Keihanshin Building Co., Ltd.

In the event of a large-scale earthquake, wind or flood damage, fire, terrorism, or similar events, damage, loss, or deterioration of owned buildings and facilities could have a material impact on operating results and financial position. The Group has explicitly identified this risk as particularly important, and if it materializes, it would have a cascading impact on the Real Estate Leasing Business and operations in the Osaka area. As countermeasures, the Group is promoting renewal to BCP-compliant buildings for both existing and newly constructed buildings, and is also implementing BCP plan preparation and drills from an operational standpoint.

The proportion of Osaka Prefecture in the sales of the Real Estate Leasing Business has remained at a high level, at 79.5% in FY2026 (ending March 2026) (of which Osaka City accounts for 75.4%), creating a structure in which changes in disasters or supply-demand trends in the Osaka area have a direct and significant impact on business performance. To reduce this regional concentration risk, the Group is actively increasing investment in the greater Tokyo area and other regions, and acquired a logistics warehouse in Komaki City, Aichi Prefecture in March 2025. However, at present the degree of concentration in Osaka is on an upward trend, and the diversification effect remains limited.

In FY2026 (ending March 2026), the top three customers—Equinix Japan K.K. (sales of ¥3,621 million, 17.9% of the composition), Japan Racing Association (¥3,328 million, 16.4%), and SoftBank Corp. (¥2,396 million, 11.8%)—accounted for approximately 46% of total sales, indicating a high degree of dependence on specific business partners. Contracts with each company include periodic rent revision clauses, and there is a risk of declining rent levels depending on the outcome of negotiations. As countermeasures, the Group is working to diversify tenants through the development and acquisition of existing and new buildings, as well as to strengthen tenant relations.

As of FY2026 (ending March 2026), the balance of interest-bearing debt stood at ¥85,422 million, with an interest-bearing debt dependency ratio of 46.0%, a high level, as the Group procures much of the funding for new construction and acquisition of rental real estate through borrowings and corporate bonds. Although the majority of interest-bearing debt is procured at fixed rates, future fundraising associated with refinancing or new investments may be affected by rising interest rate environments, and there is also a risk that interest-bearing debt could increase further as the business expands. As countermeasures, the Group is working to obtain and maintain external credit ratings, has set numerical targets for the equity ratio and net interest-bearing debt/EBITDA multiple in its long-term management plan, and is working to reduce the average procurement interest rate.

The rental building business and similar operations are susceptible to economic trends, corporate performance, and supply-demand conditions, and if deterioration in the surrounding real estate rental market causes a decline in rent levels or a rise in vacancy rates, business performance may be affected. In addition, since real estate acquisition tax and registration license tax are expensed as acquisition-related costs at the time of large-scale real estate acquisitions, there is a risk that operating results could fluctuate significantly in periods when multiple large acquisitions occur concurrently. The Group mitigates the impact of market fluctuations to a certain extent by holding a diverse range of asset types, including Office Buildings, Data Center Buildings, WINS Buildings, and Commercial Facilities & Logistics Warehouses, etc.

If the market value of owned land, buildings, investment securities, and other assets declines or their profitability deteriorates, business performance may worsen due to accounting treatment based on impairment accounting for fixed assets or financial instruments accounting. As countermeasures, for rental real estate, the Group adopts an investment policy that emphasizes diversification of the regional portfolio and location, and prevents declines in profitability through asset replacement and value enhancement. For investment securities, the Board of Directors verifies the significance of holding each security from both quantitative and qualitative perspectives every year, and the Group's policy is to consider selling any security judged to have little significance.

Rapid changes in the business environment associated with responses to climate change, such as tightening of energy conservation regulations or soaring construction costs and material prices, may affect business performance. The Group has set forth "strengthening resilience to climate change" and "sustainable use of resources through measures to reduce environmental impact" as materiality issues, and has established a Sustainability Committee chaired by the Representative Director and President, as well as a Sustainability Promotion Office, to address these issues on a company-wide, cross-functional basis. However, there is significant uncertainty regarding the impact on business performance should regulatory tightening or cost increases occur beyond expectations.

Important information, such as customer information and information on business partners, is managed through IT systems, and if information leakage occurs due to virus infection, cyberattacks, or unauthorized access, this could result in loss of social credibility, loss of customers, and claims for damages, potentially having a material impact on business activities. As countermeasures, the Group has established regulations and a management framework, provides employee education, and continuously strengthens security measures.

If a situation arises that violates laws and regulations, penalties, damages, and loss of social credibility could significantly constrain business activities, potentially having a material impact on operating results and financial position. As a countermeasure, the Human Resources and General Affairs Department serves as the responsible department, and a Compliance Committee, with compliance officers selected from each department, is held regularly to ensure thorough legal compliance through item-by-item verification and company-wide training.

If a serious infectious disease, such as the novel coronavirus, occurs and spreads, business performance and business activities may be significantly affected. As countermeasures, the Group has revised its work regulations and implemented infection prevention measures, and its policy is to promote flexible working arrangements, such as working from home and staggered commuting hours, in response to requests from the government and local authorities in the event of a new infectious disease outbreak.