Vornado Realty Trust, one of the largest publicly traded REITs in the country and one of New York City’s biggest office landlords, won't pay owners of its common shares dividends for the rest of 2023, the company announced Wednesday night.

The move came as a surprise that indicates broader problems for Vornado, analysts said — REITs typically pay out most of their earnings via dividends to shareholders.

“A complete suspension this early in the year suggests more going on inside 888 Seventh Avenue than the Street appreciates,” Piper Sandler Managing Director Alexander Goldfarb wrote in a client report, referring to Vornado's headquarters.

The company also said it plans to repurchase as much as $200M of its outstanding common shares through a new share repurchase program. It says the cash it saves on dividends — or raises through asset sales — would be used to fund the stock buybacks. It said it will pay out dividends in either cash or a combination of cash and shares after 2023, when it finalizes its taxable income.

“We believe a partial reduction would be preferable as it shows better on the underlying cash flows,” Goldfarb wrote in his note. “If cash preservation is so critical, we wonder why implementing a $200m stock buyback program is a good use.”

Vornado handed out $400M last year to shareholders via distributions, with the decision to suspend payouts sending shockwaves through the market and causing the REIT’s stock to plunge by 11% before markets opened on Thursday, MarketWatch reported. Its shares were trading at $14.93 before the announcement, and they have since recovered to almost their original value since trading began Thursday.

“It’s very unusual for a REIT to suspend its dividend at the start of the year, especially absent something like Covid,” Goldfarb told Bisnow in an interview, adding that Vornado could have arrived at the decision after looking at its upcoming tax losses and lining up some asset sales. “Fully suspending it begs the question of what’s going on.”

Vornado also announced Wednesday it would distribute a dividend to holders of preferred shares. The REIT recently put a hold on plans to redevelop the area around Penn Station, citing the interest rate environment. Chairman and CEO Steve Roth called new construction “almost impossible” during an earnings call in February.

Earlier this year, Vornado estimated that the value of some of its properties had fallen by over half a billion dollars, disclosing that it expects to take a $600M impairment change on its portfolio in a regulatory filing from the end of January.

Vornado reports its first-quarter earnings on May 2. SL Green, Manhattan's largest office owner and one of Vornado's peers, reported falling occupancy and rents last week, but also announced a 27-cent-per-common-share dividend.