Tokyo Tatemono Co., Ltd.

Rapid or significant fluctuations in the economy or market conditions may lead to a decline in office needs in the leasing office market, reduced purchasing intent in the residential condominium market, and lower investment demand in the real estate investment market. The Company continuously monitors and analyzes domestic and overseas economic trends and real estate market conditions and their impact on management, but the risk that a deterioration in market conditions will directly affect business and financial results is a fundamental risk for the Company, whose core business is real estate.

The majority of interest-bearing debt is procured through long-term borrowings, and interest rate volatility risk is suppressed by fixing interest rates on nearly all long-term borrowings; however, if interest rates rise, this could affect business and financial results through increased funding costs, as well as potentially lead to a decline in the value of held assets. Since the real estate industry generally carries high levels of interest-bearing debt, changes in the interest rate environment can affect both profitability and asset value.

In the event of significant and rapid price fluctuations, there is a risk that increases in construction and development costs cannot necessarily be passed on to rents or sales prices. The Company continuously monitors and analyzes cost trends in each business and their impact on profitability, but cost increases may directly squeeze profit margins and affect business and financial results.

Unfavorable weather, natural disasters, delays in obtaining permits and approvals, discovery of soil contamination or buried objects, and other unforeseen events may cause delays in development schedules and increased costs. The Group Management Council identifies and analyzes such risks in advance and takes countermeasures, but since these events stem from external factors, they cannot be entirely avoided and may affect business and financial results.

Given the handling of confidential information including personal data and the high dependence on information systems, if information leakage or system outages occur due to cyberattacks, system failures, incidents at outsourced contractors, or carelessness by officers and employees, this may result in business disruption, deterioration in customer service, additional costs, loss of social credibility, and damages claims. Measures have been taken, including the establishment of information management regulations, terminal security measures, risk training, and cyber insurance coverage, but the risk remains ongoing as threats become more sophisticated.

Strengthening of policies and regulations related to climate change and biodiversity loss, as well as the increasing frequency and severity of abnormal weather, may affect the business. The Company has endorsed the TCFD recommendations and conducted scenario analysis, registered as a TNFD Adopter, and set targets and pursued initiatives related to "Promotion of a Decarbonized Society" and "Promotion of a Circular Society"; however, further tightening of regulations could affect business and financial results through additional costs and restrictions on rights.

In the event of natural disasters such as earthquakes, storms, and floods, or man-made disasters such as war or terrorism, business activities may be disrupted due to harm to employees, and the value of real estate held, managed, or operated by the Company may decline. Business continuity measures have been taken through the establishment of various regulations and manuals and regular training, but a large-scale disaster could have a material impact on business and financial results.

The real estate business is subject to a wide range of laws and regulations, including the Companies Act, the Financial Instruments and Exchange Act, the Building Lots and Buildings Transaction Business Act, and the Building Standards Act, as well as ordinances and tax systems of various local governments. Future enactment or revision of laws, ordinances, and tax systems may give rise to new obligations, increased cost burdens, or restrictions on rights. In addition, differences in views with tax authorities regarding tax filings could also affect business and financial results. The Company gathers information in a timely manner from relevant authorities, industry associations, and experts and responds accordingly, but the risk of system changes cannot be completely eliminated.

Based on the "Expansion of Overseas Business" priority strategy in the Group's medium-term management plan, the Company operates in the United States, Australia, Thailand, China, and other countries; deterioration in political or economic conditions, changes in laws and regulations, or worsening security in these countries may result in business suspension, schedule delays, or increased costs. The Company strives to gather information through collaboration with local companies, but geopolitical risks and country-specific regulatory changes are difficult to predict, and exposure is increasing as overseas business expands.

The Company holds cross-shareholdings for purposes such as maintaining and strengthening business relationships; if the value of these held shares declines significantly due to a fall in stock market prices or other factors, this may affect business and financial results. In accordance with the Corporate Governance Code (Principle 1-4), the Company regularly reports to the Board of Directors and verifies the appropriateness of the rationale for holding such shares, managing them with a view to reduction; however, the risk of valuation losses remains in the event of a sudden change in market conditions.