CEL Corporation

As the Group concentrates its business operations in the Tokyo metropolitan area (Tokyo and three surrounding prefectures), the occurrence of a large-scale earthquake, typhoon, or other natural disaster could result in substantial expenses for repairing construction sites, offices, information equipment, etc., as well as costs associated with supporting owners and tenants. In addition, damage to social infrastructure could disrupt the supply of construction materials and affect employees, delaying contract execution, construction commencement, and construction progress, while damage to managed properties could also hinder leasing activities. The high degree of geographic concentration raises concerns about repercussions across the entire business.

The Group operates its business based on numerous laws and regulations, including the Construction Business Act, the Building Standards Act, the Real Estate Brokerage Act, and the Rental Housing Management Business Act. Failure to adequately respond to legal amendments or new legislation, or an unexpected violation of laws and regulations, could restrict business activities and adversely affect performance. The Group holds multiple licenses and registrations, including a construction business license (specific construction business), a real estate brokerage license, and registration as a rental housing management business operator; if grounds for revocation arise, this could seriously impede business continuity. Although the Internal Control Committee conducts ongoing compliance initiatives, it is difficult to eliminate all risks comprehensively.

The Rental Management Business employs a rent guarantee system (master lease system) under which the Company leases apartments and subleases them to tenants. Under this structure, if changes in the external environment or intensifying competition for tenants prevent the Company from securing tenants or rents as planned, it may be forced to lower rent levels, which could adversely affect performance. The Company strives to secure tenants through differentiation via space design based on the concept of "continuing to deliver the ultimate smile and excitement to guests," but ongoing responses are required to address changes in the competitive environment.

As the Company operates numerous construction sites and factories, the occurrence of workplace accidents or environmental pollution incidents at these sites could result in human and physical damage, adversely affecting performance. Although the Company implements measures giving top priority to safety and environmental considerations, site-specific risks inherent to the construction industry cannot be completely eliminated.

The Company is inherently exposed to the risk of litigation being brought against it in the ordinary course of business operations, and depending on whether a suit is filed or the outcome of litigation, performance could be affected. The Company makes its best efforts to ensure legal compliance and thorough adherence to compliance standards, and as of the filing date of this document, it has disclosed that no material litigation has been brought against it.

Although the Company has established manuals governing all processes including design, construction, and inspection, and has implemented a multi-stage inspection system involving in-process inspections, external construction inspection bodies, and government inspections, if liability for non-conformity to contract or similar issues beyond the expected scope arises, this could result in substantial costs and damage to corporate reputation, affecting performance. The Company employs a unique construction system combining in-house manufactured steel materials with in-house construction, and thorough quality control forms the foundation of its competitiveness.

Securing and developing excellent human resources is essential for sustainable and stable growth; however, if the Company is unable to hire appropriate and sufficient personnel, if human resources decline due to resignations or leaves of absence, or if development does not proceed as planned, this could affect performance. The timing of occurrence is positioned as medium- to long-term, and continued strengthening of recruiting capability, retention rates, and training programs is required.

The Company positions "providing added value through overwhelming differentiation" as a strategic pillar for its flagship brand "My Style vintage," but if it is unable to secure competitiveness due to competitors introducing similar products and services, this could affect performance and financial condition. Although the Company seeks to differentiate itself through consulting content and design, continuous product and service innovation is required to respond to changes in the competitive environment in the apartment construction market.

If increases in procurement prices or construction costs resulting from surging raw material and materials prices, labor costs, and other factors cannot be passed on to sales prices, this could adversely affect performance. The Company strives to control construction costs through developing new business partners, promoting the use of general-purpose materials, and introducing new construction methods, but continued price management remains a challenge amid the recent environment of rising construction costs.

Demand from apartment owners is affected by the state of the Japanese economy, the tax system, financial market trends, interest rate trends, and demographic trends; fluctuations in these factors could affect order intake and built-for-sale housing sales. In particular, a sharp rise in interest rates or a change in financial institutions' lending stance toward apartment loans would directly affect owners' fund procurement and could lead to a decrease in construction orders. As countermeasures, the Company proposes that owners bear approximately 20-30% of costs as equity capital in their funding plans to avoid excessive reliance on loans, and has established a loan brokerage department to strengthen cooperation with financial institutions.