We believe that the following matters related to the Group's business, accounting and other conditions could have a material impact on the decision-making of investors.
It should be noted that matters concerning the future in this document have been determined based on information available to the Group as of March 31, 2019.

Risks resulting from deterioration of business environment

With regard to the Company's business environment, a domestic or overseas economic downturn, the planned consumption tax increase in October 2019, and a potential decrease in corporate earnings and a decline in personal consumption, or an increase in interest rates and an oversupply in the real estate market may occur. Thus, any such events may cause a decline in purchasing sentiment among customers of the Residential Development Business, the Property Brokerage & CRE Business, as well as a consequent fall in selling prices, an increase in inventories, and valuation losses on inventories.
As for the Leasing Business and the Investment Management Business, there could be a decline in office rent levels, an increase in vacancy rates, a fall in property prices or a drop in profit ratios and an associated valuation loss on assets owned by the Group. Additionally, declining REIT stock prices and weakening demand for investment funds may occur.
The Company has positioned M&A as an important growth strategy, and aims to increase its corporate value by implementing M&A that can be expected to generate synergies and utilizing the characteristics of the holding company system. However, in the event of changes in the business environment, the expected growth of the acquired company, or the synergy expected from the acquisition, may not be realized. The events described above could have an adverse impact on the Group's business performance.

Risks resulting from changes to real estate-related legislation or the tax systems

A number of laws and regulations in Japan and overseas apply to the various businesses of the Group, which will be subject to new regulations as it expands its operational scope in the future.
For example, in Japan, the Group may face new obligations and expense burdens if the Building Standards Law, the Building Lots and Buildings Transaction Business Law, the Financial Instruments and Exchange Law, or other real estate-related laws are revised, or if new legislation is implemented. Such events could adversely affect the Group’s business performance.
Furthermore, if revisions to the various tax systems in Japan and overseas that impact the Real Estate Development Business are implemented, this could lead to an increase in expenses for the holding, acquisition, and sale of assets, or cause a decline in the purchasing sentiment of customers. It could also prompt a change in the facility strategies of companies and revisions of their investment plans. Such events could have an adverse impact on the Group’s business performance.

Risks resulting from a rise in interest rates

The balance of interest-bearing debt at March 31, 2019 was ¥914,000 million, an increase of ¥36,200 million year on year (equivalent to 51.9% of total assets, decreased by 0.5 percentage points year on year). When raising funds by borrowing, the Group attempts to deal with the risk of a short-term rise in interest rates mainly by taking out long-term, fixed-rate loans.
However, an increase in borrowing costs due to a rise in market interest rates could have a negative impact on the Group's business performance and financial condition.

Risks resulting from natural disasters and sudden accidents

Natural disasters, such as earthquakes and wind and flood damage, as well as sudden accidents, could lead to damage or destruction of real estate owned or managed by the Group. Such incidents could have a negative impact on the Group's business performance and financial condition.

Risks resulting from leakage of personal information and a crisis in the information management system

In the course of carrying out its operations, the various businesses of the Group handle large quantities of personal information. The Group endeavors to comply with various laws and regulations pertaining to personal information, such as the Law Concerning Protection of Personal Information, and also handle information in the proper manner. Moreover, Group companies have produced various documents, such as "Information Security Provisions," "Rules for Handling Specific Personal Information" and "Guidelines for Handling Information." In these ways, the Group strives to train and educate employees and protect the interests of customers. In the event of external leakage of personal information due to unforeseen circumstances.
However, in the event of an external leakage of personal information or a risk arising to the Company's information management system due to unforeseen circumstances including a cyberattack or illegal access to the Company's computer system, confidence in the Group could be lost, leading to such issues as a decrease in sales, the incurrence of expenses to pay compensation for damages, and delays to business activities and business processing. This could have an adverse impact on the Group's business performance.

Risks related to the Real Estate Development Business

When considering purchases of land for business use, the Group conducts historical and pollution assessments in advance. If the presence of pollution is confirmed, the Group either cancels the acquisition or engages specialists to remove such pollution. However, it is possible that the aforementioned assessments fail to confirm the full extent of soil pollution. The detection of soil pollution on land purchased by the Group, therefore, could lead to changes in the Group's original business schedules or to the incurrence of additional expenses, which could have a negative impact on its business performance or financial condition.
Moreover, when carrying out design and construction, we place orders with third parties such as construction and other companies who possess certain skills in building design, construction operations, and other matters. At the Group, departments possessing specialist knowledge carry out appropriate supervision and direction at each stage of design and construction. However, in the event of defective construction work or other issues, confidence in the Group could be lost, and unexpected expenses and delays to development projects could occur. This could have an adverse impact on the Group's business performance.