Office building to be torn down after 2 years

This would set a record for one of the shortest lived office buildings in Japan. Only two years after completion, a high-rise office building near Osaka’s Umeda area is now facing a threat of demolition.

Midosuji Front Tower is located in alongside Midosuji Avenue in Sonezakishinchi 1 Chome in Kita-ku. The 20 story building was completed in June 2010 and has a total floor area of 18,000 sqm (193,680 sqft). It was intended to be let out to tenants but the construction barricades around the building have never been removed and it has never been occupied.

In 2003, Toyo Real Estate bought the 1700 sqm site. After approaching Mitsubishi Jisho, the two companies set up a special purpose company in 2007 to develop the site. Both parties would contribute funds to the project while the remaining majority was to be financed. The SPC entered into an agreement with Kajima Corporation to construct the building at a cost of 5 billion Yen. When completed, the building was expected to bring in an annual rent of between 800 million ~ 1 billion Yen.

However, with the onset of the Lehman Shock the SPC could not obtain financing and applied for bankruptcy in the Tokyo District Court in April 2011, leaving 4 billion in unpaid debt to Kajima.

It became impossible to advertise for tenants while related parties were arguing over who was responsible for the debt incurred. Mitsubishi Jisho explained that they believed financing would have been possible at the time construction began, but the affects of the Lehman Shock made financing impossible.

In June, Toyo Real Estate, wanting their land back, took Kajima to court to seek demolition of the building. Kajima said the demolition request was unreasonable since they have not even been paid in full for the building’s construction.

A local real estate agent said that the building is in a prime business location and tenants could be found should they advertise, and that tearing it down would be a waste.

Sources:
The Mainichi Shimbun, October 17, 2012.
The Yomiuri Shimbun, November 26, 2012.

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