STrust Co.,Ltd.

The Group procures a portion of the funds for acquiring business land and construction funds mainly through borrowings from financial institutions, resulting in a high degree of dependence on interest-bearing debt. This high level is expected to continue as the business expands, and if sufficient funding cannot be secured or interest rates rise, there is a possibility of an impact on business performance. In particular, in the current environment of rising interest rates, there is a risk that increased borrowing costs will squeeze profits.

Because the Group acquires land in advance for the planning and sale of condominiums and detached houses for sale, a sharp economic downturn, rising interest rates, or changes to housing-related tax systems that reduce demand could lead to an increase in stagnant inventory, worsening cash flow, and higher interest burdens. In addition, in accordance with the "Accounting Standard for Measurement of Inventories," if the net realizable value of real estate for sale and real estate for sale in process falls below acquisition cost, a valuation loss must be recorded, which would directly affect business performance.

The real estate industry is highly susceptible to economic conditions, interest rate trends, real estate market conditions, trends in new supply, real estate sales price trends, and real estate tax systems. A deterioration in the economic outlook, a substantial rise in interest rates, or a decline in sales prices due to oversupply could affect business performance. These changes in the external environment are factors that the Group cannot directly control and could have a wide-ranging impact on the entire business.

The Group's development and sales areas are concentrated in the Yamaguchi and Kyushu regions, and an economic downturn or major disaster in these areas could affect business performance. Although the Group is considering development and sales in other regions, regional diversification has not yet progressed sufficiently at this time. Dependence on specific regions represents a structural vulnerability whereby localized risks can easily spread to the entire business.

In the real estate sales business, construction costs are fixed at the time of the construction contract with the contractor, but if the prices of building materials and components surge due to domestic and overseas economic conditions, construction costs may rise. While such cost increases are basically passed on to the sales prices of condominiums for sale, if this pass-through negatively affects sales activities, it could impact business performance.

Since the core real estate sales business recognizes revenue on a delivery basis, if construction is delayed due to natural disasters or other unforeseeable events, or if delivery is delayed due to supply chain disruptions in housing equipment, revenue recognition for the period may be pushed back to subsequent periods, causing performance to fluctuate. Because revenue is not recognized at the time a sales contract is concluded, the concentration or dispersion of delivery timing can significantly affect performance for a given period.

Although various surveys are conducted when acquiring business land, if defects such as soil contamination or buried objects are discovered after acquisition, or if opposition movements arise among nearby residents regarding noise during construction or shadowing after completion, project schedules may be delayed and additional costs incurred, potentially affecting business performance. While these risks are mitigated through prior surveys, they cannot be completely eliminated.

The real estate industry is subject to regulation under numerous laws, including the Building Standards Act, the National Land Use Planning Act, the City Planning Act, and the Building Lots and Buildings Transaction Business Act, as well as various local ordinances. Future revisions, abolitions, or major changes to legal regulations, or the enactment of new laws, may require a review of business plans. In particular, the real estate transaction business license is essential to the Group's core business, and if the license is revoked or its renewal is denied for any reason, it would seriously impede the Group's core business activities. The subsidiary Trust Community is also subject to regulations such as the Condominium Management Optimization Act.

The Group is a small organization, and its growth is premised on the timely securing of excellent personnel in sales, procurement, development, and management, but there is no guarantee that the necessary personnel can be secured. If personnel recruitment does not proceed as planned or if the establishment of a management structure is delayed, business operations could be hindered, and increased fixed costs associated with staff expansion, training, and system infrastructure enhancement could also worsen profitability.

The parent company, Saibu Gas Holdings Co., Ltd., currently maintains a policy of preserving the Company's unique corporate culture and management autonomy, and there were no material transactional relationships during the current consolidated fiscal year. However, if there is a change in the parent company's management policy, it could affect the Company's business operations. A shift in the parent company's intentions is recognized as a risk that could constrain the Company's strategic autonomy.