Kean moves ahead on Merck purchase

Private developer files lawsuit; Union official takes issue with statements by school president

UNION COUNTY — The Kean University Board of Trustees made it clear Monday night they are standing firmly behind the efforts of the school’s president to acquire 50 acres of Merck land on Morris Avenue in Union, even though they will be facing a legal battle.

The board passed two resolutions at this meeting, one stating the university “secured the right of first refusal” on the Merck property and they fully intend to “undertake due diligence associated with the purchase.” The resolution also noted that the kickoff of this “due diligence” would be the transfer of a $500,000 deposit to Merck to get the ball rolling.

The second resolution went further into how the university would be proceeding, mentioning they will be paying up to a half million dollars for the services of an expert in environmental remediation to perform extensive tests and research on the property to determine its “viability and value.”

Complicating matters even more and adding a twist was that late last week Kean University, the board of trustees and township were served with a lawsuit from John Russo, owner of Russo Development, a Carlstadt leasing, real estate and development company. The company has been negotiating to buy the Merck property since 2013.

The lawsuit resulted after Russo spent more than a year negotiating with Merck to buy the property for $6.2 million and then the deal fell apart in April because of a clause that gave the Kean family “the first right of refusal” to buy back the acreage.

According to the developer’s lawsuit, Russo was made aware – from the beginning of his negotiations – that the Kean family had “the right of first refusal” when it came to anyone buying the land that originally belonged to this family and he did not have a problem with that legal hitch.

Actually, in the lawsuit, he mentions that he expected the Kean family to turn down the option.
The right of first refusal came about as a means of ensuring that if at any time the land sold by the Kean family to Schering-Plough decades ago was ever sold to another party, the Kean family had the right to buy the property back. However, this covenant may not be in effect at all, according to Russo’s lawsuit.

The Kean family did opt not to buy the property, as Russo expected, but they turned around and “assigned” that right to the Kean Board of Trustees. This gave Kean University the right to buy the Merck property. In question is whether the Kean family had the right to assign the right of first refusal and more importantly if the right of first refusal even legally exists today.
Russo believes it no longer is legally binding.

In the lawsuit Russo admitted he was well aware of this “covenant,” however, he pointed out that he and his legal team were operating under the belief the right of first refusal was named in the 1986 deed and that the trust it named was terminated in 1997.

Russo said that as “an obligation of good faith” from Merck, “there should have been, at the very least,” some written evidence to substantiate the claim that the right of first refusal was transferred to John Kean prior to the trust being terminated.

The developer also indicated in the lawsuit that he was advised by his legal team that when the trust was disbanded in 1997, there should have been “an assignment or refunding bond” to confirm such a transfer, but Merck never received any notification of this and so far no one has produced any legal documentation supporting such a transfer.

That leaves in question not only whether the right of first refusal could legally be transferred to Kean University, but also if there is an actual legal covenant to be assigned.

The developer said he has been left hanging, stating Merck stopped communicating with him recently, and decided a lawsuit was the only way to slow things down.

He says in the lawsuit he tried to reach out to attorneys working on behalf of Kean, but his pleas fell on deaf ears.
“Unfortunately, after exhausting all efforts to try and reach an amicable resolution, the board of trustees has stated that it will pursue its claim and will not cease its efforts to claim the 44-acre parcel and 9-acre parcel,” the lawsuit said.

Russo Development planned on developing a transit-oriented center complete with 1,000 sale and rental housing units, 100,000-square feet of lifestyle retail space and 2,000 parking spaces.
Russo also fully intended to work closely with the township boards and governing body to facilitate this large development project.
The developer is asking the court to “maintain the status quo” and not allow Kean University to move forward with a purchase until all the legal issues are ironed out and it is determined who actually has the right to buy the property.

“The plain truth is that in a highly complex transaction of this nature there is too much that can be mishandled or handled in a way that would be different and inimical to the way an experienced developer like Russo would proceed and could be conducted in a manner that would impair or injure Russo’s proposed project,” the lawsuit noted in summary.

The township, although not a party to anything the state university is trying to accomplish, was named in the lawsuit because Kean is located in their municipality.

The township, in the dark about what was going on, and frustrated by years of a lack of communication or respect from Kean officials, lashed back at Farahi in the form of a public letter. The letter, from Union Mayor Clifton People to the residents of the township and county, appeared in several newspapers this week, including LocalSource.

In the missive, People provided details to what he called “details on a developing situation involving the Merck property.”
“This situation is moving rapidly and if not properly addressed, will have a direct impact on all of Union County and Union Township residents now and into the future,” he said, adding that if Kean succeeded in their quest to buy the Merck property, the result will be “in greater traffic, an even larger burden on our infrastructure and a significant increase in our local and county property taxes due to loss of ratables.”

The Union mayor stressed that everyone’s taxes in the county would go up if the full 50 acres are exempt from paying property taxes and mentioned that while the township is committed to the future success of the university, the long term impact on residents from such a deal is not good.

People explained this is why the township and county passed unanimous resolutions “condemning the actions of Kean University in this matter.” The mayor also made it clear that the township fully intended to “pursue every legal option” to protect township and county residents. He also asked the Kean Board of Trustees, in the spirit of cooperation, to refuse the assignment of the right of first refusal and “work with the township to address any real or unmet needs of the university.”
It did not take long to get an answer to his letter.
Monday the Kean Board of Trustees made it clear there would be no working with the township when they passed the two resolutions that moved the university closer to purchase of the Merck property. Compounding the issue was a letter released Monday night at the board meeting from the university president to the mayor in response to People’s public missive.
The four-page letter addressed the resolution the township passed regarding the university’s interest in buying the Merck property, stressing that Kean wanted to work with the township “for the betterment of the communities we serve.”
Farahi noted he was “saddened by the focus and tenor of your resolution,” especially because Kean had served “as a vibrant contributor to your community.” He went on to list many things the university has done for Union in the past, including the fact that Kean “funded the purchase of a new fire truck and equipment.”
This raised the ire of Township Administrator Ron Manzella, who explained what actually took place.
“Kean made three of the five payments on that fire truck and we had to dip into surplus to pay off the remaining $200,000,” said Manzella Tuesday morning, pointing out that Farahi told them he “did not have the money to pay off the rest.”
Farahi also indicated that the university could not walk away from the assignment by the Kean family of the right of first refusal because the Merck property is linked to the university on three sides.
“Not only is it the only piece of land available to a completely land-locked Kean University, but its future also could have serious ramifications both now and in the years to come on our institution,” the university president said in his letter to People.
Farahi also addressed the mayor’s concern that the township will lose about a million dollars in property taxes if the university acquires the Merck property because state universities and colleges do not have to pay municipal or state taxes.
“If after the period of due diligence we find the property could be developed appropriately or acquired, we assure you that there are several options that would render the township whole in this regard,” Farahi said, adding that the township and Kean have been discussing these issues for the last three years, most notably at a meeting that took place in recent weeks between Manzella and Kean’s Executive Vice President Of Operations, Philip Connelly.
Manzella, though, begged to differ.
“I met with Phil for lunch,” the township administrator said in an interview with LocalSource Tuesday morning, explaining that he and assistant township administrator Tammie Kopin spent an hour discussing sports with Connelly and only in the last few minutes did Connelly even bring up the issue of the Merck property or anything to do with that subject.
“Right before we finished lunch Phil asked me if the township had a contract with Merck and I told him ‘how could we? We don’t own the property.’” the township administrator explained, adding that the conversation lasted less than a minute and was over.
Manzella brought up that in his letter to the mayor, Farahi noted that the university “sold the township the property it needed to successfully develop the Union Train Station,” and that was not true at all.
“We swapped land,” said the township administrator flatly, adding that the university president was aware of what actually transpired regarding this issue.