Arilex Realty’s Good Cash Flow, Bad Debt in Cliffside Park

The Centre, a 314-unit complex with 50,000 square feet of retail in Cliffside Park, New Jersey, has a lot going for it.

It was completed fairly recently, in 2017. That same year, its owner, Arilex Realty, paid off its construction loan with a $126 million bridge loan from TPG Real Estate Finance, then replaced that with a $130 million CMBS loan. The New York Times called the 16-story property a “luxury rental building in the heart of the business district.”

All indications are that it has been a success for Arilex, named for managing members Arianne Schreer and Alexis Pizzurro — daughters of veteran Gold Coast developer James Demetrakis. Cash flow (the debt service coverage ratio is a robust 2.4) and occupancy (more than 90 percent) are even better than underwriters expected when Arilex nabbed the CMBS debt.

Yet the owners failed to refinance and pay off the mortgage when it matured in July 2024. An initial two-month forbearance ended Sept. 6.

Modification negotiations with the debt’s special servicer are ongoing. “This one is a bit of a head-scratcher,” Morningstar analysts wrote.

So, what is going on here? A new appraisal puts the Bergen County property’s value at $161.1 million, down 14 percent from $188.2 million when the mortgage was issued. Higher interest rates, and thus higher cap rates, likely explain the drop.

A $130 million refinancing would have a loan-to-value ratio of more than 80 percent, well above the initial 69 percent and too high for CRE lenders. A refi at an LTV of 69 percent would be a $111 million loan, which means the borrower would need to come up with $19 million to repay the matured loan.

Arilex might also be buying time in hopes that interest rates will drop, but one month into the new administration, nothing seems imminent on that front. Ten-year Treasury notes were yielding 4.29 percent on Election Day and are now at about 4.5 percent.

A message left at The Centre seeking comment was not returned.

Schreer and Pizzurro joined their family firm’s development team of what was then called Cliffside Park Towne Centre, at 702 Anderson Avenue, shortly before the project opened in 2017, then managed the property through the pandemic.

The sisters’ first ground-up project was Metro Place in North Bergen, at Tonnelle Avenue and 48th Street. Last fall they borrowed $59 million from S3 Capital to build a 12-story multifamily project at 7711 River Road in Edgewater.

Their father, Demetrakis, a prolific builder known for such projects as Waterford Towers in Edgewater, got into trouble late in his career. He pleaded guilty in 2019, when he was 79, to helping fellow Gold Coast developer Fred Daibes illegally obtain loans.

Schreer had gone to work for her father straight out of college in 1994, and Pizzurro joined two years later after a year as a CNBC news writer, NJ.com reported in 2021. Billy Procida, a protégé of Demetrakis, told NJ.com that Schreer and Pizzurro “have grown up eating and sleeping real estate.”

But, as is the case for many real estate investors, this is the first time the sisters have had to cope with a suddenly heightened interest rate environment. Because Arilex used CMBS debt for 702 Anderson Avenue, the world can see how they are navigating it.