STRATUS PROPERTIES INC 10-Q

Item 1. Financial Statements . STRATUS PROPERTIES INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) September 30, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 23,169 $ 12,434 Restricted cash 36,452 21,749 Real estate held for sale 1,773 4,204 Real estate under development 144,666 98,137 Land available for development 42,564 53,432 Real estate held for investment, net 211,972 217,369 Lease right-of-use assets 10,634 10,871 Other assets 20,606 20,093 Assets held for sale 67,264 105,727 Total assets $ 559,100 $ 544,016 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 10,541 $ 8,047 Accrued liabilities, including taxes 10,066 12,698 Debt 295,394 276,712 Lease liabilities 13,888 13,269 Deferred gain 5,253 6,173 Other liabilities 21,382 16,709 Liabilities held for sale 75,174 100,644 Total liabilities 431,698 434,252 Commitments and contingencies Equity: Stockholders’ equity: Common stock 94 94 Capital in excess of par value of common stock 188,553 186,777 Accumulated deficit ( 71,340 ) ( 66,357 ) Common stock held in treasury ( 21,753 ) ( 21,600 ) Total stockholders’ equity 95,554 98,914 Noncontrolling interests in subsidiaries 31,848 10,850 Total equity 127,402 109,764 Total liabilities and equity $ 559,100 $ 544,016 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 2 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In Thousands, Except Per Share Amounts) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenues: Real estate operations $ 900 $ 5,025 $ 8,296 $ 19,254 Leasing operations 5,723 5,807 16,098 17,257 Hotel 5,198 1,596 11,251 8,537 Entertainment 3,659 373 5,926 4,818 Total revenues 15,480 12,801 41,571 49,866 Cost of sales: Real estate operations 1,845 3,578 7,824 15,754 Leasing operations 2,667 2,789 7,443 9,941 Hotel 4,312 3,318 11,076 10,983 Entertainment 2,781 1,143 5,646 5,449 Depreciation 2,832 3,329 8,758 10,339 Total cost of sales 14,437 14,157 40,747 52,466 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 ) Gain on sale of assets — — ( 22,931 ) — Total 20,484 17,025 34,806 46,252 Operating (loss) income ( 5,004 ) ( 4,224 ) 6,765 3,614 Interest expense, net ( 2,859 ) ( 3,587 ) ( 8,666 ) ( 11,168 ) Net gain on extinguishment of debt 3,680 — 3,454 — Other income, net 70 85 74 114 (Loss) income before income taxes and equity in unconsolidated affiliates' loss ( 4,113 ) ( 7,726 ) 1,627 ( 7,440 ) Provision for income taxes ( 82 ) ( 7,536 ) ( 351 ) ( 6,166 ) Equity in unconsolidated affiliates' loss ( 2 ) ( 9 ) ( 11 ) ( 9 ) Net (loss) income and total comprehensive (loss) income ( 4,197 ) ( 15,271 ) 1,265 ( 13,615 ) Total comprehensive loss (income) attributable to noncontrolling interests in subsidiaries 433 193 ( 6,248 ) 1,601 Net loss and total comprehensive loss attributable to common stockholders $ ( 3,764 ) $ ( 15,078 ) $ ( 4,983 ) $ ( 12,014 ) 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 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 3 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Nine Months Ended September 30, 2021 2020 Cash flow from 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 ) — Net gain on extinguishment of debt ( 3,454 ) — Amortization of debt issuance costs and stock-based compensation 1,468 1,601 Equity in unconsolidated affiliates' loss 11 9 Deferred income taxes — 12,277 Purchases and development of real estate properties ( 30,841 ) ( 11,607 ) 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 Cash flow from investing activities: Capital expenditures ( 6,708 ) ( 5,328 ) Proceeds from sale of assets 59,488 — Payments on master lease obligations ( 1,019 ) ( 1,093 ) Other, net 36 ( 9 ) Net cash provided by (used in) investing activities 51,797 ( 6,430 ) Cash flow from financing activities: Borrowings from credit facility 37,700 18,800 Payments on credit facility ( 26,778 ) ( 25,975 ) Borrowings from project loans 39,445 15,690 Payments on project and term loans ( 53,330 ) ( 7,584 ) 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 provided by financing activities 10,010 429 Net increase (decrease) in cash, cash equivalents and restricted cash 25,438 ( 5,542 ) Cash, cash equivalents and restricted cash at beginning of year 34,183 38,591 Cash, cash equivalents and restricted cash at end of period $ 59,621 $ 33,049 The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements. 4 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (In Thousands) THREE MONTHS ENDED SEPTEMBER 30 Stockholders’ Equity Common Stock Held in Treasury Total Common Stock Capital in Excess of Par Value Accum-ulated Deficit Noncontrolling Interests in Subsidiaries Number of Shares At Par Value Number of Shares At Cost Total Equity 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 Exercised and vested stock-based awards 11 — 22 — — — 22 — 22 Stock-based compensation — — 176 — — — 176 — 176 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 5 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (In Thousands) NINE MONTHS ENDED SEPTEMBER 30 Stockholders’ Equity Common Stock Held in Treasury Total Common Stock Capital in Excess of Par Value Accum-ulated Deficit Noncontrolling Interests in Subsidiaries Number of Shares At Par Value Number of Shares At Cost Total Equity Balance at December 31, 2020 9,358 $ 94 $ 186,777 $ ( 66,357 ) 1,137 $ ( 21,600 ) $ 98,914 $ 10,850 $ 109,764 Exercised and vested stock-based awards 30 — 25 — — — 25 — 25 Stock-based compensation — — 589 — — — 589 — 589 Grant of restricted stock units under the Profit Participation Incentive Plan — — 1,162 — — — 1,162 — 1,162 Tender of shares for stock-based awards — — — — 6 ( 153 ) ( 153 ) — ( 153 ) 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 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 Exercised and vested stock-based awards 28 — 22 — — — 22 — 22 Stock-based compensation — — 516 — — — 516 — 516 Tender of shares for stock-based awards — — — — 4 ( 91 ) ( 91 ) — ( 91 ) 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. 6 Table of Contents STRATUS PROPERTIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL The unaudited consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (GAAP) and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K for the year ended December 31, 2020 (Stratus 2020 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission. 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 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. Actual results could differ materially from those estimates. As the impact of the COVID-19 pandemic continues to evolve, and the extent of its impact cannot be determined with certainty, estimates and assumptions about future events and their effects require increased judgement. Stratus’ assessment of the future magnitude and duration of the COVID-19 pandemic and related economic disruption, as well as other factors could result in material changes to the estimates used in and material impacts to Stratus’ consolidated financial statements in future reporting periods. COVID-19 Pandemic Impact. Since January 2020, the COVID-19 pandemic has caused substantial disruption in international and U.S. economies and markets. 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 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. The pandemic has resulted in government restrictions of various degrees and effective at various times, including stay-at-home orders, bans on travel, limitations on the size of gatherings, limitations on the operations of businesses deemed non-essential, closures of work facilities, schools, public buildings and businesses, cancellation of events (including entertainment events, conferences and meetings), quarantines, mask mandates and social distancing measures. Effective March 10, 2021, the Governor of Texas issued an executive order lifting the mask mandate in Texas and increasing the capacity of all businesses and facilities in the state to 100 percent. Businesses in Texas may still limit capacity or implement additional safety protocols at their own discretion. 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, as of November 12, 2021, includes much of Texas, although Austin and Houston are currently areas of “moderate” transmission. 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, 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 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. 7 Table of Contents 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. 2. 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. 3. LIMITED PARTNERSHIPS The Saint June, L.P. 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. In July 2021, an unrelated equity investor contributed $ 16.3 million to The Saint June, L.P. partnership for a 65.87 percent interest. Stratus has a 34.13 percent interest in The Saint June, L.P. following its contribution of land, development to date and $ 1.1 million of cash. The Saint June, L.P. is governed by a limited partnership agreement between Stratus and the equity investor, and a wholly owned subsidiary of Stratus serves as the general partner. The general partner will manage The Saint June, L.P. in exchange for an asset management fee of $ 210 thousand per year beginning two years after construction of The Saint June, which began in July 2021, and will earn a development management fee of 4 percent of certain construction costs for The Saint June. 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. 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. 8 Table of Contents The Saint Mary, L.P. In June 2018, The Saint Mary, L.P., a Texas limited partnership and a subsidiary of Stratus, completed a series of financing transactions to develop The Saint Mary, a 240 -unit luxury, garden-style apartment project in the Circle C community in Austin, Texas. The financing transactions included a $ 26.0 million construction loan with Texas Capital Bank, National Association and an $ 8.0 million private placement. 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. The Saint Mary, L.P. sold The Saint Mary property in January 2021. In connection with the sale, The Saint Mary, L.P. 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 (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. 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. 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. 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 sheet as of December 31, 2020. September 30, 2021 December 31, 2020 Assets: Cash and cash equivalents $ 6,454 $ 745 Restricted cash 15,511 — Real estate under development 35,413 2,380 Land available for development 7,627 8,143 Real estate held for investment 31,615 31,962 Other assets 3,181 2,195 Total assets 99,801 45,425 Liabilities: Accounts payable and accrued liabilities 2,451 850 Debt 45,669 31,215 Total liabilities 48,120 32,065 Net assets $ 51,681 $ 13,360 4. DISPOSITIONS Block 21. 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 9 Table of Contents 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 Assets: Cash and cash equivalents $ 8,338 $ 3,125 Restricted cash 16,225 a 12,850 Real estate held for investment, net 121,010 124,669 Other assets 2,184 2,165 Total assets $ 147,757 $ 142,809 Liabilities: 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 a. 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 Revenues: 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 The Santal. 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. 10 Table of Contents 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 Assets: Real estate held for investment, net $ 67,236 $ 69,160 Other assets 28 51 Total assets held for sale $ 67,264 $ 69,211 Liabilities: 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. In January 2021, The Saint Mary, L.P. sold The Saint Mary for $ 60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $ 34 million. 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 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. The carrying amounts of the major classes of assets and liabilities for The Saint Mary as of December 31, 2020, follow (in thousands): Assets: Real estate held for investment, net $ 36,341 Other assets 175 Total assets held for sale $ 36,516 Liabilities: Accrued liabilities $ 68 Debt 25,319 Other liabilities 220 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, $ 0.9 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. 11 Table of Contents 5. FAIR VALUE MEASUREMENTS Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The carrying value for certain Stratus financial instruments (i.e., cash and cash equivalents, restricted cash, accounts payable and accrued liabilities) approximates fair value because of their short-term nature and generally negligible credit losses. A summary of the carrying amount and fair value of Stratus' debt follows (in thousands): September 30, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value Liabilities: Debt $ 295,394 $ 297,997 $ 276,712 $ 279,328 Stratus' debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates. Accordingly, Stratus' debt is classified within Level 2 of the fair value hierarchy. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans. 6. DEBT The components of Stratus' debt follow (in thousands): 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 Paycheck Protection Program loan 272 3,987 Construction loans: Kingwood Place 31,853 31,215 Lantana Place 21,726 24,051 West Killeen Market 6,116 6,707 Amarra Villas credit facility 1,593 1,109 Jones Crossing — 22,377 Total debt b $ 295,394 $ 276,712 a. 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. b. 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. In June 2021, a Stratus subsidiary entered into a $ 24.5 million loan with Regions Bank (the Jones Crossing loan). Of the proceeds from the Jones Crossing loan, $ 22.2 million was used to repay in full the original Jones Crossing construction loan. 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 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. 12 Table of Contents If the debt service coverage ratio falls below 1.15 to 1.00 for any fiscal quarter beginning with the quarter ending September 30, 2022, a “Cash Sweep Period” (as defined in the Jones Crossing loan) results, which limits Stratus’ ability to receive cash from its Jones Crossing subsidiary. The Jones Crossing loan is secured by the Jones Crossing project, and Stratus has provided a guaranty limited to non-recourse carve-out obligations and environmental indemnification. In addition, any default under the ground leases, which grant Stratus the right to occupy the Jones Crossing property, would trigger the carve-out guaranty. 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. In March 2021, Stratus exercised its option to extend the New Caney land loan for an additional 12 months from March 8, 2021, to March 8, 2022, which required a principal payment of $ 0.5 million. PPP Loan. 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 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. In January 2021, a Stratus subsidiary entered into an amendment to the Lantana Place construction loan in which Stratus' Lantana Place subsidiary was granted a waiver of the debt service coverage ratio covenant until September 30, 2021, at which point the ratio is measured by reference to the three-month period then ended, and subsequently builds each quarter until measured by reference to the 12-month period ending June 30, 2022, and then on a trailing 12-month period for each quarter thereafter. As part of the January 2021 amendment, Stratus repaid $ 2.0 million in principal on the Lantana Place construction loan. The Saint June Construction Loan. In June 2021, The Saint June, L.P. entered into a construction loan with Texas Capital Bank to finance approximately 55 percent of the estimated $ 55 million cost of the development and construction of The Saint June. 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 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. The loan bears interest at 30-day LIBOR plus 2.75 percent, with a floor of 3.50 percent. 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. However, the guaranty will convert to a 50 percent repayment guaranty upon completion of construction of The Saint June. Further, once The Saint June, L.P. 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. The Saint June, L.P. is not permitted to make distributions to its partners until completion of The Saint June project and after the project achieves a debt service coverage ratio of at least 1.00 for three consecutive months. Magnolia Place Construction Loan. In August 2021, a Stratus subsidiary entered into a $ 14.8 million construction loan with Veritex Community Bank secured by the Magnolia Place project. 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 13 Table of Contents 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. 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 $ 4.2 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. 7. 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 (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 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 Charged to general and administrative expense $ 2,751 $ 190 $ 3,495 $ 401 Capitalized to project development costs ( 60 ) 134 367 315 Total PPIP costs $ 2,691 $ 324 $ 3,862 $ 716 14 Table of Contents 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. 8. INCOME TAXES 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 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. Upon a change in facts and circumstances, management may conclude that sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance in the future, which would favorably impact Stratus' results of operations. 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. 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 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. 9. BUSINESS SEGMENTS Stratus has four operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment. The Real Estate Operations segment is comprised of Stratus’ real estate assets (developed for sale, under development and available for development), which consists of its properties in Austin, Texas (including the Barton Creek community; the Circle C community; and the Lantana community, including a portion of Lantana Place planned for a future multi-family phase); in Lakeway, Texas, located in the greater Austin area (Lakeway); in College Station, Texas (a portion of Jones Crossing and vacant pad sites); 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. The Entertainment segment includes ACL Live, a live music and entertainment venue, and 3TEN ACL Live, both located at Block 21. 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. 15 Table of Contents Stratus uses operating income or loss to measure the performance of each segment. General and administrative expenses, which primarily consist of employee salaries, wages and other costs, are managed on a consolidated basis and are not allocated to Stratus’ operating segments. The following segment information reflects management determinations that may not be indicative of what the actual financial performance of each segment would be if it were an independent entity. Revenues from Contracts with Customers. Stratus' revenues from contracts with customers follow (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Real Estate Operations: Developed property sales $ — $ 5,001 $ 4,615 $ 19,141 Undeveloped property sales 750 — 3,250 — Commissions and other 150 24 431 113 900 5,025 8,296 19,254 Leasing Operations: Rental revenue 5,723 5,807 16,098 17,257 Hotel: Rooms, food and beverage 4,748 1,504 9,978 7,511 Other 450 92 1,273 1,026 5,198 1,596 11,251 8,537 Entertainment: Event revenue 2,865 373 4,515 4,224 Other 794 — 1,411 594 3,659 373 5,926 4,818 Total revenues from contracts with customers $ 15,480 $ 12,801 $ 41,571 $ 49,866 Financial Information by Business Segment. The following segment information was prepared on the same basis as Stratus’ consolidated financial statements (in thousands). Real Estate Operations a Leasing Operations Hotel Entertainment Corporate, Eliminations and Other b Total Three Months Ended September 30, 2021: Revenues: Unaffiliated customers $ 900 $ 5,723 $ 5,198 $ 3,659 $ — $ 15,480 Intersegment 55 247 38 1 ( 341 ) — Cost of sales, excluding depreciation 1,945 2,547 4,312 2,905 ( 104 ) 11,605 Depreciation 46 1,600 878 346 ( 38 ) 2,832 General and administrative expenses — — — — 5,422 c 5,422 Impairment of real estate 625 d — — — — 625 Operating (loss) income $ ( 1,661 ) $ 1,823 $ 46 $ 409 $ ( 5,621 ) $ ( 5,004 ) Capital expenditures and purchases and development of real estate properties $ 25,962 e $ 4,138 $ 177 $ 15 $ — $ 30,292 Total assets at September 30, 2021 211,405 194,143 f 91,779 35,222 26,551 559,100 16 Table of Contents Real Estate Operations a Leasing Operations Hotel Entertainment Corporate, Eliminations and Other b Total Three Months Ended September 30, 2020: Revenues: Unaffiliated customers $ 5,025 $ 5,807 $ 1,596 $ 373 $ — $ 12,801 Intersegment 5 223 18 ( 6 ) ( 240 ) — 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 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 September 30, 2020 160,890 236,970 f 93,666 35,495 16,198 543,219 Nine Months Ended September 30, 2021: Revenues: Unaffiliated customers $ 8,296 $ 16,098 $ 11,251 $ 5,926 $ — $ 41,571 Intersegment 64 723 98 1 ( 886 ) — Cost of sales, excluding depreciation 7,781 7,456 11,076 6,000 ( 324 ) 31,989 Depreciation 149 5,003 2,635 1,094 ( 123 ) 8,758 General and administrative expenses — — — — 16,365 c 16,365 Impairment of real estate 625 d — — — — 625 Gain on sale of assets — ( 22,931 ) g — — — ( 22,931 ) Operating (loss) income $ ( 195 ) $ 27,293 $ ( 2,362 ) $ ( 1,167 ) $ ( 16,804 ) $ 6,765 Capital expenditures and purchases and development of real estate properties $ 30,841 e $ 6,273 $ 392 $ 43 $ — $ 37,549 Nine Months Ended September 30, 2020: Revenues: Unaffiliated customers $ 19,254 $ 17,257 $ 8,537 $ 4,818 $ — $ 49,866 Intersegment 13 666 82 8 ( 769 ) — Cost of sales, excluding depreciation 15,653 9,955 h 10,992 i 5,773 ( 246 ) 42,127 Depreciation 173 6,132 2,927 j 1,279 j ( 172 ) 10,339 General and administrative expenses — — — — 8,786 8,786 Income from forfeited earnest money — — — — ( 15,000 ) k ( 15,000 ) Operating income (loss) $ 3,441 $ 1,836 $ ( 5,300 ) $ ( 2,226 ) $ 5,863 $ 3,614 Capital expenditures and purchases and development of real estate properties $ 11,607 $ 4,681 $ 523 $ 124 $ — $ 16,935 a. Includes sales commissions and other revenues together with related expenses. b. Includes consolidated general and administrative expenses and eliminations of intersegment amounts. c. 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. d. 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. e. Includes the purchase of The Annie B land for $ 22.5 million. f. 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. 17 Table of Contents g. Represents the gain on the January 2021 sale of The Saint Mary. h. Includes a $ 1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs. i. 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. j. 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. k. Represents income from earnest money received as a result of Ryman's termination in May 2020 of the 2019 agreements to purchase Block 21. 10. SUBSEQUENT EVENTS 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.