Vermella Union

MIXED-USE MULTIFAMILY DEVELOPMENT | Union, NJ

Vermella Union is a 42-acre mixed-use luxury residential development project located in the Township of Union in Northern New Jersey. To date, Russo Development, by and through its affiliates¹ , has delivered over 900 residential units and when fully completed, Vermella Union will include 1,360 modern apartments and townhomes with a comprehensive amenity package including a multi-acre park and 35,000 square feet of service/food retail headlined by Starbucks, Chipotle, &Pizza, Habit Burger, Cold Stone Creamery, Mighty Quinn’s BBQ, Panera Bread, CVS, Blue Foundry Bank and an AT&T Store. The architectural and painstaking attention to detail in design, functionality, and resident experience deliver an unmatched lifestyle compared to any large-scale project across the State and has led to awards from the Urban Land Institute, BOMA and the New Jersey Apartment Association.

DEVELOPING THE PROPERTY

The redevelopment initiative of the Vermella Union site begin in 2013. Merck Pharmaceuticals had previously merged with Schering Plough and maintained a significant campus on an approximately 55-acre parcel containing roughly 1 million square feet of improvements, consisting of twenty-three buildings for pharmaceutical manufacturing, research and development activities. After winding down its operations on the site, the entire campus was brought to market in 2013 by Jones Lang Lasalle on behalf of Merck. At that time, there was still existing staff occupancy on site, but in small numbers, whereas at the facilities’ peak, the buildings housed upward of two thousand employees in buildings constructed in the 1930s and 1940s; the latest of which was constructed in 2010.

When the property was initially marketed for sale, Russo Development was among a handful of bidders vying for the opportunity to acquire the property for development, ultimately succeeding in a competitive bidding process, and successfully signing a contract in February 2014. The contract awarded to Russo included significant demolition and remediation obligations of the environmentally constrained site, which Russo was obligated to satisfy within an abbreviated period of time following closing on the property, representing a significant and expensive hurdle to the successful development of the site. After signing its contract, Russo was approached by Kean University, who asserted a claim to a purported right of first refusal that Kean alleged gave the University paramount rights to acquire the fifty-five-acre campus, which “right” they intended to enforce.

In an effort to address Kean’s claims, Russo Development’s Ownership met with Dr. Dawood Farahi, Ph.D., the then President of Kean University, to engage in thoughtful conversation about next steps towards negotiation and settlement. Despite what appeared as meaningful discourse, and Russo’s sincere, expressed desire to work with the University, Kean remained resolute in its position that it was entitled to enforce the right of first refusal to acquire the entire Merck property. The University offered Russo the opportunity to bid as the redeveloper, once Kean procured the land, but that suggestion was unacceptable to Russo and not in line with Russo’s goals, as bidding again felt unnecessary and redundant, particularly given the uncertainty of Kean’s claimed right.

Negotiations ultimately broke down and Russo Development and Kean University became embroiled in protracted litigation involving the study and application of certain archaic and novel areas and principals of real property law, where Russo’s in-house legal counsel utilized tactful legal strategy and their robust experience, ultimately resulting in a successful result.

In addition to the claimed right of first refusal, among the significant issues in the litigation Kean also claimed that in certain Deeds transferring the property to Schering Plough in or about 1986, the property was restricted to only pharmaceutical manufacturing use, or certain other unreasonably limited uses – thereby precluding Russo’s intended use and development of the site. Russo and its legal team were able to diligently and successfully argue that the right of first refusal, originally held by members of the Kean Family, was never properly or legally transferred to the University in accordance with certain fundamental principles of real property law, and accordingly, the University was not a viable beneficiary of that purported right. Moreover, Russo established that no third-party beneficiaries retained justiciable rights to enforce the use restrictions that Kean sought to enforce against the Property, and that such enforcement would amount to an unreasonable restriction on the rights of the property owner to use, develop and otherwise operate its property, contrary to applicable law.

After 2 and a half years, following initially successful decisions in favor of Russo Development, and thereafter a successful appellate effort by Kean as to limited issues in dispute, the parties, having reengaged in diligent settlement discussions throughout the process, came to amicable terms resolving all outstanding claims in the litigation, including confirmation of the right of Russo Development to acquire the entire fifty-five acre property; an agreed upon transfer of an approximately thirteen acres of the overall property to the University to expand its campus educational and housing facilities; and the elimination of the use restrictions that would have otherwise limited the overall use and development of the site. Russo Development recognizes the significant mutually beneficial relationship that could be cultivated with the University as a valuable neighbor, and respected New Jersey University enjoying a long-revered legacy. Similarly, Kean recognized the inherent benefits to having the property developed as a first-class, luxury and well tenanted mixed-use development, which vision would enhance its adjacent campus and the daily experience of its students and faculty.

Throughout the litigation, Russo maintained a strong conviction that it was both defending its vested rights in and to the property, as well as advocating for the Township of Union, who had joined in the proceeding.

Russo Development’s initial and current mission, of bettering the underutilized land with thoughtful TOD development, still stands today as we are a complete campus of 1,360 residential units, complete with retail, affordable homes and green spaces.

Construction Challenges

When Russo Development finally secured the property in 2017, there was a great deal of demolition, decommissioning and environmental remediation to undertake. 250 monitoring wells existed on the property, along with the decommission of a water treatment plant, which took two years, during 2017-2019. The area went through an exhaustive demolition process and significant building abatements. The redevelopment, initially considered a daunting task, was slated to take ten years, but Russo Development was able to accomplish it in six. What resulted from years of hard work and commitment, was an impressive sprawling campus complete with 1,360 residential apartment homes, affordable housing opportunities, unparalleled amenities, ample green space, and convenient and plentiful nationally recognized retail, which brought further ratables to the town and enhanced the community.

The Township of Union did not request affordable housing initially, as they had other sites in town intended for that use. The town was eager to secure the greatest economic benefits from our site and was confident that its initial affordable housing plans would generate adequate housing stock such that the Merck site redevelopment could proceed as a fully market rate project. The Township granted a Payment In Lieu of Taxes (PILOT) to the project, under the terms of the New Jersey Long Term Tax Exemption Law available to Urban Renewal entities developing in designated Redevelopment Areas, which provided that 10% of the annual gross revenue generated by the project is payable directly to the Township in lieu of conventional, ad valorum taxes, resulting in the generation of significant financial surpluses enjoyed by the Township over the life of the 30 year PILOT.

During its prosecution of applications for various entitlements for the Project, Russo Development’s then market-rate site plan for the property was ultimately challenged by the Fair Share Housing Center, an affordable housing advocacy group, who sought to compel the inclusion of affordable housing units in the project. Russo engaged in meaningful discussions with Fair Share and petitioned the Court to allow Russo to intervene in the then pending declaratory judgment action in the Superior Court, Union County, in order to achieve an economically viable and equitable solution to the affordable housing issue. Ultimately, following good faith negotiations with the Township, Fair Share, the Court Appointed Special Master in the litigation, and Russo agreed to commit to build ninety-six affordable units, representing slightly greater than a 7% set aside, as part of its overall development of the project.

Although at that time, developers were most typically required to build or otherwise contribute financially toward the construction or rehabilitation of a 15% or greater set aside, Fair Share, the Township and the Court accepted the reduced obligation, recognizing that the subject property required extensive equity investment by Russo in order to timely complete the extensive demolition and environmental remediation, and long term operation and maintenance responsibilities associated with the environmental condition of the former pharmaceutical manufacturing campus. The Township of the Union joined in the compromise, by committing to subsidize Russo’s satisfaction of the affordable housing obligations implicated by the settlement, reinforcing their substantial support for the Vermella Union project.

Vermella Union’s campus also includes for sale townhomes built by Pulte Homes. At the time of the completion of Building C and getting prepared for the site plan of Vermella Union D (Sol at Vermella Union) Russo recognized they were not zoned for more than 1,360 apartment homes and were already at that number with proposed site plans. The developer also recognized the value of for sale product and there was a great benefit to having more diversity of housing on the campus. Russo Development went back to the township of Union to secure zoning for for sale housing. We curated a deal with Pulte that the residents who buy townhomes can utilize and enjoy the amenities of Vermella Union D at an added fee, as valued members of the diverse campus.

Vermella Union’s favorable location, adjacent to the Union train station and proximate to major roads and highways, makes the community an ideal location for commuters via rail, bus and car. Union Station is the newest rail station built and the second busiest on the Raritan Valley line, following Westfield.

ONE OF THE LARGEST RESIDENTIAL MIXED-USE DEVELOPMENTS OFF THE WATERFRONT

Vermella Union is one of the largest residential mixed-use development projects off the New Jersey Gold Coast Waterfront. Its full scope includes the first phase of retail and residential delivered in the Fall of 2019 to remarkable success with its second phase opening in late 2021 with future residents eager to experience the Vermella lifestyle. Its third and final phase, Sol at Vermella Union, set to deliver in Spring 2023 features an array of diverse home types, such as loft-style apartments and apartments with bonus spaces such as dens and spacious dining nooks, which have grown increasingly popular in the post-Covid remote-work landscape The master plan is cohesive and thoughtful and brings real value to the Township of Union, the Vermella community, and Kean University.

LUXURY LIVING IN UNION, NJ

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