MIDDLETOWN, NJ — A long-running legal battle over the future of a 51-acre property along Route 35 has been settled, clearing the way for a significantly scaled-back residential development that will bring 450 town homes to the site.
A New Jersey Superior Court judge signed off on the settlement Oct. 2 between Middletown Township and AAMHMT Property LLC, the Wall Township-based developer seeking to purchase the property at 761 Route 35.
The settlement resolves a lawsuit filed by AAMHMT against the township in 2023 over the proposed development and Middletown's affordable housing obligations.
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Under the agreement, 450 residential units will be permitted on the property, with 68 units — 15 percent of the total — designated as affordable housing.
The development plan calls for 170 three-story, market-rate townhomes, 226 stacked townhomes, and 54 affordable housing apartment-style units. Some of the stacked townhomes also will be designated as affordable housing.
The settlement represents a major reduction from the developer's original proposal, which called for 937 housing units on the site.
The property, long associated with the former Circus Liquors and the Calico the Evil Clown sign along Route 35, includes a large vacant parking area, an empty liquor store building and wooded portions of the site. Most recently the property was used as a film location, temporarily outfitted as a gas station, etc.
The Scaduto and Azzolina families, through their company Mountain Hill, have owned the property for years and have a contract to sell all 51 acres to AAMHMT.
While the residential development will occupy much of the property, portions of the site will remain wooded.
The settlement requires the developer to preserve trees and maintain buffers along Route 35 and Kings Highway East. According to Middletown Township attorney Brian Nelson, the retained trees should provide significant screening, particularly during the summer months, when the homes are expected to be largely hidden from view from the major roadways.
According to the plans, there will be no entrance to the development directly from Route 35.
Instead, access will be provided through Kings Highway East, Carton Way and Kanes Lane.
The settlement also includes requirements addressing the property's environmental features, including wetlands located on the site.
The project is not ready for construction at this time.
AAMHMT still must submit engineering plans and site renderings to Middletown and obtain approval from the Middletown Planning Board. Depending on the final plans and environmental conditions, approvals from the New Jersey Department of Environmental Protection may also be required.
As a result, construction remains years away.
The settlement brings an end to a legal dispute that began after AAMHMT proposed a much larger residential development for the property.
The developer sued Middletown in 2023, arguing that the township was not meeting its affordable housing obligations under state requirements. AAMHMT contended that its proposed development, which included affordable housing, should be permitted to move forward.
Middletown opposed the original 937-unit proposal.
The court-ordered settlement allows housing to be built on the property, but at less than half the density originally sought by the developer.
The 68 affordable units will represent 15 percent of the total development.
The future of the property has been the subject of development proposals for years.
Middletown had previously supported a mixed-use concept that would have placed housing toward the rear of the property while bringing retail, restaurants and entertainment uses closer to Route 35.
That proposal became known as Village 35, or The Shoppes at Middletown.
Plans unveiled in 2018 called for a Wegmans, movie theater, 24-Hour Fitness and additional shops and restaurants along Route 35, with housing located behind the commercial development.
The project ultimately collapsed in 2020 during the COVID-19 pandemic after the developer withdrew, citing an inability to secure financing.
Now, instead of the long-discussed mixed-use center, the property is slated for a primarily residential future.
The settlement agreement is 37 pages and has been posted by Middletown Township on its website.
For a property that has sat largely vacant for years, the agreement marks another major step toward determining what will eventually occupy one of Middletown's most recognizable stretches of Route 35.
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