GRANDES,Inc.

Sales of built-for-sale housing and investment real estate are affected by sudden changes in land prices, competitors' supply and pricing trends, and consumer purchasing sentiment, which in turn is influenced by the economy, income levels, employment, interest rates, and housing tax policy. Fluctuations in these external factors could significantly affect the Group's business results and financial position. As a countermeasure, the Group continuously monitors market trends, but since these are external factors, fundamental avoidance is difficult.

Because investment real estate sales involve large transaction amounts per deal, are conducted through negotiated transactions, and require long development and sales periods, construction delays or sudden changes in the sales environment can easily occur due to natural disasters, sudden changes in economic conditions, or changes in housing policy. Since the Group recognizes revenue on a

The Group relies on borrowings from financial institutions to fund the development of properties for sale and investment real estate. At the end of the 20th fiscal period, the balance of interest-bearing debt was ¥2,247,392 million (original figure in thousands of yen: ¥2,247,392 thousand), and the interest-bearing debt ratio rose sharply to 40.5% from 23.0% in the previous fiscal period. In the course of future development of new investment real estate, changes in financial institutions' lending stance or a rise in interest rates could increase procurement costs and worsen cash flow, potentially affecting business results and other aspects of the Group.

Funds for land acquisition and construction related to investment real estate development depend on borrowings from regional financial institutions, and there is a risk that lending attitudes could change abruptly due to shifts in financial conditions. If financial institutions decline loan applications or the Group is unable to secure alternative funding methods, business operations may not proceed as planned, which could have a material impact on business results and other aspects. While relations with financial institutions are currently described as favorable, the situation could change rapidly depending on external conditions.

The Group procures land for built-for-sale housing and investment real estate development based on its annual budget, but if a sudden change in economic or financial conditions causes financial institutions' lending stance or consumer sentiment to deteriorate, there is a risk of increased finished inventory, delays in development, and impairment losses or unrealized losses on inventory assets. Although the basic policy is short-term sales, in the event of sudden changes in the external environment, it may become difficult to execute plans as intended, potentially affecting business results and other aspects.

Information on reasonably priced development land is scarce, and competition with other companies in the same industry is intense for most such land, meaning stable land procurement significantly affects business performance. Although the Group investigates soil contamination, buried objects, and ground strength in advance, if soil contamination issues are discovered after acquisition, construction delays or extraordinary/additional expenditures may occur, potentially affecting business results and other aspects.

Construction work is outsourced to specialized contractors, and design and construction supervision are outsourced to design firms and general contractors, but many of these subcontractors are small in scale with unstable management, and there are concerns about business continuity due to succession difficulties. If subcontractors experience business deterioration, quality issues, or shifts in bargaining power, it may become difficult to secure subcontractors or hinder the execution of management plans, potentially affecting business results and other aspects.

Planning and sales of investment real estate, as well as the management turnaround of Morizo Co., Ltd., remain highly dependent on Representative Director and President Hiroshi Kamei. If he becomes unable to be involved in management due to illness or other reasons, it could affect the Group's business results and other aspects. While built-for-sale housing sales have established an organizational approach to business development, establishing a succession framework in the investment real estate and group turnaround areas remains a challenge.

The Group operates under numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Construction Business Act, and the Architects Act, and Grandys, Morizo, and Sanai Home each hold multiple licenses and permits. If any license or permit is revoked or suspended for any reason, business activities could be significantly restricted, potentially having a material impact on business results and other aspects. The Group strives to prevent grounds for revocation through thorough legal compliance, but compliance risk increases as the business expands.

The Group considers M&A aimed at expanding existing businesses and entering new businesses as one option in its growth strategy, but if the initially anticipated synergies or business expansion effects are not achieved, or if an acquired company's business performance underperforms, resulting in goodwill impairment losses, this could affect business results and financial position. The Group works to reduce risk through prior due diligence, but post-acquisition integration and performance management remain challenges.