Major real estate lender Bank OZK is having an awful day on the stock market after an analyst hit the institution hard over two projects it financed.
Citi analyst Benjamin Gerlinger downgraded his recommendation on the Bank OZK stock from buy to sell, a double downgrade that skipped over the hold option, Bloomberg reported. Gerlinger also dropped his price target on the stock from $57 to $37.
The bank’s stock shares closed at $46.19 on Tuesday, but after Gerlinger’s analysis, the shares opened Wednesday at $41.36 and spent most of the morning falling, dropping by as much as nearly 14 percent by midday, the largest drop within a day for the company since March 2020. As of 12:25 p.m. ET, the stock is down 20 percent year-to-date.
“We have newfound, but substantial concerns with what we believe to be OZK’s largest individual loan, a multi-use project in Atlanta, and Life Science construction lending in general,” Gerlinger said in his client note.
Gerlinger honed in on two projects. In San Diego, the Arkansas-based lender financed a research and development district that hasn’t scored much in the way of leases, “indicative of a difficult Life Science construction lending market.”
In Atlanta, meanwhile, there has been a “lack of interest” in leasing office space at the mixed-use Echo Street West project, a 19-acre development with 292 apartments, 300,000 feet of office space, 50,000 square feet of retail space and 16,000 square feet of event space, according to Morningstar. Bank OZK provided at least $135 million in financing.
Gerlinger is one of two analysts recommending holders sell on Bank OZK, according to Bloomberg. Three analysts have still labeled the stock as a buy, while about half of the analysts covering the company recommend holding.
Bank OZK did not respond to a request for comment from Bloomberg.
In the first quarter, Bank OZK reported a record level of net income available to common stockholders, record diluted earnings per common share, and a record pre-tax, pre-provision net revenue.
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