Mitsubishi Estate to Rebuild Apartments After Defects Found

Mitsubishi Estate Co. (8802),Japan’s biggest developer by market value, will rebuild a Tokyoresidential complex where it stopped selling apartments that went for as much as 350 million yen ($3.4 million) after finding defects. The reconstruction will take about three to four years to complete, and builder Kajima Corp. will be in charge of the project and cover the cost, said Masayuki Watanabe, a spokesman at Tokyo-based Mitsubishi Estate. The building was constructed by Kajima along with Kandenko (1942) Co., according to the developer. Mitsubishi Estate stopped selling apartments in the building in central Tokyo’s upscale Aoyama neighborhood after finding it needed repairs, including to some of the pipes, the developer said in an e-mail on Feb. 3. Eighty-three out of 86 units were under contract and were expected to be handed over to the owners on March 20, the company said last month. “Reconstruction is what our customers want,” said Watanabe in a telephone interview today. “We don’t know how much it will cost yet at this stage.” The decision to rebuild was made last week and Mitsubishi Estate held information sessions for its customers over the weekend, Watanabe said.

‘Caused Trouble’

Mitsubishi Estate shares fell 2.1 percent to 2,371 yen as of 1:34 p.m. in Tokyo. Kajima (1812) lost 1.1 percent to 355 yen, paring earlier gain of as much as 3.3 percent, while Kandenko declined 1.5 percent to 511 yen. “Because of flaws in construction, we have caused trouble for our business partner and the homebuyers,” Tokyo-based Kajima said in an e-mailed statement. “We see it as our responsibility to complete the reconstruction that will satisfy the customers and we will strive for perfection to regain the trust.” The reconstruction will cost from about 6 billion yen to 10 billion yen, according to two analysts’ estimates. Scrapping the complex and rebuilding it may amount to as much as 10 billion yen, according to an estimate by Masahiro Mochizuki, an analyst at Credit Suisse Group AG, who spoke via telephone. Reconstruction of the building could total about 5 billion yen with another 1 billion yen for tearing it down, said Yoji Otani, an analyst at Deutsche Bank AG in Tokyo. Mitsubishi Estate began investigating the construction after one of the buyers told the developer that there were some postings on the Internet about the defects on Dec. 9, it said in an e-mail. The apartments cost as much as 350 million yen, with the majority of them around 140 million yen, the company said last month. To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Takahiko Hyuga in Tokyo at thyuga@bloomberg.net To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net Tomoko Yamazaki Source :  http://www.bloomberg.com/news/2014-03-17/mitsubishi-estate-to-fix-tokyo-apartments-after-defects-found.html