Agratio urban design Inc.

If consumer demand declines due to fluctuations in economic trends, interest rate trends, land price trends, price trends, tax system changes, or population decline from the falling birthrate, there is a risk of a decrease in the number of housing starts/deliveries and a decline in sales prices. Since the Housing Business, the Company's main business, is heavily influenced by consumer demand, the impact on business performance could be widespread. The Company continuously monitors multiple demand fluctuation factors, but disclosure of specific countermeasures is limited.

The Housing Business's areas of operation are concentrated in the Greater Tokyo area, so changes in economic trends, the economic environment, housing demand, and land price trends within the Greater Tokyo area directly affect business performance. As regional diversification has not been achieved, the impact would be significant if risks specific to the Greater Tokyo area materialize. At present, no specific policy toward area diversification has been disclosed.

The average business period from the land purchase settlement date to delivery is approximately 10.1 months, and if sales are prolonged due to economic deterioration, intensified competition, persistently high housing prices, or a chill in consumer sentiment caused by rising interest rates, there is a risk of a decline in sales prices and recognition of inventory valuation losses. Since inventory valuation losses directly compress profits, the financial impact could be significant. The Company strives to acquire land at appropriate prices, but its response measures to market fluctuations are limited.

Funds for acquiring land for sale in the Housing Business and for condominium land and construction in the Asset Solution Business are mainly raised through borrowings from financial institutions, resulting in a high degree of reliance on interest-bearing debt. If interest rate levels or the financial environment change due to fluctuations in monetary policy or economic conditions, procurement costs may rise or fundraising may become more difficult, affecting business development and operating results. The Company has adopted a policy of reducing interest-bearing debt and strengthening its equity capital, but the current level of reliance remains high.

Continuously acquiring detached housing land at appropriate prices is essential for the continuation of the Housing Business, but there is a risk of purchasing land at prices higher than market rates due to competition with other companies or delays and shortcomings in information gathering. If land acquisition does not proceed as planned, this could also affect operating results. The Company secures multiple sources of information on land sale opportunities and strives to acquire land at appropriate prices after investigating location conditions, surrounding environment, area, and other factors.

Since a large portion of construction work depends on subcontractors, business development and operating results could be affected if the number of subcontractors decreases due to a shortage of skilled workers, if it becomes difficult to secure subcontractors meeting selection criteria as the number of units sold increases, or if construction delays occur due to subcontractors' poor business performance or being overburdened with work. This structural dependence on subcontractors could become a bottleneck during phases of business expansion. The Company is focused on securing subcontractors, but details of specific alternative measures have not been disclosed.

If prices of materials such as lumber and building materials rise due to domestic and overseas market trends, this could affect the procurement of raw materials by the Company's group or its subcontractors. If it is difficult to pass on the increase in material prices to sales prices, there is a risk of reduced profits. The Company strives to secure appropriate profits, but the feasibility of price pass-through depends on market conditions.

Property completions and deliveries tend to be concentrated in September, December, and March, and the sales composition ratio for the fourth quarter of FY2026 (ending March 2026) stood out at 37.5%. Concentration of completions and deliveries in a particular period poses a risk of adversely affecting cash flow, potentially impacting business development and operating results. In FY2026 (ending March 2026), sales for the Housing Business in the single month of March reached ¥6,123,313 thousand (a composition ratio of 20.2%), confirming a structure heavily weighted toward certain seasons.

The Company is subject to a wide range of laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Construction Business Act, the City Planning Act, and the Act for Promotion of Proper Housing Quality Assurance, and business development and operating results could be affected if regulations are strengthened or newly introduced. Additionally, if the Company's license as a real estate broker, its special construction business license, its registration as a first-class registered architect office, or its registration as a rental housing management business operator were revoked, this would seriously hinder its main business activities. As of the date of submission of this report, no grounds for revocation of these licenses, permits, or registrations exist.

Ryuichi Obayashi, Representative Director and President, plays an important role as chief executive officer in determining management policy and strategy, and there is a risk that business performance and financial condition could be affected if he becomes unable to perform his duties for any reason. The Company seeks to avoid excessive dependence on a specific individual by promoting collective decision-making and delegation of authority, but the current degree of dependence remains high. The Company's small organizational scale is also a factor increasing the challenge of building a succession structure.