What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 253 added, 153 removed, 344 unchanged (54% of the section changed)

3 unchanged sentences

(In Thousands)

September 30,

2021 December 31,

7 unchanged sentences

Other assets 20,606 20,093

Assets held for sale - The Saint Mary — 36,516

Assets held for sale 67,264 105,727

Total assets $ 559,100 $ 544,016

6 unchanged sentences

Other liabilities 21,382 16,709

Liabilities held for sale - The Saint Mary — 25,607

Liabilities held for sale 75,174 100,644

Total liabilities 431,698 434,252

11 unchanged sentences

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(In Thousands, Except Per Share Amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

12 unchanged sentences

General and administrative expenses 5,422 2,868 16,365 8,786

Impairment of real estate 625 — 625 —

Income from forfeited earnest money — — — ( 15,000 )

3 unchanged sentences

Interest expense, net ( 2,859 ) ( 3,587 ) ( 8,666 ) ( 11,168 )

Loss on early extinguishment of debt ( 163 ) — ( 226 ) —

Net gain on extinguishment of debt 3,680 — 3,454 —

Other income, net 70 85 74 114

1 unchanged sentence

( 4,113 ) ( 7,726 ) 1,627 ( 7,440 )

(Provision for) benefit from income taxes ( 62 ) ( 1,148 ) ( 269 ) 1,370

Provision for income taxes ( 82 ) ( 7,536 ) ( 351 ) ( 6,166 )

Equity in unconsolidated affiliates' loss ( 2 ) ( 9 ) ( 11 ) ( 9 )

3 unchanged sentences

433 193 ( 6,248 ) 1,601

Net (loss) income and total comprehensive (loss) income attributable to common stockholders

Net loss and total comprehensive loss attributable to common stockholders

$ ( 3,764 ) $ ( 15,078 ) $ ( 4,983 ) $ ( 12,014 )

Basic and diluted net (loss) income per share attributable to common stockholders $ ( 1.23 ) $ 0.50 $ ( 0.15 ) $ 0.37

Weighted-average common shares outstanding:

Basic and diluted net loss per share attributable to common stockholders $ ( 0.46 ) $ ( 1.84 ) $ ( 0.61 ) $ ( 1.46 )

Basic and diluted weighted-average common shares outstanding

8,239 8,214 8,232 8,208

Diluted 8,235 8,228 8,229 8,230

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

2 unchanged sentences

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flow from operating activities:

Net income $ 5,462 $ 1,656

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Net income (loss) $ 1,265 $ ( 13,615 )

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation 8,758 10,339

Cost of real estate sold 4,028 10,692

Impairment of real estate 625 —

Gain on sale of assets ( 22,931 ) —

Loss on early extinguishment of debt 226 —

Net gain on extinguishment of debt ( 3,454 ) —

Amortization of debt issuance costs and stock-based compensation 1,468 1,601

2 unchanged sentences

Purchases and development of real estate properties ( 30,841 ) ( 11,607 )

Increase in deposits 358 46

(Increase) decrease in other assets ( 1,309 ) 1,215

Decrease in accounts payable, accrued liabilities and other ( 2,162 ) ( 8,385 )

Increase in other assets ( 997 ) ( 2,974 )

Increase (decrease) in accounts payable, accrued liabilities, deposits and other 5,699 ( 6,263 )

Net cash (used in) provided by operating activities ( 36,369 ) 459

10 unchanged sentences

Payments on project and term loans ( 53,330 ) ( 7,584 )

Cash dividend paid on vested stock-based awards ( 4 ) ( 8 )

Stock-based awards net payments ( 132 ) ( 79 )

Distributions to noncontrolling interests ( 13,227 ) —

Noncontrolling interests’ contributions 27,977 —

Financing costs ( 1,645 ) ( 423 )

Net cash used in financing activities ( 38,813 ) ( 4,076 )

Net cash provided by financing activities 10,010 429

Net increase (decrease) in cash, cash equivalents and restricted cash 25,438 ( 5,542 )

5 unchanged sentences

(In Thousands)

THREE MONTHS ENDED JUNE 30

THREE MONTHS ENDED SEPTEMBER 30

Stockholders’ Equity

2 unchanged sentences

of Shares At Par

Balance at March 31, 2021 9,377 $ 94 $ 188,121 $ ( 57,413 ) 1,143 $ ( 21,753 ) $ 109,049 $ 4,485 $ 113,534

Balance at June 30, 2021 9,377 $ 94 $ 188,323 $ ( 67,576 ) 1,143 $ ( 21,753 ) $ 99,088 $ 4,444 $ 103,532

Exercised and vested stock-based awards 11 — 25 — — — 25 — 25

Stock-based compensation — — 205 — — — 205 — 205

Distributions to noncontrolling interests — — — — — — — ( 140 ) ( 140 )

Noncontrolling interests’ contributions — — — — — — — 27,977 27,977

Total comprehensive loss — — — ( 3,764 ) — — ( 3,764 ) ( 433 ) ( 4,197 )

Balance at September 30, 2021 9,388 $ 94 $ 188,553 $ ( 71,340 ) 1,143 $ ( 21,753 ) $ 95,554 $ 31,848 $ 127,402

Balance at June 30, 2020 9,347 $ 93 $ 186,422 $ ( 40,503 ) 1,137 $ ( 21,600 ) $ 124,412 $ 11,575 $ 135,987

Balance at March 31, 2020 9,347 $ 93 $ 186,244 $ ( 44,637 ) 1,137 $ ( 21,600 ) $ 120,100 $ 11,906 $ 132,006

Exercised and vested stock-based awards 11 — 22 — — — 22 — 22

Stock-based compensation — — 176 — — — 176 — 176

Total comprehensive income (loss) — — — 4,134 — — 4,134 ( 331 ) 3,803

Balance at June 30, 2020 9,347 $ 93 $ 186,422 $ ( 40,503 ) 1,137 $ ( 21,600 ) $ 124,412 $ 11,575 $ 135,987

Total comprehensive loss — — — ( 15,078 ) — — ( 15,078 ) ( 193 ) ( 15,271 )

Balance at September 30, 2020 9,358 $ 93 $ 186,620 $ ( 55,581 ) 1,137 $ ( 21,600 ) $ 109,532 $ 11,382 $ 120,914

STRATUS PROPERTIES INC.

1 unchanged sentence

(In Thousands)

SIX MONTHS ENDED JUNE 30

NINE MONTHS ENDED SEPTEMBER 30

Stockholders’ Equity

9 unchanged sentences

Distributions to noncontrolling interests — — — — — — — ( 13,227 ) ( 13,227 )

Noncontrolling interests’ contributions — — — — — — — 27,977 27,977

Total comprehensive (loss) income — — — ( 4,983 ) — — ( 4,983 ) 6,248 1,265

Balance at June 30, 2021 9,377 $ 94 $ 188,323 $ ( 67,576 ) 1,143 $ ( 21,753 ) $ 99,088 $ 4,444 $ 103,532

Balance at September 30, 2021 9,388 $ 94 $ 188,553 $ ( 71,340 ) 1,143 $ ( 21,753 ) $ 95,554 $ 31,848 $ 127,402

Balance at December 31, 2019 9,330 $ 93 $ 186,082 $ ( 43,567 ) 1,133 $ ( 21,509 ) $ 121,099 $ 12,983 $ 134,082

3 unchanged sentences

— — — — 4 ( 91 ) ( 91 ) — ( 91 )

Total comprehensive income (loss) — — — 3,064 — — 3,064 ( 1,408 ) 1,656

Balance at June 30, 2020 9,347 $ 93 $ 186,422 $ ( 40,503 ) 1,137 $ ( 21,600 ) $ 124,412 $ 11,575 $ 135,987

Total comprehensive loss — — — ( 12,014 ) — — ( 12,014 ) ( 1,601 ) ( 13,615 )

Balance at September 30, 2020 9,358 $ 93 $ 186,620 $ ( 55,581 ) 1,137 $ ( 21,600 ) $ 109,532 $ 11,382 $ 120,914

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

3 unchanged sentences

The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported and consist of normal recurring adjustments.

Operating results for the second quarter of 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the third quarter of 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

In particular, the COVID-19 pandemic continued to affect Stratus' operations.

As a result, this interim period, as well as future interim periods while the COVID-19 pandemic is ongoing, will not be comparable to past performance or indicative of future performance.

Also, in September and October 2021, Stratus entered into agreements to sell The Santal and Block 21, respectively.

Refer to Note 4 for further discussion.

The preparation of Stratus’ consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions, including those related to the potential impacts arising from the COVID-19 pandemic and related government actions, that affect the amounts reported in these financial statements and accompanying notes.

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The impacts of the pandemic are continuing during 2021 but began to lessen as vaccines became widely available in the U.S.

during the first quarter of 2021, although there has been a recent rise in the number of cases in the U.S.

during the first quarter of 2021, although there have been periodic increases in the number of cases in the U.S.

as a result of vaccine hesitancy and the spread of COVID-19 variants.

3 unchanged sentences

As a result of the spread of the COVID-19 variants and resurgence in infections, on July 27, 2021, the U.S.

Centers for Disease Control and Prevention (CDC) changed its mask guidance to, among other things, recommend that fully vaccinated individuals wear masks indoors in areas of “substantial” or “high transmission,” which according to the CDC include Austin and much of Texas.

Stratus cannot predict the extent to which individuals may decide to restrict their activities as a result of these developments nor what impact these developments may have on its business.

As a result, the pandemic has had, and is expected to continue to have, a significant adverse impact on Stratus' business and operations, particularly on the hotel and entertainment segments.

As a result, the pandemic has had, and is expected to continue to have, an impact on Stratus' business and operations, particularly on its Hotel and Entertainment segments.

Because the pandemic is unprecedented in recent history, and its severity, duration and future economic consequences are difficult to predict, Stratus cannot predict its future impact on Stratus' business and operations with any certainty.

Stratus’ revenue, operating income and cash flow in its hotel and entertainment segments were adversely impacted beginning late in the first quarter of 2020 and through the second quarter of 2021, and are expected to continue to be adversely impacted during the second half of 2021, although the adverse impacts began to lessen during the first quarter of 2021.

The hotel has remained open throughout the pandemic and the 33 percent average occupancy rate in the second quarter of 2021 was higher than the 12 percent average occupancy rate in the second quarter of 2020 and the 21 percent average occupancy rate in the first quarter of 2021.

While Stratus' entertainment venues, ACL Live and 3TEN ACL Live, were able to host events during second-quarter 2021 and the first six months of 2021, capacity remained limited.

Stratus’ revenue, operating income and cash flow in its Hotel and Entertainment segments were adversely impacted beginning late in the first quarter of 2020 and through the first nine months of 2021, and are expected to continue to be adversely impacted during the remainder of 2021, although the adverse impacts began to lessen during the first quarter of 2021.

The hotel has remained open throughout the pandemic and the 40 percent average occupancy in the third quarter of 2021 was higher than the 16 percent average occupancy in the third quarter of 2020 and the 33 percent average occupancy in the second quarter of 2021.

While Stratus' entertainment venues, ACL Live and 3TEN ACL Live, were able to host events during third-quarter 2021 and the first nine months of 2021, capacity remained limited until opening up to full capacity in August 2021.

Refer to Note 1 of the Stratus 2020 Form 10-K for further discussion of the pandemic's impacts on Stratus' business.

Related Party Transactions.

Refer to Note 3 for discussion of LCHM Holdings, LLC (LCHM), its manager, and JBM Trust, which are related parties as a result of LCHM’s greater than 5 percent beneficial ownership of Stratus’ common stock and representation on Stratus’ Board of Directors.

LCHM and JBM Trust have invested in certain of Stratus' limited partnerships.

Stratus has an arrangement with Austin Retail Partners for services provided by a consultant of Austin Retail Partners who is the son of Stratus' President and Chief Executive Officer.

Payments to Austin Retail Partners for the consultant's consulting services and expense reimbursements totaled $ 27 thousand in third-quarter 2021, $ 28 thousand in third-quarter 2020 and $ 93 thousand for the first nine months of 2021 and the first nine months of 2020.

EARNINGS PER SHARE

Stratus’ net loss per share of common stock was calculated by dividing the net loss attributable to common stockholders by the weighted-average shares of common stock outstanding during the period.

The weighted-average shares of common stock exclude approximately 145 thousand shares for third-quarter 2021, 90 thousand shares for third-quarter 2020, 134 thousand shares for the first nine months of 2021 and 86 thousand shares for the first nine months of 2020 associated with restricted stock units (RSUs) and outstanding stock options that were anti-dilutive as a result of the net losses for the periods.

LIMITED PARTNERSHIPS

The Saint June, L.P.

On June 2, 2021, The Saint June, L.P., a Texas limited partnership and a subsidiary of Stratus, entered into a construction loan to develop The Saint June, a 182 -unit, multi-family luxury garden-style apartment project within the Amarra subdivision of the Barton Creek community in Austin, Texas.

In June 2021, The Saint June, L.P., a Texas limited partnership and a subsidiary of Stratus, entered into a construction loan to develop The Saint June, a 182 -unit, multi-family luxury garden-style apartment project within the Amarra subdivision of the Barton Creek community in Austin, Texas.

Refer to Note 6 for further discussion of this loan.

On July 1, 2021, an unrelated equity investor contributed $ 16.3 million to The Saint June, L.P.

In July 2021, an unrelated equity investor contributed $ 16.3 million to The Saint June, L.P.

partnership for a 65.87 percent interest.

6 unchanged sentences

The partnership agreement also contains a buy-sell option pursuant to which at any time either party will have the right to initiate a buy-sell of the other party’s interests.

Terminated Block 21 Sale.

In December 2019, Stratus entered into definitive agreements to sell Block 21 to Ryman Hospitality Properties, Inc.

(Ryman) for $ 275 million.

Ryman deposited $ 15.0 million in earnest money to secure its performance under the agreements governing the sales.

In May 2020, Ryman delivered a termination letter, which was agreed to and accepted by Stratus, terminating the agreements to purchase Block 21 and authorizing the release of Ryman's $ 15.0 million in earnest money to Stratus.

During the second quarter of 2020, Stratus recorded the $ 15.0 million as operating income.

EARNINGS PER SHARE

Stratus’ basic net (loss) income per share of common stock was calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average shares of common stock outstanding during the period.

A reconciliation of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating diluted net (loss) income per share (in thousands, except per share amounts) follows:

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Net (loss) income and total comprehensive (loss) income attributable to common stockholders

$ ( 10,163 ) $ 4,134 $ ( 1,219 ) $ 3,064

Basic weighted-average shares of common stock outstanding

8,235 8,210 8,229 8,205

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs)

Diluted weighted-average shares of common stock outstanding

8,235 8,228 8,229 8,230

Basic and diluted net (loss) income per share attributable to common stockholders

$ ( 1.23 ) $ 0.50 $ ( 0.15 ) $ 0.37

Excludes 147 thousand shares for second-quarter 2021 and 128 thousand shares for the first six months of 2021 of common stock associated with RSUs and stock options that were anti-dilutive as a result of the net loss.

Excludes 59 thousand shares for second-quarter 2020 and 37 thousand shares for the first six months of 2020 of common stock associated with RSUs that were anti-dilutive.

RELATED PARTY TRANSACTIONS

Stratus Block 150, L.P.

In September 2021, Stratus Block 150, L.P., a Texas limited partnership and a subsidiary of Stratus, completed financing transactions from which a portion of the proceeds were used to purchase the land for Block 150, now known as The Annie B, a proposed luxury multi-family high-rise development with ground-level retail in downtown Austin, Texas.

The proceeds will also be used to fund predevelopment costs of the project.

These financing transactions included (i) a $ 14.0 million land loan and (ii) $ 11.7 million from the sale of Class B limited partnership interests in a private placement offering, along with $ 3.9 million in cash and pursuit costs contributed by wholly owned subsidiaries of Stratus.

Refer to Note 6 for further discussion of the land loan.

Upon completion of the private placement offering, Stratus holds, in the aggregate, a 25 percent indirect equity interest in Stratus Block 150, L.P.

No individual Class B limited partner has an equity interest greater than 25 percent.

One of the participants in the private placement offering, JBM Trust, which purchased a limited partnership interest initially representing a 6.4 percent equity interest in Stratus Block 150, L.P., has a trustee who also serves as sole manager of LCHM.

Stratus Block 150, L.P.

is governed by a limited partnership agreement between Stratus and the equity investors, and a wholly owned subsidiary of Stratus serves as the general partner.

Stratus plans to capitalize The Annie B in a two-phase process consisting of the initial land partnership phase and potentially followed by a development partnership phase.

No asset management fee will be paid to the general partner during the land partnership phase.

If the general partner determines to proceed with the development partnership phase, the general partner would continue to manage Stratus Block 150, L.P.

and would begin to receive an asset management fee to be agreed on at that time.

During the development partnership phase, the general partner would receive a development management fee of approximately 4 percent of certain construction costs for The Annie B.

The Saint Mary, L.P.

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The financing transactions included a $ 26.0 million construction loan with Texas Capital Bank, National Association and an $ 8.0 million private placement.

As one of the participants in the private placement offering, LCHM Holdings, LLC (LCHM), a related party as a result of its greater than 5 percent beneficial ownership of Stratus’ common stock, purchased limited partnership interests representing a 6.1 percent equity interest in The Saint Mary, L.P.

Two of the participants in the private placement offering, LCHM and JBM Trust, each purchased limited partnership interests initially representing a 6.1 percent equity interest in The Saint Mary, L.P.

Refer to Note 2 of the Stratus 2020 Form 10-K for further discussion.

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In connection with the sale, The Saint Mary, L.P.

distributed $ 1.8 million to LCHM.

distributed $ 1.8 million each to LCHM and JBM Trust.

Refer to Note 4 for further discussion.

Stratus Kingwood Place, L.P.

In August 2018, Stratus Kingwood Place, L.P., a Texas limited partnership and a subsidiary of Stratus (the Kingwood, L.P.), completed a $ 10.7 million private placement, approximately $ 7 million of which, combined with a $ 6.75 million loan from Comerica Bank, was used to purchase a 54 -acre tract of land located in Kingwood, Texas for $ 13.5 million, for the development of Kingwood Place, a H-E-B, LP (H-E-B)-anchored, mixed-use development project (Kingwood Place).

As one of the participants in the private placement offering, LCHM purchased limited partnership interests initially representing an 8.8 percent equity interest in Kingwood, L.P.

In August 2018, Stratus Kingwood Place, L.P., a Texas limited partnership and a subsidiary of Stratus (Kingwood, L.P.), completed a $ 10.7 million private placement, approximately $ 7 million of which, combined with a $ 6.8 million loan from Comerica Bank, was used to purchase a 54 -acre tract of land located in Kingwood, Texas for $ 13.5 million, for the development of Kingwood Place, a H-E-B, LP-anchored, mixed-use development project.

Two of the participants in the private placement offering, LCHM and JBM Trust, each purchased limited partnership interests initially representing an 8.8 percent equity interest in Kingwood, L.P.

Refer to Note 2 of the Stratus 2020 Form 10-K for further discussion.

Stratus has performed evaluations and concluded that The Saint Mary, L.P.

and the Kingwood, L.P.

Accounting for Limited Partnerships.

Stratus has performed evaluations and concluded that The Saint June, L.P., Stratus Block 150, L.P., The Saint Mary, L.P.

and Kingwood, L.P.

are variable interest entities and that Stratus is the primary beneficiary.

Stratus will continue to evaluate which entity is the primary beneficiary of The Saint Mary, L.P.

and the Kingwood, L.P.

in accordance with applicable accounting guidance.

The Saint Mary, L.P.

and the Kingwood, L.P.’s results are consolidated in Stratus’ financial statements.

Stratus’ consolidated balance sheets include the following assets and liabilities of the Kingwood, L.P.

(in thousands).

The assets and liabilities of The Saint Mary (primarily the real estate held for investment and the related debt) are presented as held for sale in Stratus' consolidated balance sheets as of December 31, 2020.

June 30, 2021 December 31, 2020

Accordingly, the partnerships’ results are consolidated in Stratus’ financial statements.

Stratus will continue to evaluate which entity is the primary beneficiary of these partnerships in accordance with applicable accounting guidance.

Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships (in thousands), except those related to The Saint Mary.

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 6,454 $ 745

Restricted cash 15,511 —

Real estate under development 35,413 2,380

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Net assets $ 51,681 $ 13,360

Other Transactions.

Stratus has an arrangement with Austin Retail Partners for services provided by a consultant of Austin Retail Partners who is the son of Stratus' President and Chief Executive Officer.

Payments to Austin Retail Partners for the consultant's consulting services and expense reimbursements totaled $ 29 thousand in second-quarter 2021, $ 26 thousand in second-quarter 2020, $ 66 thousand for the first six months of 2021 and $ 65 thousand for the first six months of 2020.

In December 2019, Stratus entered into agreements to sell Block 21, a mixed-use development in downtown Austin, Texas, that contains the W Austin Hotel and office, retail and entertainment space, to Ryman Hospitality Properties, Inc.

(Ryman) for $ 275 million.

Ryman deposited $ 15.0 million in earnest money to secure its performance under the agreements governing the sales.

As a result of the negative impact on capital markets and the overall economic environment caused by the COVID-19 pandemic, in May 2020, Ryman delivered a termination letter, which was agreed to and accepted by Stratus, terminating the agreements to purchase Block 21 and authorizing the release of Ryman’s $ 15.0 million in earnest money to Stratus.

During the second quarter of 2020, Stratus recorded the $ 15.0 million as operating income.

In October 2021, Stratus entered into new agreements to sell Block 21 to Ryman for $ 260.0 million.

The purchase price includes Ryman’s assumption of approximately $ 138 million of existing Block 21 mortgage debt and is subject to downward adjustments up to $ 5.0 million.

The remainder of the purchase price will be paid in cash.

The transaction is targeted to close near year-end 2021, subject to the timely satisfaction or waiver of various closing

conditions, including the consent of the loan servicer to the purchaser’s assumption of the existing mortgage loan;

the consent of the hotel operator, an affiliate of Marriott, to the purchaser’s assumption of the hotel operating agreement;

the absence of a material adverse effect;

and other customary closing conditions.

The Block 21 purchase agreement will terminate if all conditions to closing are not satisfied or waived by the parties.

Ryman has deposited $ 5.0 million in earnest money to secure its performance under the agreements governing the sale.

Of the total purchase price, $ 6.9 million will be held in escrow for 12 months after the closing, subject to a longer retention period with respect to any required reserve for pending claims.

The carrying amounts of Block 21's major classes of assets and liabilities in the consolidated balance sheets follow (in thousands):

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 8,338 $ 3,125

Restricted cash 16,225 a

Real estate held for investment, net 121,010 124,669

Other assets 2,184 2,165

Total assets $ 147,757 $ 142,809

Accounts payable and accrued liabilities, including taxes $ 4,943 $ 5,296

Debt 137,284 139,013

Other liabilities 9,887 7,183

Total liabilities $ 152,114 $ 151,492

Most restricted cash would be received by Ryman upon the closing of the sale.

Block 21’s results of operations in the consolidated statements of comprehensive loss consists of the following (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Hotel $ 5,198 $ 1,596 $ 11,251 $ 8,537

Entertainment 3,658 373 5,923 4,816

Leasing operations and other 356 347 1,124 1,193

Total revenue 9,212 2,316 18,298 14,546

Cost of sales:

Hotel 4,312 3,318 11,076 10,983

Entertainment 2,749 1,112 5,559 5,369

Leasing operations and other 196 350 871 1,137

Depreciation 1,360 1,423 4,134 4,671

Total cost of sales 8,617 6,203 21,640 22,160

General and administrative expenses 170 133 568 1,181

Income from forfeited earnest money — — — ( 15,000 )

Operating income (loss) 425 ( 4,020 ) ( 3,910 ) 6,205

Interest expense, net ( 2,005 ) ( 2,039 ) ( 5,976 ) ( 6,099 )

Other income, net — — — 27

Provision for income taxes ( 52 ) ( 111 ) ( 106 ) ( 109 )

Net (loss) income $ ( 1,632 ) $ ( 6,170 ) $ ( 9,992 ) $ 24

In September 2021, Stratus entered into an agreement to sell The Santal for $ 152.0 million, which was subsequently amended to provide the purchaser a $ 0.7 million repair credit and to extend the closing date to no later than December 10, 2021.

The Santal is Stratus’ wholly owned 448 -unit garden-style, multi-family luxury apartment complex located in Section N of Austin’s upscale Barton Creek community.

In connection with entering into the agreement to sell The Santal, Stratus amended the loan agreement with the project lender to enable prepayment of the loan, subject to a prepayment fee.

The sale is expected to close in December 2021, subject to the satisfaction or waiver of customary closing conditions.

The transaction will terminate if all conditions to closing are not satisfied or waived by the parties.

The purchaser has deposited $ 3.5 million in earnest money toward the purchase price of The Santal.

Stratus guaranteed the obligations of its subsidiary under the purchase agreement, up to a liability cap of $ 2.3 million for any claims related thereto up to a period of two years after the transaction closes.

Stratus reported the assets and liabilities of The Santal as held for sale in its consolidated balance sheets.

The carrying amounts of the major classes of assets and liabilities for The Santal follow (in thousands):

September 30, 2021 December 31, 2020

Real estate held for investment, net $ 67,236 $ 69,160

Other assets 28 51

Total assets held for sale $ 67,264 $ 69,211

Accrued liabilities $ 113 $ 170

Debt 74,523 74,343

Other liabilities 538 524

Total liabilities held for sale $ 75,174 $ 75,037

The Santal had rental revenue of $ 2.3 million in third-quarter 2021, $ 2.2 million in third-quarter 2020, $ 6.8 million for the first nine months of 2021 and $ 6.5 million for the first nine months of 2020.

Interest expense related to The Santal loan was $ 0.7 million in third-quarter 2021, $ 1.0 million in third-quarter 2020, $ 2.4 million for the first nine months of 2021 and $ 3.0 million for the first nine months of 2020.

The Saint Mary.

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After establishing a reserve for remaining costs of the partnership, Stratus received $ 20.9 million from the subsidiary in connection with the sale and $ 12.9 million of the net proceeds were distributed to the noncontrolling interest owners.

Stratus recognized a gain on the sale of $ 22.9 million ($ 16.2 million net of noncontrolling interests) for the first six months of 2021.

Stratus also recognized a $ 63 thousand loss on extinguishment of debt for the first six months of 2021 related to the repayment of The Saint Mary construction loan.

Stratus recognized a gain on the sale of $ 22.9 million ($ 16.2 million net of noncontrolling interests) for the first nine months of 2021.

Stratus also recognized a $ 63 thousand loss on extinguishment of debt for the first nine months of 2021 related to the repayment of The Saint Mary construction loan.

Stratus reported the assets and liabilities of The Saint Mary as held for sale in its December 31, 2020, consolidated balance sheet.

6 unchanged sentences

Total liabilities held for sale $ 25,607

The Saint Mary had rental revenue prior to the sale of $ 0.1 million in first-quarter 2021, $ 0.7 million in second-quarter 2020, and $ 1.4 million for the first six months of 2020.

Interest expense, net of capitalized amounts, related to The Saint Mary construction loan was less than $ 0.1 million in first-quarter 2021, $ 0.3 million in second-quarter 2020 and $ 0.6 million for the first six months of 2020.

The Saint Mary had rental revenue prior to the sale of $ 0.1 million in first-quarter 2021, $ 0.9 million in third-quarter 2020, and $ 2.3 million for the first nine months of 2020.

Interest expense, net of capitalized amounts, related to The Saint Mary construction loan was less than $ 0.1 million in first-quarter 2021, $ 0.2 million in third-quarter 2020 and $ 0.8 million for the first nine months of 2020.

Kingwood Place Land.

In September 2021, Stratus entered into a contract to sell the multi-family tract of land at Kingwood Place, which was planned for approximately 275 multi-family units, for $ 5.5 million.

The sale, if consummated, is expected to close by mid-2022.

Upon entering into the contract, Stratus recorded a $ 625 thousand impairment charge in the third quarter of 2021 to reduce the carrying value of the land to its fair value based on the contractual sale price less estimated selling costs.

FAIR VALUE MEASUREMENTS

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A summary of the carrying amount and fair value of Stratus' debt follows (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Value Carrying

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The components of Stratus' debt follow (in thousands):

June 30, 2021 December 31, 2020

Block 21 loan $ 137,855 $ 139,013

The Santal loan 74,480 74,343

September 30, 2021 December 31, 2020

Block 21 loan a

$ 137,284 $ 139,013

Comerica Bank credit facility 54,226 43,304

Jones Crossing loan 24,016 —

The Annie B land loan 13,816 —

New Caney land loan 4,492 4,949

8 unchanged sentences

$ 295,394 $ 276,712

Includes net reductions for unamortized debt issuance costs of $ 2.1 million at June 30, 2021, and $ 2.2 million at December 31, 2020.

As of June 30, 2021, Stratus had $ 14.3 million available under its $ 60.0 million Comerica Bank credit facility, with a $ 150 thousand letter of credit committed against the credit facility.

The Santal Loan.

In April 2021, a Stratus subsidiary entered into an amendment to The Santal loan to (i) extend the maturity date from October 5, 2022, to October 5, 2024 (and remove two options to extend the maturity date for an additional 12 months);

(ii) revise the interest rate from London Interbank Offered Rate (LIBOR) (or, if applicable, a replacement rate) plus 2.85 percent, with a 4.80 percent floor, to LIBOR (or, if applicable, a replacement rate) plus 3.25 percent, with a 3.40 percent floor;

(iii) eliminate the requirement that Stratus' Santal subsidiary make minimum amortization payments beginning in November 2022;

(iv) extend the period during which The Santal loan may not be prepaid from April 2020 to June 2022;

and (v) revise certain events or circumstances that would qualify as an event of default or violate the prohibition on conveyances under the applicable provisions.

The Block 21 loan is expected to be assumed by Ryman as part of the sale of Block 21.

Refer to Note 4 for further discussion of the pending Block 21 sale.

Includes net reductions for unamortized debt issuance costs of $ 1.6 million at September 30, 2021, and $ 1.5 million at December 31, 2020.

Total debt does not include debt associated with The Santal or The Saint Mary, which is reflected in liabilities held for sale.

Refer to Note 4 for further discussion.

As of September 30, 2021, Stratus had $ 5.6 million available under its $ 60.0 million Comerica Bank credit facility, with a $ 150 thousand letter of credit committed against the credit facility.

Jones Crossing Loan.

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The repayment of the Jones Crossing construction loan resulted in Stratus recognizing a $ 163 thousand loss on the early extinguishment of debt representing the write-off of unamortized debt issuance costs related to the construction loan.

The Jones Crossing loan has a maturity date of June 17, 2026, and bears interest at LIBOR plus 2.25 percent, provided LIBOR shall not be less than 0.15 percent.

The Jones Crossing loan has a maturity date of June 17, 2026, and bears interest at the London Interbank Offered Rate (LIBOR) plus 2.25 percent, provided LIBOR shall not be less than 0.15 percent.

Payments of interest only on the Jones Crossing loan are due monthly through the term of the loan with the outstanding principal due at maturity.

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The Jones Crossing loan contains certain financial covenants, including a requirement that Stratus maintain liquid assets of at least $ 2.0 million.

The Annie B Land Loan.

In September 2021, a Stratus subsidiary entered into an 18-month, $ 14.0 million land loan with Comerica Bank to acquire The Annie B (The Annie B land loan).

The loan matures on March 1, 2023, and bears interest at LIBOR plus 3.0 percent, provided LIBOR shall not be less than 0.5 percent.

Payments of interest only on the loan are due monthly through February 2023, with the outstanding principal due at maturity.

The Annie B land loan is guaranteed by Stratus and secured by The Annie B project.

The loan agreement contains financial covenants, including a requirement that Stratus maintain a net asset value, as defined in the agreement, of $ 125.0 million and an aggregate debt-to-gross asset value of less than 50 percent.

The Annie B land loan requires Comerica Banks’ prior written consent for any Stratus common stock repurchases in excess of $ 1.0 million.

New Caney Land Loan.

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In April 2020, Stratus received a $ 4.0 million loan under the Paycheck Protection Program (PPP loan) of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law on March 27, 2020.

The PPP loan accrues interest at 1 percent and will mature on April 15, 2022, except for the portion that may be forgiven.

The proceeds from the loan were to be used to retain workers and maintain payroll and make mortgage interest payments.

Stratus' PPP loan forgiveness application is currently under review by the Small Business Administration;

however, no assurance of full forgiveness can be provided.

The PPP loan accrues interest at 1 percent and will mature on April 15, 2022, except for the portion that was forgiven.

Stratus' PPP loan forgiveness application was accepted and approved in August 2021 and the outstanding balance and accrued interest were forgiven with the exception of $ 0.3 million.

As such, Stratus recognized a gain on extinguishment of debt of $ 3.7 million during third-quarter 2021.

Lantana Place Construction Loan.

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Available borrowings under the loan total the least of (i) $ 30.3 million, (ii) 60 percent of the total construction costs, or (iii) 55 percent of the as-stabilized appraised value of the property.

As of June 30, 2021, no amounts were outstanding under this loan.

As of September 30, 2021, no amounts were outstanding under this loan.

The loan matures on October 2, 2024, with two options to extend the maturity for an additional 12 months, subject to satisfying specified conditions and the payment of an extension fee for each extension.

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Payments of interest only on the loan are due monthly through October 2, 2024, with the outstanding principal due at maturity.

The loan is secured by The Saint June project and is fully guaranteed by Stratus, including customary carve-out obligations and environmental indemnity.

The loan is secured by The Saint June project and is fully guaranteed by Stratus.

However, the guaranty will convert to a 50 percent repayment guaranty upon completion of construction of The Saint June.

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is able to maintain a debt service coverage ratio of 1.25 to 1.00, the repayment guaranty will be eliminated.

Notwithstanding the foregoing, Stratus will remain liable for customary carve-out obligations and environmental indemnity.

Stratus is also required to maintain a net asset value, as defined by the guaranty, of $ 125.0 million and liquid assets of at least $ 10.0 million.

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The loan matures on August 12, 2024, with two options to extend the maturity for an additional 12 months, subject to satisfying specified conditions and the payment of an extension fee.

The loan bears interest at 30-day LIBOR plus 3.25 percent (or, if applicable, a replacement rate), with a floor of 3.50 percent.

The loan bears interest at 30-day LIBOR plus 3.25 percent (or, if applicable, a

replacement rate), with a floor of 3.50 percent.

Payments of interest only are due monthly through August 12, 2024, with the outstanding principal due at maturity.

As of September 30, 2021, no amounts were outstanding under this loan.

Stratus provided a completion guaranty and 25 -percent-limited-payment guaranty.

The loan agreement contains financial covenants, including that Stratus is required to maintain a net asset value, as defined in the loan agreement, of $ 125.0 million and liquid assets of at least $ 7.5 million.

Refer to Note 10 for further discussion of the Magnolia Place project and construction loan.

For additional information regarding Stratus' debt, refer to Note 6 in the Stratus 2020 Form 10-K.

Interest Expense and Capitalization.

Interest costs (before capitalized interest) totaled $ 4.0 million in second-quarter 2021, $ 4.9 million in second-quarter 2020, $ 8.3 million for the first six months of 2021 and $ 10.1 million for the first six months of 2020.

Stratus' capitalized interest totaled $ 1.2 million in second-quarter 2021 and 2020, and $ 2.5 million for each of the first six months of 2021 and 2020.

Interest costs (before capitalized interest) totaled $ 4.2 million in third-quarter 2021, $ 4.7 million in third-quarter 2020, $ 12.5 million for the first nine months of 2021 and $ 14.8 million for the first nine months of 2020.

Stratus' capitalized interest totaled $ 1.3 million in third-quarter 2021, $ 1.1 million in third-quarter 2020, $ 3.8 million for the first nine months of 2021, and $ 3.6 million for the first nine months of 2020.

Capitalized interest is primarily related to development activities at Barton Creek.

PROFIT PARTICIPATION INCENTIVE PLAN

In July 2018, the Compensation Committee of Stratus' Board of Directors (the Committee) unanimously adopted the Stratus Profit Participation Incentive Plan (the Plan), which provides participants with economic incentives tied to the success of the development projects designated by the Committee as approved projects under the Plan.

In July 2018, the Compensation Committee of Stratus' Board of Directors (the Committee) unanimously adopted the Stratus Profit Participation Incentive Plan (PPIP), which provides participants with economic incentives tied to the success of the development projects designated by the Committee as approved projects under the PPIP.

Estimates related to the awards may change over time as a result of differences between projected and actual development progress and costs, market conditions and the timing of capital transactions or valuation events.

Refer to Note 8 of the Stratus 2020 Form 10-K for further discussion.

In March 2021, Stratus granted 53,411 stock-settled RSUs with a grant-date value of $ 1.5 million, based on Stratus' stock price on the date of issuance, under the Plan for West Killeen Market, which reached a valuation event under the Plan in October 2020.

Stratus transferred the $ 1.2 million accrued liability balance under the Plan for West Killeen Market to capital in excess of par value and will amortize the $ 0.3 million balance of the grant date value with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year vesting period of the RSUs.

The sale of The Saint Mary in January 2021, was a capital transaction under the

The accrued liability under the Plan related to The Saint Mary project totaled $ 2.2 million at June 30, 2021, and is expected to be paid in cash to eligible participants no later than March 15, 2022.

A summary of Plan costs follows (in millions):

Three Months Ended Six Months Ended

June 30, June 30,

In March 2021, Stratus granted 53,411 stock-settled RSUs with a grant-date value of $ 1.5 million, based on Stratus' stock price on the date of issuance, under the PPIP for West Killeen Market, which reached a valuation event under the PPIP in October 2020.

Stratus transferred the $ 1.2 million accrued liability balance under the PPIP for West Killeen Market to capital in excess of par value and will amortize the $ 0.3 million balance of the grant date value with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year vesting period of the RSUs.

The sale of The Saint Mary in January 2021, was a capital transaction under the PPIP.

The accrued liability under the PPIP related to The Saint Mary project totaled $ 2.1 million at September 30, 2021, and is expected to be paid in cash to eligible participants no later than March 15, 2022.

In September 2021, Lantana Place reached a valuation event under the PPIP and Stratus plans to obtain an appraisal of the property to determine the payout under the PPIP.

The accrued liability under the PPIP related to Lantana Place totaled $ 1.5 million at September 30, 2021, and, subject to adjustment based on the appraisal, is expected to be settled in RSUs awarded to eligible participants in the first half of 2022.

The expected sale of The Santal in December 2021 will be a capital transaction under the PPIP.

The accrued liability under the PPIP related to The Santal totaled $ 2.8 million at September 30, 2021, but may increase by as much as approximately $ 4 million upon a sale closing.

The award is expected to be paid in cash to eligible participants no later than March 15, 2022, subject to the PPIP’s limits on cash compensation paid to certain officers.

Specifically, if the total cash payments made with respect to development projects under the PPIP for 2021 to an executive officer exceed four times the executive officer’s base salary, any amounts due under the PPIP in excess of that amount will be converted to an equivalent number of RSUs with a one-year vesting period.

Any such RSUs would be awarded in the first half of 2022.

A summary of PPIP costs (credits) follows (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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Capitalized to project development costs ( 60 ) 134 367 315

Total Plan costs

Total PPIP costs

$ 2,691 $ 324 $ 3,862 $ 716

The accrued liability for the Plan totaled $ 6.2 million at June 30, 2021, and December 31, 2020 (included in other liabilities).

As of June 30, 2021, no amounts had been paid in cash to participants under the Plan.

The accrued liability for the PPIP totaled $ 8.9 million at September 30, 2021, and $ 6.2 million at December 31, 2020 (included in other liabilities).

As of September 30, 2021, no amounts had been paid in cash to participants under the PPIP.

Stratus’ accounting policy for and other information regarding its income taxes are further described in Notes 1 and 7 in the Stratus 2020 Form 10-K.

Stratus had deferred tax assets (net of deferred tax liabilities and valuation allowances) totaling $ 44 thousand at June 30, 2021 , and December 31, 2020.

Stratus' deferred tax assets had valuation allowances totaling $ 12.6 million at June 30, 2021, and $ 10.7 million at December 31, 2020.

Stratus had deferred tax assets (net of deferred tax liabilities and valuation allowances) totaling $ 44 thousand at September 30, 2021 , and December 31, 2020.

Stratus' deferred tax assets had valuation allowances totaling $ 12.9 million at September 30, 2021, and $ 10.7 million at December 31, 2020.

In the third quarter of 2020, Stratus recorded a valuation allowance on its deferred tax assets of $ 9.6 million.

In evaluating the recoverability of the deferred tax assets, management considered available positive and negative evidence, giving greater weight to the recent current cumulative losses and uncertainty regarding projected future financial results.

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Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets that are not more likely than not to be realized.

The difference between Stratus' consolidated effective income tax rate of less than 1 percent for the first six months of 2021 and the U.S.

Federal statutory income tax rate of 21 percent was primarily attributable to a forecasted taxable loss for 2021, noncontrolling interests in subsidiaries, the presence of a full valuation allowance against U.S.

Stratus' consolidated effective income tax rate of 22 percent for the first nine months of 2021 approximates the U.S.

Federal statutory income tax rate of 21 percent.

The difference was primarily attributable to a full valuation allowance against U.S.

Federal deferred tax assets, and the Texas state margin tax.

The difference between Stratus' consolidated effective income tax rate for the first six months of 2020 and the U.S.

Federal statutory income tax rate of 21 percent, was primarily attributable to the CARES Act, which allowed Stratus to carryback losses to 2017 when the U.S.

corporate tax rate was 35 percent, among other impacts, resulting in a discrete tax benefit of $ 1.4 million, and the Texas state margin tax.

The difference between Stratus' consolidated effective income tax rate of ( 83 ) percent for the first nine months of 2020 and the U.S.

Federal statutory income tax rate of 21 percent, was primarily attributable to a discrete tax charge of $ 9.6 million to record a valuation allowance on Stratus' deferred tax assets;

the CARES Act, which allowed Stratus to carryback losses to 2017 when the U.S.

corporate tax rate was 35 percent, among other impacts, resulting in a discrete tax benefit of $ 1.4 million;

and the Texas state margin tax.

BUSINESS SEGMENTS

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in College Station, Texas (a portion of Jones Crossing and vacant pad sites);

in Killeen, Texas (vacant pad sites at West Killeen Market);

in Killeen, Texas (a vacant pad site at West Killeen Market);

and in Magnolia, Texas (Magnolia Place), Kingwood, Texas (land for future multi-family development and vacant pad sites) and New Caney, Texas (New Caney), located in the greater Houston area.

The Leasing Operations segment is comprised of Stratus’ real estate assets, both residential and commercial, that are leased or available for lease and includes The Santal, West Killeen Market, office and retail space at Block 21 and completed portions of Lantana Place, Jones Crossing and Kingwood Place.

In September 2021, Stratus entered into an agreement to sell The Santal for $ 152.0 million.

The sale is expected to close in December 2021, subject to the satisfaction or waiver of customary closing conditions.

The Hotel segment includes the W Austin Hotel located at Block 21 in downtown Austin, Texas.

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In addition to hosting concerts and private events, ACL Live is the home of Austin City Limits, the longest running music series in American television history.

In October 2021, Stratus entered into new agreements to sell Block 21 for $ 260.0 million.

The transaction is targeted to close near year-end 2021, subject to the timely satisfaction or waiver of various closing conditions.

The sale of Block 21 will include the W Austin Hotel, ACL Live, 3TEN ACL Live and the office and retail space at Block 21.

Stratus uses operating income or loss to measure the performance of each segment.

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Stratus' revenues from contracts with customers follow (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Leasing Operations Hotel Entertainment Corporate, Eliminations and Other b

Three Months Ended June 30, 2021:

Three Months Ended

September 30, 2021:

Unaffiliated customers $ 900 $ 5,723 $ 5,198 $ 3,659 $ — $ 15,480

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General and administrative expenses — — — — 5,422 c

Impairment of real estate 625 d

Operating (loss) income $ ( 1,661 ) $ 1,823 $ 46 $ 409 $ ( 5,621 ) $ ( 5,004 )

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$ 4,138 $ 177 $ 15 $ — $ 30,292

Total assets at June 30, 2021 165,607 194,696 91,878 33,884 24,276 510,341

Total assets at September 30, 2021 211,405 194,143 f

91,779 35,222 26,551 559,100

Leasing Operations Hotel Entertainment Corporate, Eliminations and Other b

Three Months Ended June 30, 2020:

Three Months Ended

September 30, 2020:

Unaffiliated customers $ 5,025 $ 5,807 $ 1,596 $ 373 $ — $ 12,801

Intersegment 5 223 18 ( 6 ) ( 240 ) —

Cost of sales, excluding depreciation 1,886 4,074 d

1,305 ( 67 ) 8,965

Cost of sales, excluding depreciation 3,585 2,793 3,317 1,242 ( 109 ) 10,828

Depreciation 57 2,051 891 392 ( 62 ) 3,329

General and administrative expenses — — — — 2,868 2,868

Income from forfeited earnest money — — — — ( 15,000 ) f

Operating (loss) income $ ( 46 ) $ ( 174 ) $ ( 1,652 ) $ ( 1,420 ) $ 11,778 $ 8,486

Operating income (loss) $ 1,388 $ 1,186 $ ( 2,594 ) $ ( 1,267 ) $ ( 2,937 ) $ ( 4,224 )

Capital expenditures and purchases and development of real estate properties

$ 2,952 $ 716 $ 213 $ 2 $ — $ 3,883

Total assets at June 30, 2020 163,900 233,268 g

Total assets at September 30, 2020 160,890 236,970 f

93,666 35,495 16,198 543,219

Six Months Ended June 30, 2021:

Nine Months Ended

September 30, 2021:

Unaffiliated customers $ 8,296 $ 16,098 $ 11,251 $ 5,926 $ — $ 41,571

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General and administrative expenses — — — — 16,365 c

Gain on sale of assets — ( 22,931 ) h

Impairment of real estate 625 d

Gain on sale of assets — ( 22,931 ) g

— — — ( 22,931 )

Operating income (loss) $ 1,466 $ 25,470 $ ( 2,408 ) $ ( 1,576 ) $ ( 11,183 ) $ 11,769

Operating (loss) income $ ( 195 ) $ 27,293 $ ( 2,362 ) $ ( 1,167 ) $ ( 16,804 ) $ 6,765

Capital expenditures and purchases and development of real estate properties

$ 6,273 $ 392 $ 43 $ — $ 37,549

Six Months Ended June 30, 2020:

Nine Months Ended

September 30, 2020:

Unaffiliated customers $ 19,254 $ 17,257 $ 8,537 $ 4,818 $ — $ 49,866

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5,773 ( 246 ) 42,127

116 4,081 2,036 i

173 6,132 2,927 j

( 172 ) 10,339

General and administrative expenses — — — — 8,786 8,786

Income from forfeited earnest money — — — — ( 15,000 ) f

Income from forfeited earnest money — — — — ( 15,000 ) k

Operating income (loss)

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Includes consolidated general and administrative expenses and eliminations of intersegment amounts.

The increases from the comparable prior year periods are primarily the result of increased consulting, legal and public relation costs for Stratus' successful proxy contest and the ongoing REIT exploration process totaling $ 3.3 million and $ 4.4 million in second-quarter 2021 and for the first six months of 2021, respectively.

The increase in third-quarter 2021, compared to third-quarter 2020, is primarily the result of a $ 2.6 million increase in employee incentive compensation costs associated with the PPIP resulting primarily from an increased valuation for The Santal.

The increase for the first nine months of 2021, compared to the first nine months of 2020, is primarily the result of a $ 4.0 million increase in employee incentive compensation costs, including those associated with the PPIP, and increased consulting, legal and public relation costs for Stratus' successful proxy contest and the real estate investment trust exploration process totaling $ 3.8 million.

Represents the difference by which the fair value of the multi-family tract of land at Kingwood Place, based on the contractual sale price less estimated selling costs, was less than Stratus' carrying value of the land.

Includes the purchase of The Annie B land for $ 22.5 million.

Includes assets held for sale at The Santal totaling $ 67.3 million at September 30, 2021, and The Santal and The Saint Mary, totaling $ 106.1 million at September 30, 2020.

Represents the gain on the January 2021 sale of The Saint Mary.

Includes a $ 1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.

Includes a $ 0.8 million credit related to a business interruption insurance claim filed as a result of water and smoke damage in the W Austin Hotel in January 2018.

Represents income from earnest money received as a result of Ryman's termination of the agreements to purchase Block 21.

Includes assets held for sale at The Saint Mary, which totaled $ 36.6 million at June 30, 2020.

Represents the gain on the January 2021 sale of The Saint Mary.

Includes a $ 202 thousand adjustment in the Hotel segment and an $ 89 thousand adjustment in the Entertainment segment for the period in December 2019 when the hotel and entertainment venues were held for sale and, therefore, not depreciated.

Represents income from earnest money received as a result of Ryman's termination in May 2020 of the 2019 agreements to purchase Block 21.

SUBSEQUENT EVENTS

In August 2021, Stratus announced its new project development plans and completed construction financing for the first phase of development of Magnolia Place, an H-E-B grocery shadow-anchored, mixed-use project in Magnolia, Texas.

Magnolia Place is currently planned to consist of 4 retail buildings totaling approximately 35,000 square feet, 5 retail pad sites to be sold or ground leased, 194 single-family lots and approximately 500 multi-family units.

The first phase of development is expected to consist of 2 retail buildings totaling approximately 19,000 square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development.

H-E-B recently began construction on its 95,000 -square-foot grocery store on an adjoining 18 -acre site owned by H-E-B.

Stratus entered into a $ 14.8 million, three-year construction loan to finance the first phase of development of Magnolia Place.

Refer to Note 6 for further discussion of the Magnolia Place construction loan.

The remaining estimated project costs are being funded by equity contributed by Stratus.

Stratus evaluated events after June 30, 2021, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

Stratus evaluated events after September 30, 2021, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements