Shares in Bank OZK are sliding this week after Citigroup analysts noted that a short-term loan modification on a $915M construction loan looked more like a stopgap measure than a solution.

The Arkansas-based bank provided IQHQ with an approximately six-week extension on the construction loan covering its struggling Research and Development District development in downtown San Diego, pushing the new maturity date out to Oct. 9. Citi Research analysts said in a note that the deal looked like a last-ditch effort to avoid default on the property. 

"The new maturity date is October 9, 2026 (agreement signed by OZK on September 30, IQHQ on October 1). The modification was made effective as of August 26, 2026 (despite being signed a month later), indicating it was a last-minute agreement (in our view) to prevent a default on the original maturity date, which had already passed," the researchers wrote.

"In our view, this extremely short extension of approximately six weeks is not a long-term solution but rather a brief forbearance period,” the note says. 

The analysts said the result suggests that Bank OZK and IQHQ were unable to reach an agreement to extend or refinance the loan. Citi analysts noted that the extension offered a short-term window to finalize a more substantive workout but said it “underscores the severity of the project’s financial distress” and pressure to resolve the situation. 

Shares in Bank OZK were trading down by more than 5% since Citi disclosed the loan modification in the research note this week.

“In complex transactions, short-term extensions routinely occur as the parties finalize documentation for longer-term extensions,” Michelle Rossow, Bank OZK’s chief communications officer, told Bisnow in an email Wednesday. 

Bank OZK executives were asked about the loan by analysts on the firm’s second-quarter earnings call in July and will have to have some type of update on the third-quarter call on Oct. 21, after the amended loan’s maturity date. 

President Brannon Hamblen said on the call that the bank was engaged in conversations with IQHQ and a mezzanine lender around a multiyear extension and recapitalization of the project. Terms hadn’t been fully developed yet, he said, but he hoped to be able to say more on the third-quarter call. 

“Can't really say more about it now, hopefully in around 92 days, we'll have more to report,” he said.

The $1.6B Research and Development District, or RaDD, began construction in 2021. The 1.7M SF life sciences project was completed in 2024 without any tenants in place, and IQHQ has struggled to fill it with life sciences tenants. 

The San Diego-based firm’s bet on RaDD has dragged down investors, with six registered funds with $707M allocated to IQHQ having their positions marked down in the second half of 2025.