Sumitomo Realty & Development Co., Ltd.

If a force majeure event exceeding assumptions, such as an earthquake or flood/storm damage, occurs, the Group may incur restoration costs for owned assets and experience a slowdown in business activities, which could affect its operating results and financial condition. The Group strives to ensure business continuity through the adoption of seismic isolation and vibration control structures, installation of emergency power generators, and formulation and training of BCP manuals; however, a risk remains that the Group may not be able to fully respond to events far exceeding assumed scale. The BCP Countermeasures Council under the Sustainability Committee is responsible for monitoring.

The Group conducts business under numerous laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Construction Business Act, the Building Standards Act, and the Labor Standards Act, and the impact of legal amendments on business activities could spill over into operating results and financial condition. In addition, if a compliance violation by an officer or employee occurs, there is a risk that it could lead to a decline in demand for products through damage to the Group's reputation. The Group works to deter such occurrences through monitoring by the Internal Control Meeting, audits by the Internal Audit Office covering subsidiaries, development of a compliance handbook, and establishment of an internal reporting hotline.

In addition to physical risks such as flood and storm damage, transition risks such as tightening decarbonization regulations and rapid changes in the business environment could raise construction costs and business operating costs, potentially affecting operating results and financial condition. The Group analyzes and discloses financial impacts based on the TCFD framework, and is working to promote energy conservation and decarbonization through the development of new properties with high environmental performance and the renovation of existing properties. The Sustainability Promotion Council is responsible for advancing specific measures.

The Group depends on numerous suppliers, including construction contractors, cleaning staff, security personnel, and facility maintenance and inspection contractors, and if unexpected events cause business disruptions or quality issues attributable to suppliers, this could affect operating results and financial condition. The Group seeks to reduce this risk through due diligence at the start of new transactions, dissemination of the "Sustainable Procurement Guidelines," regular price negotiations, and safety training for suppliers. The effectiveness of price negotiations is regularly verified through supplier surveys.

Each business holds a large amount of important information, including personal information, and if a cyberattack or careless conduct by employees leads to an information leak, this could affect operating results and financial condition through the incurrence of compensation costs and a decline in demand for products due to loss of trust. The Group has taken measures such as introducing cybersecurity systems, developing an "Information Management Regulation," and conducting information security training; however, complete defense against increasingly sophisticated cyberattacks is difficult.

The real estate leasing and sales businesses are investment-front-loaded, making stable fundraising through borrowings from financial institutions and corporate bonds essential; however, rapid and significant changes in the financial environment or changes in the financial condition of lenders could result in higher borrowing interest rates or a deterioration in cash flow. As of the end of FY2026 (ending March 2026), consolidated interest-bearing debt stood at ¥3,975,920 million, with a debt-equity ratio of 1.6, indicating that the Group continues to carry a high level of interest-bearing debt. The Group is working to stabilize its fundraising by extending borrowing terms and increasing the proportion of fixed-rate debt (fixed-rate ratio of 81%), as well as by building diverse business relationships with 117 financial institutions.

The Real Estate Leasing, Real Estate Sales, Housing, and Step businesses are susceptible to economic trends, corporate earnings, personal income, demographic trends, land price trends, raw material prices, construction costs, and tax systems, and fluctuations in these factors could affect operating results and financial condition. In particular, soaring construction costs pose a risk of directly pushing up business costs, and changes in land price trends affect the value of owned assets and the profitability of the sales business. As these are external environmental factors, there are limits to what an individual company can do in response.