STARTS CORPORATION INC.

As of March 31, 2026, the Group holds land and buildings as tangible fixed assets with a book value of ¥131,393 million, and real estate for sale (including real estate under development for sale) as inventory of ¥41,156 million. Depending on future trends in real estate prices and the earnings status of leased real estate, the application of impairment accounting or the recognition of valuation losses or losses on sale could have a material impact on business performance. Given the large scale of real estate holdings, there is a risk that a downturn in prices could have wide-ranging effects on the Group's finances.

The balance of interest-bearing debt at the end of FY2026 (ending March 2026) was ¥67,690 million, a decrease of ¥1,956 million from the end of the previous fiscal year, but it remains at a high level. As the Group relies on bank borrowings to fund capital expenditures and other needs, future changes in financial conditions (such as rising interest rates) could increase funding costs and affect business performance. Although the Group is continuously working to reduce interest-bearing debt, borrowing demand associated with business expansion is expected to continue.

The Group operates city resort hotels and business hotels at 10 locations in Japan and overseas, mainly under the emit Brand Hotels and Lumiere Brand. Deterioration in future occupancy conditions (due to economic recession, spread of infectious diseases, intensified competition, etc.) could affect the Group's financial condition. The Hotel & Leisure Business has a high fixed-cost ratio, inherently carrying the risk that a decline in occupancy rates directly impacts earnings.

If delivery delays occur due to rising prices or supply constraints for building materials, business performance could be affected by prolonged construction periods and additional costs. A deterioration in the materials procurement environment directly pressures the profitability of the housing and construction businesses, and could also lead to a decline in customer trust due to delays in delivery. Global supply chain disruptions and concentrated domestic construction demand are factors that heighten procurement risk.

Amendments, abolitions, or the introduction of new legal regulations concerning real estate and construction-related laws such as the Building Standards Act, the City Planning Act, the Construction Business Act, and the Architects Act could affect the execution of the Group's various businesses. Tightened regulations may force increases in development costs or changes to business schemes, and the expenses and time required to respond pose a risk of pressuring business performance. Since the Group's main businesses are real estate and construction, the effects of legal changes tend to spread across the entire business.

Changes to real estate-related tax systems or income tax-related tax systems could result in increased costs when acquiring or selling real estate. In addition, a decline in the purchasing motivation of home-buying customers or in the business motivation of rental housing owners could have wide-ranging effects on the Group's sales, brokerage, and management businesses. Because tax system changes are subject to policy trends, they present a challenge in that advance prediction and response can be difficult.

The Group holds the personal information of a large number of customers in its real estate brokerage and management businesses, and if an information leak were to occur, business performance could be affected by a decline in customer trust and the cost burden of resolving related issues. While management is being strengthened through the establishment of a personal information protection policy and the development of information management regulations and operational manuals, the risk of leakage due to unforeseen circumstances cannot be completely eliminated. With the strengthening of personal information protection legislation, the risk of legal and social sanctions in the event of a leak is also increasing.

The occurrence of natural disasters such as earthquakes, storms, and floods, or man-made disasters such as accidents, fires, war, or terrorism, could affect the Group's business performance and financial condition. Businesses such as real estate, hotels, and construction are highly dependent on physical assets, creating a risk that asset damage or business suspension caused by disasters could lead directly to losses. The high risk of earthquakes within Japan, as well as geopolitical risks including those related to overseas business locations, must also be taken into consideration.