Vornado Realty Trust, other Office REITs take a Hit, Axios says Office Real Estate “getting kind of ugly.”  

Vornado Realty Trust, which owns a portfolio of New York City offices, announced on April 26, 2023, that it will postpone dividends on its common shares until the end of the year. At that point, the dividend may be payable in a combination of cash and securities, in the board of trustees’ discretion.   

Vornado’s board also announced that it had authorized a $200 million stock buyback plan, which is a significant portion of the overall $2.8 billion market capitalization, according to SEC filings. The board further noted that cash retained from the suspended dividend or prospective asset sales would be the source of funds for the stock buyback plan.  

Vornado previously announced that a joint venture it controlled had defaulted on a $450 million loan related to a group of Fifth Avenue retail properties.  

Office REITs take a Dive  

According to a recent article from Axios, “office real estate is getting kind of ugly.” With interest rates continuing to rise and more people working from home, commercial real estate –and office REITs – are struggling.  

There were two more defaults in February – Columbia Property Trust, another office REIT who defaulted on $1.7 billion in debt related to a portfolio of seven office buildings. And the massive multinational real estate firm Brookfield Corp. reportedly defaulted on $750 million in loans connected to two office buildings in downtown Los Angeles.  

According to Axios, nearly 30% of companies still have remote or hybrid options and office building appraisals were down 25% in February compared to last year. Delinquencies on commercial office mortgages was reportedly 2.4% in February, up from 1.5% six months ago, according to Axios citing Trepp.   

Risks of Investing in Publicly Traded REITs  

Investing in publicly traded Real Estate Investment Trusts (REITs) comes with certain risks that investors should be aware of. Diversification, understanding the specific REIT’s strategy, and considering one’s risk tolerance are important factors to consider in managing these risks effectively. These risks include:  

• Market Risk: REITs are subject to market fluctuations and can be affected by changes in interest rates, economic conditions, and overall market sentiment. If the real estate market experiences a downturn, the value of REIT shares may decline. 
• Change in Interest Rates: REITs often rely on debt financing to acquire properties. When interest rates rise, the cost of borrowing increases, which can impact the profitability of REITs. Higher interest rates may also make other investments more attractive, diverting capital away from REITs. 
• Underlying Properties: The performance of a REIT depends on the underlying properties it owns. Factors such as location, tenant quality, and property management can impact the revenue and profitability of the REIT. Changes in occupancy rates, rental rates, or property values can affect the income generated by the properties and, subsequently, the returns to investors. 
• Suspension of Dividends: REITs are required by law to distribute a significant portion of their income as dividends to maintain their tax benefits. However, if a REIT experiences financial difficulties or faces challenges in generating rental income, it may reduce or suspend dividend payments, which can negatively impact investors’ income. 
• Regulatory Risk: REITs are subject to various regulations and tax requirements. Changes in tax laws, regulations, or government policies can impact the operations and profitability of REITs. These changes may affect the attractiveness of investing in REITs and can create uncertainty for investors. 
• Risk of Liquidity: Although REITs are publicly traded, their shares may not always have high trading volumes. This illiquidity can make it challenging to buy or sell shares at desired prices, potentially leading to higher transaction costs or difficulty in exiting a position. 
• Poor management: The success of a REIT depends on the skills and expertise of its management team. Incompetent management, poor decision-making, or lack of experience can negatively impact the performance of the REIT and investor returns. 

Broker Due Diligence  

Brokerage firms are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor considering that investor’s age, investment experience, net worth, risk tolerance, investment objectives, and income.  Firms that fail to perform adequate due diligence or that make unsuitable recommendations can be held responsible for investment losses in a FINRA arbitration claim. 
 
Aggressive financial advisors may have unsuitably recommended Vornado Realty Trust in an effort to chase yield. Investors who buy solely based on the dividend may experience losses as the dividend is cut and the stock price declines in response.  

If your financial advisor over-concentrated your portfolio, you may have a viable claim to recover your losses.  Diversification is the key to reducing risk — over-concentrated exposure to any sector can be unsuitable for any investors.  

White Law Group – National Securities Attorneys  

If you are concerned about your investment losses in Vornado Realty Trust or another office REIT, the White Law Group may be able to help you. Please call the offices at 888-637-5510 for a free consultation.
  
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.          

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.           

With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.    For more information, please visit our website, www.whitesecuritieslaw.com.