Sekisui, Taisei Find Defects in Tokyo Apartment Complex

Sekisui House Ltd. (1928) said it found defects in a Tokyo residential complex being built by Taisei Corp. (1801) and is rebuilding parts of the project where apartments sell for as much as $3.5 million. Shares of both companies fell.

Taisei last month found about 20 columns out of 34 posts were missing some reinforcing metals in the building that will be 30 stories when completed next year in Shirokane, a neighborhood where many corporate executives live, Keiji Kobayashi, a Tokyo-based spokesman at Sekisui, said in a phone interview yesterday. Taisei is now fixing the defects by breaking the concrete and adding the necessary metals at the project sold by Sekisui, he said.

The defects came to light after Mitsubishi Estate Co. said one of its residential complexes in central Tokyo, built by Kajima Corp. (1812), is being rebuilt after construction flaws were found. Demand for homes has risen ahead of a sales tax increase to 8 percent from 5 percent in April. Housing starts rose to 980,025 units in 2013, the highest in five years, according to a land ministry report on Jan. 31.

“After the incident with Mitsubishi Estate, people are becoming very sensitive to this kind of information,” said Masahiro Mochizuki, an analyst at Credit Suisse Group AG. “A shortage of labor and rising material costs seems to have added a burden to the construction companies.”

Shares Drop

Sekisui shares fell 1 percent to 1,197 yen at the close of trading in Tokyo, the lowest since Aug. 30, while Taisei dropped 2.9 percent to 441 yen.

The error, found during a routine check, was made because building plans were misread, Kobayashi said. Taisei will finish fixing the building in early April and the quality of the property won’t be affected, he said, adding that the Tokyo-based builder will be responsible for any extra costs for the reinforcements. Akihiko Shimo, a Tokyo-based spokesman at Taisei, declined to comment.

Sekisui started construction of the complex in January 2013 and sold 218 units in September, with the most-expensive going for 359 million yen ($3.5 million), according to the Osaka-based company’s website. It plans to sell the rest of the apartments in the 334-unit building starting next month, it said. The handover of the apartments is expected in July 2015, it said.

“The construction companies have to secure skillful workers who can offer high-quality construction,” said Mochizuki. “Without securing skillful workers, a simple failure could reoccur.”

Demand to rebuild after the March 2011 earthquake and tsunami has contributed to the worst shortage of construction workers since 1994, according to labor ministry data. Forty-one percent of construction companies in a November survey said they didn’t have enough workers, while just 3 percent reported a surplus.

To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net; Kathleen Chu in Tokyo at kchu2@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net Tomoko Yamazaki, Iain McDonald

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