Mitsubishi Estate seeks damages from Kajima over botched condo

TOKYO Wed Feb 5, 2014 7:01am EST

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TOKYO Feb 5 (Reuters) - Mitsubishi Estate Co Ltd, Japan's largest property developer by market value, is seeking damages from contractor Kajima Corp after discovering construction flaws that may force it to tear down a nearly completed condominium in central Tokyo.

Mitsubishi Estate said it would seek to cancel contracts for the sale of the building's 86 units due to flaws in its drainage pipe structure. The condominiums each fetched up to 350 million yen ($3.45 million) and were to be handed over to buyers on March 20.

The developer said the problem would delay the delivery of the units by at least a year and that it might end up having to tear down the structure. The problem comes at a time that a pickup in construction in Japan is heightening a labour shortage, which is creating headaches for contractors.

Kajima Corp acknowledged responsibility for inadequate execution of the project in a statement emailed to Reuters on Wednesday. "We will act based on discussions with the client," it said.

Mitsubishi Estate discovered in December that drainage pipe openings were not properly aligned in the concrete floors of the seven-storey Parkhouse Gran Minami Aoyama, in central Tokyo's exclusive Aoyama district.

Mitsubishi Estate did not say how much compensation it would seek from Kajima. Keisuke Tamaki, Mitsubishi Estate general manager for investor relations, said strong sales of other condominiums would offset the hit from the contract cancellations, which would not affect its earnings for the year to end-March.

Business has increased for Japan's construction companies with the stimulus from Prime Minister Shinzo Abe's reflationary economic policies as well as reconstruction from the major earthquake and tsunami three years ago.

They are also expected to benefit from a building boom ahead of the 2020 Tokyo Olympics, although worries have emerged that the labour shortage could make it harder for contractors to meet project deadlines and specifications. ($1 = 101.3950 Japanese yen) (Reporting by Junko Fujita; Editing by Edmund Klamann and Jane Baird)

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