The performance and financial position of the Haseko Group have the potential of being impacted by a variety of factors and we have described the primary items related to business and other risks that we feel can potentially have a material impact on the decisions of investors. The Haseko Group recognizes that there can be a variety of risks in addition to those listed below and is striving to prevent, disperse or avoid these as much as possible. However, there is also the potential that the performance and financial position of the Haseko Group will be impacted by external factors not under our control and by other items, etc. that are presently judged to have little potential of actually occurring.
Furthermore, any items referring to the future that appear in the following text are based on judgments made as of March 31, 2023 .

Dependence on the condominium business

The core business of the Haseko Group is related to for-sale condominiums in the Tokyo, Kinki and Tokai metropolitan areas, and the Haseko Group is significantly dependent on the business of constructing for-sale condominiums. As such, the amount of orders received of construction and the transaction volume of the for-sale condominium business may be largely impacted by trends involving the supply of new for-sale condominiums, their sales, the supply of sites for building for-sale condominiums, the business scale of the developers Haseko conducts business with, the government’s housing policies, the tax system on residences and interest rates, etc. Fluctuations in these factors may negatively impact the Haseko Group’s performance and financial position.
Furthermore,the Haseko’s primary business model involves securing orders by bringing in land, built on our capabilities in gathering land information and managing for-sale condominium projects. There is no guarantee, however, that this business model will continue to give us a competitive edge and enable us to maintain or enlarge our market share and profitability.
Therefore, in order to raise the level of stable revenue sources, the Haseko Group aims to bolster its revenue base and transform its revenue structure by expanding its holding and development business—primarily rental condominiums—and by working to expand the business areas of its Service-Related Business.

Construction market trends

Haseko secures construction materials, labor, and other supplies through a centralized purchasing system operated by the head office. And we are striving to enhance cost competitiveness through operations and overall procurement based on forecasts of future construction start dates. However, the performance and financial conditions of the Haseko Group may be negatively impacted if the trend in the overall performance of the construction industry causes increasing entries to the condominium construction industry, leading to intensified price competition with rivals in the industry. In addition, a negative impact could be produced if prices for construction materials and labor suddenly increase and securing of materials and labor becomes difficult or if our production capacity decreases due to a failure to secure cooperating companies for other reasons.

Legal and administrative regulations, etc.

There are a wide variety of laws, regulations, and rules with which the Haseko Group must comply in the course of its business operations, including the Building Standards Act, the Construction Business Act, the Real Estate Brokerage Act, and the Act on Architects and Building Engineers directly related to our business. There are also important laws and regulations, including the Companies Act and the Financial Instruments and Exchange Act, not directly related to our business. The Haseko Group implements education and training programs as appropriate to ensure compliance with these laws and regulations for officers and employees. Failure to comply with these laws and regulations, or their revision or abolition, or the establishment of new laws and regulations that the Haseko Group cannot foresee, could have a negative impact on its business performance and financial position. The revision, abolishment or new establishment of the Building Standards Act and other legal regulations governing condominium construction, in particular, or building certifications and inspections becoming stricter, could result in significant changes in business plans, delays in construction start or cancellation. This could negatively impact the business performance and financial position of the Haseko Group.
Moreover, in the course of conducting business in Japan and overseas, if the outcome of litigation against the Haseko Group differs from the Haseko Group’s claims and forecasts, its business performance and financial position may be negatively impacted.

Relationship with local residents

Upon construction starts, we implement explanatory meetings with local residents on the business plan. However, major changes in the business plan or delay of the start of or cancellation of construction due to anti-construction campaign and accompanying lawsuits could negatively impact the Haseko Group's performance and financial conditions.

Liability for noncompliance with contract

We are taking all possible measures to maintain and enhance construction quality through improvement activities by the “four bodies”—the construction division, design division, technological promotion division, and main cooperating companies. The occurrence of burdens that exceed appropriated amounts of allowances and the occurrence of damage compensation that cannot be covered by insurance, etc. may have an impact on the performance and financial conditions of the Haseko Group.

Accidents and other incidents in the construction business

The Haseko Group does its utmost with regard to safety management, including implementation of safety education and inspection tours, in order to eliminate construction and quality accidents and disasters. Furthermore, the Haseko Group conducts construction by preparing safe work environments that includes creating elaborate construction plans when starting construction. Should a serious construction accident, quality accident, or industrial accident occur, it might cause a loss of trust that society has placed in us, damage the corporate image, and negatively impact the Haseko Group’s performance and financial conditions.

Credit risk of clients

A characteristic of the construction industry is that the amounts of money involved in contracts for a single transaction are substantial and, in many cases, the construction costs are paid for in installments, or large payments are made upon and after delivery of the property. Although the Haseko Group manages the creditworthiness and credit line of its business partners, when a business partner suffers from poor credit prior to having paid for the construction costs, it may have an impact on the performance and financial conditions of the Haseko Group.

Owned real estate

The Haseko Group owns real estate out of necessity of its business activities. From the perspective of business diversification or risk management, the Haseko Group acquires real estate based on investment plans that specify investment limits for each real estate investment area. However, real estate has an inherent risk of fluctuation in market price and, due to its generally low liquidity, may not be able to be sold at the market price, depending on the supply-demand conditions at the time of sale.
Regarding inventory real estate, the Haseko Group invests mainly in for-sale housing, for which it has development expertise. However, it may not be possible to secure the scheduled collection amount depending on the progress of the business plan, or the plan may have to be suspended due to various factors. As for fixed assets, the Haseko Group invests primarily in rental condominiums, for which the Haseko Group has development and operational expertise. However, it may not be able to achieve the scheduled cash flows due to deterioration of leasing conditions and business income and expenditure or other factors. If such situations occur, the Haseko Group may have to recognize valuation losses, impairment losses, losses on sales and other losses, which would impact the performance and financial conditions of the Haseko Group.

Corporate acquisitions, etc.

The Haseko Group may acquire companies with the aim of expanding its business or bolstering its revenue base. Depending on the significance of the acquisition, it enlists the assistance of third-party experts in conducting an objective, detailed investigation of the target company and its business environment. The Haseko Group then makes its determination based on the investigation reports. However, failure to achieve the initially anticipated benefits due to factors such as an inability to integrate businesses subject to acquisition in line with the business strategy of the Haseko Group, an inability to efficiently utilize management resources with respect to existing businesses and those subject to acquisition, or sudden changes in market conditions, may have an adverse effect on the performance and financial conditions, such as the occurrence of impairment loss of goodwill.

Unbalanced business areas

The Haseko Group is working to expand its business areas, centered around major regional cities, with the aim of expanding its business and bolstering its revenue base, but most of the company's management resources are concentrated in the Tokyo, Kinki, and Tokai metropolitan areas. Due to this characteristic, the performance and financial conditions of the Haseko Group may be negatively impacted if earthquakes, storms, floods and other natural disasters, infectious diseases, accidents, fire or other human-made disasters occur in or around the Tokyo, Kinki and Tokai metropolitan areas and cause delays in construction periods which may discourage consumers from buying owned assets or damage owned assets.

Overseas business risks

Overseas business activities involve risks related to differences in social practices, unforeseen changes in laws, regulations and rules, economic and exchange rate fluctuations, and political and military issues. Any problems related to these risks could negatively impact the Haseko Group’s performance and financial conditions. For this reason, we are also striving to augment internal risk control through measures such as using multifaceted evaluations by third-party experts to make determinations on new projects in regions where we have little experience in business activities.

Operational risks

In conducting operations, the Haseko Group may experience a variety of operational risks, including misconduct by officers and employees, inappropriate behavior, mistakes in administrative tasks or problems concerning labor management. The Haseko Group has established risk management regulations and, by managing and responding to operational risks and other various risks related to business operations, endeavors to reduce as much as possible and control risk factors that may hinder the realization of the Haseko Group’s management policies. However, the occurrence of any of the above operational risks may cause a loss of trust that society has placed in us, damage the corporate image, and negatively impact the Haseko Group’s performance and financial conditions.

Management of personal information

The Haseko Group possesses large amounts of personal information for customers who have purchased or are considering the purchasing of housing, residents of condominiums managed by the Haseko Group, etc. In addition, it manages a large amount of computer data including sales and purchasing information. The Haseko Group has established internal rules (basic policies, regulations and detailed rules) for handling personal information in accordance with the Act on the Protection of Personal Information. And, in compliance with the Individual Number (social security and tax number) system, we have established policy on the proper handling of Individual Numbers (basic policies and regulations), and prepared organizations to meet the regulations. As for the handling of other information, each department is also strictly committed to the management of information and preparation of individual security policies (basic policies, countermeasure standards and execution procedures) in stages. However, there is always the possibility that information will be leaked due to a computer system problem or that information may be leaked at the result of a criminal act. These types of incidents may cause the Haseko Group to lose its societal standing, hurt its corporate image, and negatively impact the Haseko Group’s performance and financial conditions.

Fund procurement and interest payments

The Haseko Group procures funds through borrowings and the issuance of corporate bonds. It fixes interest rates on a portion of its borrowings to address the risk of interest rate fluctuations. However, changes in market conditions, such as interest rates, or a decline in creditworthiness, such as a downgrade of Haseko's credit rating, could increase financing costs and impact the Haseko Group’s performance and financial conditions.
There is no guarantee that we will be able to procure funds on similar terms through borrowings from financial institutions or issuance of corporate bonds. If the Haseko Group is unable to borrow funds from financial institutions or issue corporate bonds in a timely manner, its fund procurement capability may be impacted.
Haseko has concluded loan agreements for term loans via the syndication method, as well as for commitment line contracts, primarily with financial institutions, in order to procure funds needed for conducting business. These loan agreements contain financial covenants concerning the two items of maintaining capital adequacy ratio and securing ordinary income. In case the covenants are violated, there is a possibility that Haseko will forfeit the benefit of time because of claims based on combined intentions of multiple lenders, and that Haseko will be obliged to repay principals and interests of loans, etc. before repayment dates.

Stock market trends

The Haseko Group holds marketable stocks, but if the stock market were to decline and the value of the stocks held by the Group decreased substantially, it could negatively impact the financial conditions of the Haseko Group.
In order to limit the impact, the Haseko Group aims to maintain the balance of stock holdings to consolidated net assets to a certain extent.

Medium-term business plan

In the “HASEKO Next Stage Plan” (Plan NS), the medium-term business plan launched in the fiscal year ended March 31, 2021, the Haseko Group set the following goals. In addition to making strategic investments for growth to strengthen our revenue base, and expanding shareholder returns, we have announced that we aim to establish CSR management to address social issues through our business.
In formulating the content of the plan, the Board of Directors has conducted comprehensive deliberations concerning the issues and direction of the business. Since the Haseko Group's performance may be impacted by various factors, including the economic environment, there is no guarantee that we will achieve our targets, nor the planned business and financial effects.
In order to strengthen its revenue base, the Haseko Group is also planning to bolster business development by expanding its holding and development business centered on rental condominiums and by expanding business areas in the Service-Related Business. Unforeseen changes in economic conditions or rapid fluctuations in the market may prevent us from executing our business development as planned, which could negatively impact the Haseko Group's performance and financial conditions.

Climate change risk

The introduction of a carbon tax and various regulatory tightening may increase construction costs during the transition to a decarbonized society, which raises the risk of a negative impact on our performance and financial conditions. With regard to physical risks, a decrease in productivity at construction sites due to higher average summer temperatures or delays in construction periods caused by increasingly frequent and severe weather disasters could negatively impact our performance and financial conditions.
In light of these climate change-related risks, the Haseko Group established the Climate Change Response Policy: HASEKO ZERO-Emission in December 2021. In accordance with this policy, the Haseko Group has been working to mitigate the impact of climate change on the Haseko Group's operations. In accordance with this policy, we are working to reduce greenhouse gas emissions through the expansion of the introduction of renewable energy, promotion of the use of environmentally friendly materials, low-carbon construction, and development of technologies related to decarbonized housing and other measures. We are also working to mitigate the effects of physical risks through mechanization and the use of IT to enhance work efficiency at construction sites, and by researching construction methods that are less susceptible to climate change. Furthermore, we are focusing on upgrading our disaster business continuity plan (BCP) system to respond promptly to damage to related properties and facilities—including those under construction—and on developing condominiums that are resilient in the face of disaster.

Get ADOBE® READER®
Adobe Acrobat Reader Download To view PDF documents,
you need Adobe® Reader®.Please download from here if you do not have it.