and business development. Since the real estate development business is premised on large-scale external fund procurement, it carries a risk whereby changes in the financial environment or deterioration in credit conditions directly affect business continuity.

Continuation of the Company's core business is premised on the Real Estate Brokerage License (Tokyo Governor License (8) No. 61084, valid until April 12, 2027), the First-Class Architect Office Registration (valid until October 24, 2026), and the Type II Financial Instruments Business Registration (Kanto Local Finance Bureau (Kinsho) No. 1675). If the Company fails to meet statutory requirements (such as maintaining the minimum number of licensed real estate transaction managers) or falls under grounds for revocation under the relevant laws, its licenses and registrations could be revoked, potentially having a material impact on business performance and financial position.

The real estate industry is subject to legal regulations such as the National Land Use Planning Act, the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the City Planning Act, and the Act on Promotion of Ensuring Housing Quality, and if existing regulations are abolished or new regulations are introduced, business performance may be affected. Since regulatory changes directly affect the business model and property development and sales processes, this risk requires continuous monitoring.

Lawsuits or other claims may arise from business partners or customers in connection with real estate developed and sold by the Company. Depending on the content and outcome of such litigation, business performance and financial condition may be affected, and due to the nature of real estate transactions, the risk of legal disputes arising from defects, breach of contract, and similar causes is persistent.

The Company holds a large amount of customer personal information and various management information, and while it has strengthened its information management systems and conducts employee education and training, if important information were to leak externally, it could lead to a loss of social credibility and affect business performance. Despite implementing information security measures, the risk of leakage due to cyberattacks or internal misconduct cannot be completely eliminated.

If natural disasters such as earthquakes, storms, or floods, or man-made disasters such as war, terrorism, or fire occur, the value of held real estate could decline significantly. The Company's held real estate is concentrated in the Greater Tokyo area, centered on Tokyo, and this incorporates a regional concentration risk whereby a large-scale disaster in this region or deterioration of the Greater Tokyo economy could have a concentrated impact on business performance.

The Company has introduced a stock option system aimed at raising directors' motivation to improve performance and boosting morale, and if such options are exercised in the future, the value per share could be diluted. This is a risk that could lead to a decline in equity value for existing shareholders, and depending on the scale of exercise, it could affect the share price.