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Bank OZK signals appetite for big condo construction loans in 2019

George Gleason, Chairman of Bank OZK and New York City (Credit: Bank OZK)

Bank OZK, among the most aggressive real estate lenders in the country, has signaled it could continue to make big construction loans in 2019. The news, which came as part of the Arkansas bank’s fourth quarter earnings report, comes amid a general nationwide slowdown in the housing market.

During an earnings call on Friday, CEO George Gleason said the bank was seeing strong sales on the condo projects it was involved in, especially developments in Miami. From 2013 to 2017, Bank OZK provided more than $1 billion in Miami loans from 2013 through 2017, according to previously-released information.

Gleason’s comments stand in contrast with many indicators and reports that Miami’s luxury condo market is struggling amid a surplus of luxury condos, which is driving down prices.

The regional bank, formerly known as Bank of the Ozarks, has become one of the biggest condo lenders in New York, Los Angeles and Miami and is widely seen as barometer of how those real estate markets are performing.

In October, Bank OZK provided a $558 million construction loan to Trump Group — no relation to the president — for its The Estates at Acqualina project in Sunny Isles Beach. The loan was the largest condo construction loan in Miami-Dade County this cycle.

Gleason said the bank could continue to do large credits like the Trump Group loan in the future if presented with the right opportunity.

The company’s stock jumped more than 13 percent on Friday in early trading. That compares to its previous earnings report.

From July to September, Bank OZK made two big write-offs on real estate loans from about a decade ago. The news sent the stock down 24 percent, and raised concerns about the broader credit quality of the bank’s loan portfolio. From October through December, the bank reported no major write-downs of real estate loans.

This time around, the news was better. Its fourth quarter earnings per share were 89 cents, beating analysts expectations of 84 cents.

It did report a drop in net income of 21.3 percent to $115 million, compared to the fourth quarter in 2017. During that period, Bank OZK received a one-time tax benefit of nearly $50 million.

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