J.S.B.Co.,Ltd.

The Real Estate Leasing & Management business accounts for the majority of consolidated net sales across all segments, and within this business, dependence on the student housing business is high. If problems arise in this business due to intensified competition from entrants from other industries, housing manufacturers, and others, this could have a material impact on business performance. As a countermeasure, the Company is working to secure market superiority by nurturing core businesses such as the Student Support Services business and strengthening cooperation with universities and university co-ops.

There is a risk that the student population will decline due to the decrease in the 18-year-old population, and there is a possibility that the market will shrink in certain regions. Currently, the university enrollment rate remains at a high level and the decline in the number of students living away from home is gradual, but if the birthrate declines significantly more than forecast, this could affect business performance. As a countermeasure, the Company continuously monitors statistical information such as enrollment rates and trends at educational institutions.

The Company procures much of the funds required, primarily for property development, through borrowings from financial institutions. Rapid and significant interest rate fluctuations could increase interest expenses and affect business performance. In addition, a significant rise in interest rates could also affect the operation of the leasing business through an increase in real estate owners' fundraising costs. As a countermeasure, the Company is working to minimize the impact by increasing the ratio of long-term borrowings and fixing interest rates to a certain extent in light of financial conditions.

Against the backdrop of an era in which nearly all applicants can enter university, university consolidations and campus relocations are progressing, and if the balance of supply and demand for surrounding properties is disrupted, this could affect business performance. The Company recognizes that this risk may materialize to a certain degree in the following consolidated fiscal year as well. As a countermeasure, the Company monitors trends at educational institutions while working to reduce risk by enhancing the market value of properties and through brokerage services for conversion to working-adult use and for graduates.

The Company adopts a sublease model under which it pays a fixed monthly rent to real estate owners regardless of occupancy during the contract period. If actual occupancy rates or market rent levels fall significantly below projections, rental income from tenants may fall short of the guaranteed rent, which could affect business performance. The Company recognizes that this risk may materialize to a certain degree in the following consolidated fiscal year as well. As a countermeasure, the Company has established rent revision clauses and requires a two-month advance notice for contract terminations with tenants, thereby securing a period for finding replacement subtenants.

If the Japanese economy deteriorates rapidly, the real estate market would also be affected, potentially resulting in a decrease in rental income, brokerage fee income, and management fee income, as well as the need for impairment losses due to a decline in the value of real estate held by the Group, all of which could affect business performance. The Company recognizes that this risk may materialize to a certain degree in the following consolidated fiscal year as well. As a countermeasure, the Company monitors domestic economic trends and appropriately tracks real estate-related indicators such as market conditions and occupancy rates, working to mitigate risk in a timely manner.

Because students tend to search for housing between January and March, business performance fluctuates within the same fiscal year, with a heavier weighting on the second quarter (February to April), when key money income is concentrated in April (in the fiscal year under review, the second quarter accounted for 35.6% of net sales and 110.9% of operating income). If changes to or abolition of the key money and security deposit systems occur, this could reduce key money income and security deposit funds held, affecting business performance. As a countermeasure, the Company strives to accurately grasp information regarding system reforms and fair accounting practices.

The Company is subject to licensing and registration requirements for real estate brokerage, security services, and specified construction businesses, as well as legal regulations such as the City Planning Act, the Construction Business Act, and the Building Standards Act. Abolition or revision of regulations, establishment of new regulations, or administrative dispositions by regulatory authorities could affect business performance. In particular, revocation of the real estate brokerage license could disrupt core business activities and have a material impact on business performance. As a countermeasure, the Company regularly conducts compliance training for its officers and employees.

The Company handles a large volume of personal information belonging to real estate owners and tenants. If personal information were to be leaked externally due to an unforeseen event, this could result in a decline in the number of contracts and sales due to reputational damage, or losses from damage compensation claims, either of which could affect business performance. As a countermeasure, the Company takes great care in handling personal information, although the possibility of this risk materializing always exists.

Natural disasters such as earthquakes, typhoons, floods, and tsunamis, as well as abnormal weather associated with climate change, could suspend business operations in affected areas, require facility repairs, or disrupt utility services, any of which could affect business and business performance. In addition, if the spread of infectious diseases such as COVID-19 leads to prolonged university closures or remote classes, this could result in an increase in tenants moving out and a decline in occupancy rates. As a countermeasure, the Company strives to establish a safety confirmation system, prepare a natural disaster response manual, and develop a business continuity plan.