In the real estate sales business, we selectively acquire good-quality land for business, develop it making the best use of its locational characteristics, and provide attractive products including advantageous pricing. Upon the sale of properties, we take into account various factors in individual business plans by property and carefully consider price range. However, when sale at the price determined in the business plan fails to progress as planned due to worsening supply-demand balance caused by rising construction costs, economic trends, economic conditions, trends in interest rates, tax systems and land prices and other factors, or when delay in delivery or unexpected cost burden arises due to various factors, including unexpected defects such as underground obstacles, disorder in construction at the construction stage, the business performance of the ES-CON JAPAN Group may be impacted.

Likewise, in the real estate leasing business, depending on the effects of economic trends or conditions, or moving out of main tenants or usage situations at commercial facilities, rents or occupancy rates of assets owned may decline, which can have an impact on the Group’s operating results.

In addition to the restrictions of the Companies Act and the Financial Instruments and Exchange Act, the real estate industry to which the ES-CON Japan Group belongs is subject to the restrictions of the National Land Use Planning Act, Real Estate Brokerage Act, Building Standards Act, Act on Maintenance of Sanitation in Buildings, Act on Specified Joint Real Estate Ventures, Act on Securitization of Assets, Trust Business Act, Money Lending Business Act, and Act on Prevention of Transfer of Criminal Proceeds, etc.

In addition, the ES-CON Japan Group conducts real estate sales and related business as a real estate company licensed or registered under the Real Estate Brokerage Act, the Act on Advancement of Proper Condominium Management, the Act on Optimization of Rental Housing Management Business, and other applicable laws and regulations. The amendment or abolition of these or the creation of new legal restrictions under the Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators or other applicable laws and regulations could affect the Group’s business performance.

The Group procures funds for land acquisition, etc. related to its real estate business primarily through borrowings from financial institutions involved in project finance. In our condominium sale business, it takes time to get from land acquisition to commercialization or sale, so the ratio of the balance of interest-bearing liabilities to total assets is relatively high. We are committed to building and maintaining good business relationships with financial institutions, including the main banks, and ensuring an expeditious financing environment after becoming a consolidated subsidiary of Chubu Electric Power Company, but if financing ends up being insufficient or unsatisfactory due to higher interest rates or a significant deterioration of the financial environment, it could affect the Group’s business performance and financial position.

Our real estate-related business requires diverse expertise, making personnel an extremely important business resource. For that reason, as its medium- to long-term strategy the Group espouses the promotion of “securing personnel who underpin growth,” “reinforcing human resource development,” and “promoting employee safety and health” as a unified trinity and the establishment of a firm human resource base. In order to conduct reliable business and grow as a Group, it is indispensable that we strive to share expertise and information and continue to improve employees’ abilities as well as secure highly specialized personnel and employ, nurture, and educate executives and young employees who will be the leaders of the next generation. However, failing to secure or nurture the human resources sought by the Group or losing outstanding personnel who are currently present could affect the Group’s business performance and future business development.

As business operators handling personal information under the Act on the Protection of Personal Information, the various companies of the Group receive personal information of customers and clients in each of their businesses when developing them in a multidimensional way. This includes customers who purchase or consider purchasing condominiums or detached houses through the condominium sales business or reside in rental apartments as well as customers who purchase or consider purchasing permanent use rights in the columbarium business. The Group has set rules for the handling of personal information (basic policy, regulations, and manual) to establish an internal system and keeps personal data files under strict safekeeping with monitoring software and restricts access authority on the system in a bid to enhance the entire system as a whole to also manage information other than personal information.

Additionally, ES-CON JAPAN outsources part of the sale of condominiums to sales companies, and these companies are required to use part of ES-CON JAPAN’s management system to prevent customer information from being leaked to third parties and handle customer information within the scope to ensure confidentiality. Simultaneously, ES-CON JAPAN conducts supervision that includes prohibiting personal information submitted by customers from being used for a non-intended purpose.

Cyberattacks have grown increasingly sophisticated in recent years. Like other organizations, the Group is exposed to cybersecurity threats. To minimize risks, ES-CON JAPAN is bolstering system-side countermeasures by introducing the latest security tools and administering periodic security training for employees.

Nevertheless, should personal information be leaked due to unforeseen circumstances, the Group’s sales could fall due to its ruined credibility or compensation for damages may arise, and such may affect the Group’s business performance.

Regarding the risk of becoming subject to litigation, the Risk Management Committee consisting of directors, the heads of each division, and other members monitors risks and shares information across the Group. Important litigation, should it be filed in the future, could affect the Group’s business performance and financial condition.

A society with increasing climate damage is assumed to be seen in the future, and the increasing risk on business continuity caused by climate change may have an impact on the Group’s operating results and financial position.

In 2022, the Company endorsed the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, which assess the financial impact of risks and opportunities from climate change on management and encourage companies to make disclosures about it. We disclose information on the impact from climate change on our business based on TCFD’s framework.

Should an employee or officer of the Group or Company violate any relevant laws or regulations (including the Companies Act, Real Estate Brokerage Act, Construction Industry Act, Licensed Architect Act, Financial Instruments and Exchange Act, Act on Investment Trusts and Investment Corporations, Act on the Protection of Personal Information, Money Lending Business Act, Act on Advancement of Proper Condominium Management, Act on Optimization of Rental Housing Management Business, Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors, Labor Standards Act, Employment Security Act, and Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operator) as the Group conducts business, then administrative disposition could be imposed by the authorities concerned. In such a case, factors such as harm to the Group’s social credibility or compensation for damages could affect its financial position, business performance, and reputation in the market.

The Group strives to promote sustained growth through expanding its business domains and transforming its revenue structure through strategic M&As. However, there is no guarantee that the Group will find appropriate candidate target companies suited to its business strategies or concluded M&As with such candidates under appropriate conditions. In addition, while the Company fully considers information such as the financial and business details of subject companies in advance, there is a possibility that Group business results and financial standing could be affected by goodwill amortization or other factors in the event that business plans do not proceed as initially planned.