Prominent office owner Paramount cut its dividend payment by more than half.

REIT slashes quarterly expenses by 55%, move expected to save Paramount $40 million a year, Crain’s Report.

The firm said the move would bolster the REIT’s “already solid financial profile.” But the move surprised analysts like Evercore ISI’s Steve Sakwa, who pointed to Paramount’s already conservative payout ratio of 57%.

In a note, Sakwa said the dividend cut could cushion Paramount’s impact on JPMorgan’s upcoming office lease decision on First Republic Bank.

The failed bank leased 455,000 square feet of space at 1 Front Street (its headquarters) in downtown San Francisco, but JPMorgan can keep the lease, which would cost Paramount $42 million in rental income.

Paramount is also trying to fill the 500,000-square-foot vacancy left by Barclays at 1301 Sixth Avenue in Manhattan; the REIT’s assets are spread across two coastal cities, and the company’s largest single tenant is First Republic.

REITs are required to distribute 90% of their taxable income as dividends — a cut to Paramount’s imminent earnings hit. Last year, it paid out $73 million and held $450 million in unrestricted cash. Paramount has $2.5 billion in debt scheduled to come due within the next five years.

Two months ago, Vornado Realty Trust suspended its dividend for the rest of the year, unnerving some. Steven Roth’s REIT is the second largest office landlord in New York City. It paid out more than $400 million in dividends last year.

Before the suspension, the landlord was removed from the S&P 500 index. Vornado responded by cutting its dividend by nearly 30% — a larger-than-expected cut — as office landlords continue to be frustrated by high interest rates, high economic uncertainty and high remote work patterns.

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