Real Estate NJ
After giving a tour of the former Hoffman-LaRoche campus, Eugene Diaz and Edwin Cohen each took a seat in the expansive, sun-filled lobby of the tower known as Building 76.
It was mid-January, a little less than four months after an affiliate of their development firm closed on its purchase of the 116-acre property that straddles Nutley and Clifton. With two years of painstaking negotiations behind them, it was a chance to take stock of where they stood in their plans to redevelop the site as a bustling, mixed-use environment for corporate tenants.
They had no intention of getting ahead of themselves — or getting lost in the big picture.
“We’re at step one-half,” said Diaz, a principal with Prism Capital Partners. “We’re digesting the acquisition, making sure that we’re doing the operational activities to maintain the property and understand how it all works, how all the buildings are put together.”
As he ticked off a list of incremental steps, such as learning the building systems and making sure they run efficiently, Diaz was decidedly measured and matter-of-fact. But it would be tough to understate the impact, potential and seismic nature of what comes next for the now-vacant campus on Route 3 — the arrival of some 2,500 people in fall 2018, when the new Seton Hall-Hackensack Meridian School of Medicine is slated to open its doors.
“This is a monumental deal,” said Cohen, also a principal with the firm. “Just try to think about the other operations that would want to be close by. It’s almost like in the old days when a car manufacturer would establish their main plant somewhere. All of their suppliers would want to be around them or close to them, and that brings more people, brings more buzz, it brings more need for other support service facilities, for other residential components.
“It’s the anchor.”
Such is the mood around the former Roche campus these days, a far cry from the doubt and despair that spread through the region more than four years ago. The Swiss pharmaceutical giant announced in June 2012 that it would vacate its home of more than 80 years, but pledged to find a buyer that would work to give the property a second chance.
It found exactly that in the Bloomfield-based development firm, which closed on the property in late September. Prism would not disclose the price, but market sources pegged the transaction at more than $100 million.
Shortly after closing, Diaz proclaimed that “the pieces are now in place to move this landmark campus into its next chapter as a preeminent commercial location.”
And while Prism now appears to have momentum on its side, there is still much work to be done. The firm must develop a master plan with not one but two host municipalities, which could entail at least a year of public hearings and negotiations. Local officials in both towns are both excited and supportive of those efforts, but the exact makeup of the campus has yet to be decided.
But make no mistake: The resurrection of the Roche property is well underway — and Prism is already seeing tangible signs of the promise that its sprawling campus holds.
Renovations are underway at buildings 123 and 123A in Nutley, the future home of the Seton Hall-Hackensack Meridian School of Medicine.
It wasn’t long after the closing that construction crews began renovations at buildings 123 and 123A, two of the five that were left standing when Roche opted to raze most of the campus. In less than 18 months, they will become home to the new medical school and two existing Seton Hall programs, with a footprint that spans nearly 480,000 square feet and includes clinical research space.
For the other three buildings, Prism executives say they’ve already engaged companies in fields such as biomedical research, consumer products and television and film, despite having not launched a formal marketing campaign as of mid-January. Not to mention the build-to-suit projects that the firm is discussing with users that want to be on the campus, which is less than 10 miles from Manhattan, but don’t fit into any of the existing buildings.
“Clearly, the story that we’re telling is resonating in terms of what we’re going to create here as a 24-7, live-work-play environment,” Diaz said. “Outside of Hoboken and Jersey City, in the suburbs, where else do you have that?”
He added that Morristown has “a nice collection of office space,” but used that to highlight another key selling point: “If you looked at Morristown from James Street to Headquarters Plaza, that’s essentially the size of this campus. So we can effectively create sort of a Morristown here from that standpoint.”
It’s why Prism will seek interim redevelopment agreements in the immediate months ahead for individual portions of the site, as has already been done with the medical school, in order to reoccupy the existing buildings as quickly as possible. Diaz said it was “absolutely” atypical to approach an entitlement process in such a way, but that it made sense for this project.
“It is (atypical), and what’s driving it is the fact that there’s incredible interest already in the campus and the existing buildings of the campus — driven, in part, by the med-ed anchor of Hackensack-Seton Hall.”
Cohen added that “the quality of the balance of the real estate that we have here” is also a key component: “That’s why it’s extremely unique that you would have a parcel this large together with buildings of first-class, trophy caliber as the spearhead to new development.”
By late spring, the firm hopes to start the sizable task of developing a master plan with local officials, a process that will be more complex because it involves two governing bodies. The campus — most of which is bounded by Route 3, Kingsland Street, Darling Avenue and Cathedral Avenue — is almost evenly split between the two municipalities, although most of the vacant land sits on the Clifton side.
Diaz said he expects that process to take 12 to 18 months, even with the significant public exposure and planning that the sale of the property generated over the past two years.
And while that will likely mean plenty of work ahead for the developers and municipal leaders, there’s no denying the achievements to date.
The patio of Building 123 at the former Roche campus in Nutley and Clifton — Courtesy: JLL
Roche announced in June 2012 that it was consolidating its research at sites in Germany and Switzerland, cutting 1,000 jobs in the process. That meant the end of the iconic campus in northern New Jersey, which threatened to put even more vacant commercial space on the market in a region that is already rife with obsolete office parks.
Of the two host communities, Nutley took the biggest financial hit. Township officials said the Roche campus generated about $10 million in annual property taxes at the time, or about 10 percent of the municipality’s tax base. That has since dropped to less than $3 million with Roche’s exit and the razing of much of the property.
That impact on local tax rolls, along with the loss of jobs and the economic ripple effect, could not be abated in the near term, but stakeholders say Roche took important steps toward ensuring that a sale of the property could lead to a viable redevelopment. The company formed a joint repurposing committee, in which consultants evaluated the site and determined the best uses for it going forward.
“There was a certain amount of trust (between Roche and the host municipalities),” said Patricia Adell of Real Estate Solutions Group, a consulting firm that helped spearhead the effort in conjunction with Perkins Eastman. “They know that Roche really wanted to do this the right way.”
The committee ultimately presented three different concepts to officials in both Nutley and Clifton that showed a nearly 4 million-square-foot campus with open space and a mix of uses — everything from lab and light industrial to townhomes and hotel rooms.
Adell said the process went a long way toward easing the transition and creating value for the site, even though the plans were only conceptual. Roche could have put the property up for sale without taking any of those steps, she said, but the company “really wanted to be the corporate citizen because their name had been on this for so long.”
Also key was the company’s decision to both knock down the obsolete buildings and oversee remediation at the site, which included cleanup of both soil and groundwater.
“Although this took two years, I think it really expedited the development process,” said Adell, owner of the Princeton-based firm. “And they were very fortunate to hit a good market.”
Along the way, it also happened that the leaders of Seton Hall University, the former Hackensack University Health Network and other stakeholders struck a landmark agreement to bring the medical school to the campus. Among those who helped make the deal happen, Adell credited the late Caren Franzini, the former CEO of the state Economic Development Authority, who also worked as a consultant to the project and was “instrumental” in identifying the site for Hackensack.
Following the hospital system’s merger with Meridian Health, the school is now known as Seton Hall-Hackensack Meridian School of Medicine. The institution signed a lease in July in conjunction with the signing of a purchase and sale agreement between Roche and the developer.
“To get to this point is pretty amazing,” Adell said.
There is broad support for the high-end commercial uses that appear to be on the horizon at the campus. But Prism still has the task of working out a master development plan that figures to include a mixed-use residential component.
It’s unclear how many units that will entail — or, for that matter, what the other phases of the project will look like. The plans that were developed through the joint repurposing committee included between 600 and 800 residential units, a mix of apartments, high-end condos and age-restricted townhomes.
But those were purely conceptual and developed three years ago — well before local officials knew that they would have a medical school with 2,500 users as an anchor.
Nutley Mayor Joseph Scarpelli said the concept plans “laid the groundwork,” but that he expects significant changes, given the addition of the educational component. He also expects local residents to have a greater role in the process this time around, adding that, with concerns about overcrowding in Nutley’s schools, “residential development on the site is certainly going to be something we’re going to look at with a sharp eye.”
“Anything that produces school-age children is not going to be something the public is really going to embrace because of the overcrowding in our schools,” Scarpelli said. “So we’ve got to work through that. That’s going to be a big hurdle.”
The lobby of Building 123 on the former Roche campus, the future home of the Seton Hall-Hackensack Meridian School of Medicine.
Despite that, Scarpelli said it was important to acknowledge that “we’re excited about the live-work-play concept that Prism has been pushing, and we think it’s going to really spur the site.”
Officials in Clifton have been vocal about having little to no housing on their side of the property and no big-box retail. James Anzaldi, the city’s mayor, said the breakthrough of the medical school goes a long way toward achieving those goals and instead attracting other high-end corporate tenants.
“Certainly, a multistory building for offices or research is worth a lot more money in taxes and probably fills more jobs than we would with retail,” Anzaldi said. “So the economic stance is important that we produce jobs and ratables — and the best of those. And I think if we strive for that, we’re going to get it.
“Four years ago the medical school wasn’t something we even thought about, but it came along because I think they kept on seeing the potential.”
Diaz said he expects Prism’s proposal to have some similarities to the repurposing committee’s earlier concepts, but added, “We think that the layout and the location in terms of the design elements will have a different thought and feel to it.”
He also believes its timeframe will be much faster. The concept plans projected that full build-out and stabilization would take up to 25 years, but Prism feels it is more like 10 to 15.
One thing is certain: He and Cohen feel that the plan has to be truly mixed-use in order to work.
“Without pulling any punches, we need to create a live-work-play environment here or this will not be successful and likely the hospital’s venture here with the school will not be successful,” Diaz said. “School kids that are going to pay that kind of money to go to a medical school do not want to go to a blank, industrial, empty location.”
Those students want access to services and amenities and feel like they’re part of a community, Diaz said, so it’s critical for the towns to provide the zoning needed for such an environment.
“This is not to be a closed, insular campus,” he added. “That’s not what corporate America wants, it’s not what the C-suites want anymore. They want integration, they want people easily coming and going, they want access to transportation, access to amenities. They want people to enjoy themselves and have a culture surrounding their business.
“That’s what’s driving their decisions, and if we’re able to create that here, then we will attract those kinds of enduring businesses that will add value to these communities.”
With that in mind, Diaz and Cohen said it’s the job of a developer to ensure that all stakeholders understand just how important each component is.
“We have to educate the public that, from these gates — where they’ve never been able to enter — this new dynamism is going to be created for the benefit of the communities,” Cohen said. “This will be an open campus.”
That means an abundance of parkland, a town square and the fact that the gates that now surround the campus will eventually come down. They will remain up during construction as a security measure, but if the current interest translates into new entitlements and new tenants, it will only be a matter of time.
As for what’s next, Prism is assembling a marketing team and preparing to create a new “brand and identification for this campus,” Diaz said. That starts with simply finding a new name.
“It’s always been the Roche campus,” Diaz said. “They’re not here anymore, so we’ll have a name announced shortly that creates an identity for this campus that we think will help people recognize the principles of what this campus will stand for.”
In its heyday, the former Roche campus boasted a daily population of up to 8,000 people.
In order to get back to that level, executives with Prism say mass transit is critical.
The firm is now in discussions with NJ Transit about creating a central bus station on the property that would connect the area with the region’s main transit hubs.
“We think that there’s a wonderful opportunity to domicile and enhance the bus network system on a portion of this campus into Port Authority and into the surrounding neighborhoods like Newark as well,” Diaz said. “And from the medical school’s perspective, the broader (the area from which) they can attract students … who still get here easily without getting into their cars, that’s a key component and we think that will play out over time.”