LAND BUSINESS CO.,LTD.

As of the end of FY2025 (ending September 2025), the balance of interest-bearing debt stood at ¥33,929 million, and the ratio of interest-bearing debt to total assets of ¥56,408 million was 60.1%, a high level. Since funds for land/property acquisition and construction are mainly financed through borrowings, a rise in interest rates could increase financial costs and materially affect operating results and financial position. Although the Company has adopted a policy of reducing interest-bearing debt through portfolio review, the reliance remains high at present.

As of the end of FY2025 (ending September 2025), three borrowings totaling ¥4,256 million were subject to financial covenants, including conditions such as maintaining a certain level of net assets, prohibition of recording an ordinary loss for two consecutive periods, and prohibition of the combined operating profit before depreciation of the Restaurant Business and Apparel Business being negative for two consecutive periods. If these conditions are breached without a new agreement with financial institutions, the Company could lose the benefit of the term and be required to repay the relevant borrowings in a lump sum. Since the earnings trends of the Restaurant Business and Apparel Business directly affect covenant compliance, continuous monitoring is required.

The real estate industry is highly susceptible to economic conditions such as business trends, interest rate movements, and land price trends. If the value of held assets declines due to such changes, there is a risk of valuation losses on inventories or impairment of fixed assets. In the restaurant and apparel industries as well, performance could deteriorate due to economic downturn, changes in customer preferences, or intensified competition. As the Group operates three businesses spanning real estate, restaurant, and apparel, deterioration in market conditions across multiple industries could simultaneously affect operating results.

The Group's main sources of revenue are rental income from owned leased real estate, management fee income, and rental income from properties held for sale. If tenants' or residents' creditworthiness deteriorates, causing rent delinquency, a decline in rent levels, or a rise in vacancy rates due to move-outs, rental income would decrease and the value of held assets would decline, potentially resulting in valuation losses on inventories or impairment of fixed assets. Deterioration in the occupancy status of the Leasing Business, which is a core source of revenue, would have a direct and wide-ranging impact on the financial position.

The real estate held by the Group and its store openings/opening plans are concentrated in the Tokyo metropolitan area, given considerations of economic scale and investor demand. If a large-scale earthquake or other natural disaster, or deterioration of the regional economy, occurs in the Tokyo metropolitan area, there could be concentrated impairment of held real estate value and difficulty in store operations, which could severely affect operating results and financial position. Given the limited geographic diversification, exposure to region-specific risk is high.

The Group outsources construction and renovation work to construction companies. If accidents occur during construction, if a contractor goes bankrupt or fails to perform under a contract, or if other unforeseen events occur, construction may be halted or delayed, or construction costs may rise. Although the Architectural Design Department conducts site inspections and holds weekly regular meetings with contractors to maintain quality and prevent construction delays, risks stemming from the structure of outsourcing dependence cannot be completely eliminated. Construction delays could affect the revenue plan through delays in the timing of sales or leasing commencement.

There is a risk that the cost ratio, particularly in the Restaurant Business and Apparel Business, may rise due to increases in raw material prices and utility costs stemming from unusual weather, natural disasters, war, foreign exchange fluctuations, and other factors, including surging crude oil prices. If such cost increases cannot be passed on to selling prices, this could affect operating results and financial position through a decline in profit margins. As this stems from external factors such as geopolitical risk and foreign exchange trends, it is an area difficult for the Group to control.

Store operations of the Group are mainly staffed by part-time employees. If the hiring environment deteriorates due to rising wages, increased recruitment costs, or increased domestic labor demand, there is a risk that the Group will be unable to secure the necessary personnel at appropriate cost. In addition to increased labor costs, this could force a review of store opening plans or the suspension/closure of some stores, affecting both business operations and business expansion. Amid ongoing structural tightness in the labor market, this could constrain the execution of growth strategies in the Restaurant Business and Apparel Business.

The Real Estate-related Business is subject to legal regulations such as the Building Lots and Buildings Transaction Business Act, the City Planning Act, the Building Standards Act, the Construction Business Act, and the Act on Land and Building Leases, while the Restaurant Business is subject to the Food Sanitation Act and other regulations. Changes in laws could affect operating results and financial position. The Company holds a Real Estate Transaction Business license (valid until December 2027), a Specific Construction Business license (valid until September 2026), and a registration as a First-Class Architect Office (valid until April 2028). Revocation of these licenses due to violations of laws and regulations would directly impede business operations. In the Restaurant Business, the occurrence of a food poisoning incident could give rise to compound risks such as business suspension, license revocation, and damages liability.

The Group holds personal information of a diverse range of customers across its real estate, restaurant, and apparel businesses. If information leakage or unauthorized use occurs, this could affect operating results and financial position through a decline in social credibility. To date, there has been no incident of customer personal information leaking externally, and the Group has implemented safety management measures and corrective actions; however, risks from external threats such as cyberattacks cannot be completely eliminated. Trends toward stricter regulation of personal information protection are also an issue requiring ongoing response.