KI-STAR REAL ESTATE CO.,LTD

Housing demand is highly susceptible to economic conditions, interest rate trends, and tax incentive measures, while on the supply side, competitor trends, land prices, material costs, and labor cost fluctuations affect housing prices and supply volumes. If a sudden market change occurs, it may have a material impact on the financial position and business results of the Company Group. The Group seeks to diversify and minimize this risk through continuous analysis of supply-demand conditions and compact-lot development that emphasizes inventory turnover rate.

At the end of the current consolidated fiscal year, the ratio of interest-bearing debt to total assets reached 62.5%, and if the fundraising environment deteriorates, it may become difficult to raise funds within the planned timing and scale. In addition, some of the interest-bearing debt is subject to financial covenants, and there is a risk that violation of these covenants could result in the loss of the benefit of time. The Company addresses this through efficient use of Group funds via a cash management system and maintaining good relationships with financial institutions, while continuing to review terms appropriately as the business scale expands.

Inventory assets such as real estate for sale are affected by economic conditions, interest rate trends, real estate market conditions, price competition with competitors, and laws and policies, and therefore prolonged holding periods or declines in selling prices may affect the financial position and business results. The Group seeks to reduce this risk through compact-lot development that emphasizes inventory turnover rate and appropriate management of inventory holding periods.

Securing and developing human resources for business expansion and sustainable growth is an important issue, and there is also a risk that it will become difficult to secure subcontractors, on whom the Company relies for the majority of construction work, due to the worsening shortage and aging of skilled workers in the housing construction industry. If the Company is unable to secure sufficient human resources and subcontractors, expansion into new areas or new businesses may be delayed, potentially affecting business results. The Company has established strategies, indicators, and targets related to human capital, and is addressing the securing of regional partners as an important management issue.

The Company is subject to numerous laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Construction Business Act, the Building Standards Act, and the Act on the Protection of Personal Information, and major legal amendments or significant violations of laws and regulations may affect the financial position and business results. As of the end of the current consolidated fiscal year, no violations of laws or regulations affecting business activities have occurred, but the Company thoroughly ensures legal compliance through the development of related internal rules, training implementation, internal audits, and audits by the Audit & Supervisory Board Members.

The Company is actively promoting M&A and expansion into overseas businesses, etc. to expand its business area and enrich its business domains, but there is a possibility that expected effects may not materialize or plans may not progress as scheduled, which may affect future business results. When conducting M&A or entering new businesses, the Company conducts investigations including advice from external experts and deliberates at the Board of Directors, while also reporting the integration process and progress status to the Board of Directors and considering countermeasures.

Keiji Hanawa, Representative Director and President, plays an important role as Chief Executive Officer in determining management policies and strategies, and if he becomes unable to perform his duties for any reason, it may affect the financial position and business results. The Company is working to avoid excessive dependence on a specific individual through the promotion of collegial decision-making and delegation of authority, but a dependence risk currently remains.

Due to the escalating tension in the Middle East, there is a possibility that soaring crude oil prices and disruptions to the supply chain, particularly for petrochemical products, could spread to the housing industry as a whole through price surges and supply shortages of building materials and housing equipment. Based on experience with the COVID-19 pandemic and the wood shock, the Company has diversified procurement routes and strengthened partnerships through advance ordering with suppliers, and currently considers concerns over housing supply to be low, but continues to monitor market trends closely and maintain risk countermeasures.