What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 161 added, 139 removed, 344 unchanged (47% of the section changed)

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We are focused on the development of pure residential and residential-centric mixed-use projects in Austin and other select markets in Texas, which we believe continue to be attractive locations.

From time to time, when deemed appropriate by our Board of Directors (Board) and permitted pursuant to the terms of our debt agreements, we may return cash to shareholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million respectively, and as we have been doing during 2022 and 2023 through our $10 million share repurchase program.

From time to time, when deemed appropriate by our Board of Directors (Board) and permitted pursuant to the terms of our debt agreements, we may return cash to shareholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million respectively, and as we have done during 2022 and 2023 through our $10.0 million share repurchase program, that was completed in October 2023.

In November 2023, our Board approved a new $5.0 million share repurchase program.

Refer to “Business Strategy” in MD&A in our 2022 Form 10-K for a discussion of the evolution of our strategy during 2022.

We do not currently have any material commitments to contribute additional cash to our joint venture projects or wholly owned development projects other than the potential additional $10.0 million of capital that we may be required to contribute to Holden Hills, L.P.

(the Holden Hills partnership) and our share (related to Section N) of the cost of the Tecoma Improvements discussed below under “Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills.” However, in second-quarter 2023, we made operating loans totaling $2.3 million to Stratus Block 150, L.P.

and The Saint June, L.P.

Refer to Note 3 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” for further discussion.

(the Holden Hills partnership) and our share (related to Section N) of the cost of the Tecoma Improvements discussed below under “Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills.” However, between April and October 2023, we made operating loans totaling $3.3 million to Stratus Block 150, L.P.

and The Saint June, L.P., and we anticipate making future operating loans to Stratus Block 150, L.P.

and The Saint George Apartments, L.P.

totaling up to $3.4 million over the next 12 months.

Refer to Note 3 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” and “Capital Resources and Liquidity – Liquidity Outlook” for further discussion.

In addition, our development plans for future projects require significant additional capital.

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We expect to reduce our reliance on our revolving credit facility and retain sufficient cash to operate our business, taking into account risks associated with changing market conditions and the variability in cash flows from our business.

Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors.

Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or

distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors.

We also generate cash flow from rental income in our leasing operations and from development and asset management fees received from our properties.

Due to the nature of our development-

focused business, we do not expect to generate sufficient recurring cash flow to cover our general and administrative expenses each period.

Due to the nature of our development-focused business, we do not expect to generate sufficient recurring cash flow to cover our general and administrative expenses each period.

However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, will provide us with positive cash flows and net income over time, as evidenced by our recent sales of The Saint Mary, The Santal and Block 21 in 2021 and 2022 and the cash distribution from the Holden Hills partnership in 2023.

Further, we believe our investment strategy, current liquidity and pipeline of projects provide us with many years of opportunities to increase long-term value for our stockholders.

Largely as a result of our recent property sales and the cash distribution from the Holden Hills partnership, as of June 30, 2023 we had cash and cash equivalents of $44.1 million and availability under our revolving credit facility of $42.7 million.

Largely as a result of our recent property sales and the cash distribution from the Holden Hills partnership, as of September 30, 2023 we had cash and cash equivalents of $35.2 million and availability under our revolving credit facility of $40.5 million.

Given challenging market conditions discussed in more detail below, we are currently focused on successfully completing our projects under construction, managing our capital expenditures, advancing other projects through the planning, designing and entitlement process, maximizing cash flow from stabilized assets, controlling costs as much as possible in this inflationary environment, and working to manage and expand our credit and joint venture partner relationships.

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We may sell or lease the real estate we develop, depending on market conditions.

Multi-family and retail rental properties that we develop are reclassified to our Leasing Operations segment when construction is completed and they are ready for occupancy.

Multi-family and retail rental properties that we develop are reclassified to our Leasing Operations segment when construction is substantially completed and they are ready for occupancy.

Revenue in our Real Estate Operations may be generated from the sale of properties that are developed, undeveloped or under development, depending on market conditions.

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We may also generate income from the sale of our leased properties, depending on market conditions.

Summary Financial Results for the Second-Quarter and First Six Months of 2023

Our revenues totaled $3.5 million in second-quarter 2023 and $9.3 million for the first six months of 2023, compared with $11.1 million in second-quarter 2022 and $14.2 million for the first six months of 2022.

The decrease in revenues in second-quarter 2023 and the first six months of 2023, compared to second-quarter 2022 and the first six months of 2022, is primarily a result of the sales of undeveloped real estate properties in our Real Estate Operations segment in second-quarter 2022 partially offset by an increase in revenue in our Leasing Operations segment primarily reflecting revenue from Magnolia Place, which had no rental revenue in the 2022 periods.

We had no property sales in second-quarter 2023.

Summary Financial Results for the Third-Quarter and First Nine Months of 2023

Our revenues totaled $3.7 million in third-quarter 2023 and $13.0 million for the first nine months of 2023, compared with $10.0 million in third-quarter 2022 and $24.2 million for the first nine months of 2022.

The decrease in revenues in the 2023 periods, compared to the 2022 periods, is primarily a result of higher sales of undeveloped real estate properties in our Real Estate Operations segment in both 2022 periods compared to no sales in third-quarter 2023 and lower sales in the first nine months of 2023.

The decreases were partially offset in both 2023 periods by an increase in revenue in our Leasing Operations segment primarily reflecting revenue from Magnolia Place and The Saint June, both of which had no rental revenue in the 2022 periods, as well as increased revenue at Kingwood Place and West Killeen Market.

Refer to "Results of Operations" below for further discussion of our segments.

Our net loss totaled $5.3 million, or $0.64 per diluted share in second-quarter 2023, compared to net income of $96.6 million, or $11.53 per diluted share, in second-quarter 2022.

During the first six months of 2023 our net loss attributable to common stockholders totaled $11.1 million, or $1.35 per diluted share, compared to net income attributable to common stockholders of $98.9 million, or $11.82 per diluted share, during the first six months of 2022.

Our results for second-quarter 2022 and the first six months of 2022 include a $119.7 million pre-tax gain on the sale of Block 21.

Our net loss attributable to common stockholders totaled $2.8 million, or $0.35 per diluted share in third-quarter 2023, compared to net loss attributable to common stockholders of $2.4 million, or $0.29 per diluted share, in third-quarter 2022.

During the first nine months of 2023 our net loss attributable to common stockholders totaled $13.9 million, or $1.69 per diluted share, compared to net income attributable to common stockholders of $96.5 million, or $11.50 per diluted share, during the first nine months of 2022.

Our results for the first nine months of 2022 include a $119.7 million pre-tax gain on the sale of Block 21.

Refer to Note 4 under the heading “Block 21 - Discontinued Operations” for additional discussion.

The results during the first six months of 2022 also include a $4.8 million pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

The results during the first nine months of 2022 also include a $4.8 million pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

Refer to Note 4 under the heading “The Oaks at Lakeway” for additional discussion.

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On May 31, 2022, we completed the previously announced sale of Block 21 to Ryman for $260.0 million, subject to certain purchase price adjustments, and including Ryman’s assumption of $136.2 million of existing mortgage debt, with the remainder paid in cash.

Our net proceeds of cash and restricted cash totaled $112.3 million (including $6.9 million escrowed at closing and disbursed in full to Stratus in June 2023).

Our net cash proceeds totaled approximately $112 million (including $6.9 million escrowed at closing and disbursed in full to Stratus in June 2023).

We recorded a pre-tax gain on the sale of $119.7 million in second-quarter 2022.

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In second-quarter 2022, we sold a six-acre undeveloped multi-family tract of land for $2.5 million.

As of June 30, 2023, two developed Amarra Drive Phase III lots remained unsold.

As of September 30, 2023, two developed Amarra Drive Phase III lots remained unsold.

Amarra Villas.

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In first-quarter 2023, we completed and sold one home for $2.5 million.

Construction on the last ten units continues to progress, and as of August 9, 2023, one home was under contract to sell and nine homes remain available for sale.

Construction on the last ten homes continues to progress with four of the homes expected to be completed in fourth-quarter 2023.

As of November 8, 2023, one home was under contract to sell and nine homes remain available for sale.

The Saint June.

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The Saint June is comprised of multiple buildings featuring one, two and three bedroom units for lease with amenities that include a resort-style clubhouse, fitness center, pool and extensive green space.

The first units were ready for occupancy in July 2023, and the project is expected to be completed in September 2023.

The first units were available for occupancy in July 2023, and construction was completed in November 2023.

As of September 30, 2023, we had signed leases for approximately 25 percent of the units.

Holden Hills.

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We entered into a limited partnership agreement with a third-party equity investor for this project in January 2023, and in February 2023 obtained construction financing for Phase I of the project and commenced infrastructure construction.

We contributed to the partnership the Holden Hills land and related personal property at an agreed value of $70.0 million, and our 50.0 percent partner contributed $40.0 million in cash.

Immediately thereafter, the

Holden Hills partnership distributed $30.0 million of cash to us.

We contributed to the partnership the Holden Hills land and related personal property at an agreed

value of $70.0 million, and our 50.0 percent partner contributed $40.0 million in cash.

Immediately thereafter, the Holden Hills partnership distributed $30.0 million of cash to us.

Further, the Holden Hills partnership reimbursed us for certain initial project costs and closing costs of approximately $5.8 million.

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We have posted standby letters of credit with the City of Austin under our revolving credit facility with Comerica Bank totaling approximately $11.0 million as fiscal security for completion of certain infrastructure improvements benefiting the Holden Hills project and have agreed to leave such fiscal security in place until the improvements are completed.

As of June 30, 2023, we had $10.6 million remaining to complete the Tecoma Improvements.

As of September 30, 2023, we had $9.2 million remaining to complete the Tecoma Improvements.

The Holden Hills partnership is expected to be eligible to be reimbursed in the future by Travis County Municipal Utility Districts (MUD) for a portion of costs of the Tecoma Improvements and also for a portion of costs related only to the Holden Hills project, with such MUD reimbursements currently estimated to be up to a maximum of $6.4 million for the Tecoma Improvements and $8.0 million for only the Holden Hills project.

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We currently expect to achieve substantial completion by mid-2024.

In third-quarter 2021, we purchased the land and announced plans for The Annie B, a proposed luxury high-rise rental project in downtown Austin to be developed as a 400-foot tower, consisting of approximately 420,000 square feet with 316 luxury multi-family units.

We continue to work to finalize our development plans with a goal of beginning construction in late 2024 or 2025, subject to obtaining financing and other market conditions.

In third-quarter 2021, we purchased the land and announced plans for The Annie B, a proposed luxury high-rise project in downtown Austin to be developed as a 400-foot tower, consisting of approximately 420,000 square feet with 316 luxury residential units.

We continue to work to finalize our development plans and to evaluate whether the project is most profitable as a for rent or for sale product.

Our goal is to commence construction as soon as financing and other market conditions warrant.

The Saint Julia

We have advanced development plans for The Saint Julia, an approximately 300-unit multi-family project that is part of Lantana Place, a partially developed, mixed-use development project located south of Barton Creek in Austin.

We currently do not expect to begin construction prior to 2024, and The Saint Julia project remains subject to financing and market conditions.

Our goal is to commence construction as soon as financing and other market conditions warrant.

Lakeway Multi-Family

After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, we secured the right to develop a multi-family project on our remaining land in Lakeway, Texas.

The multi-family project is expected to utilize the road, drainage and utility infrastructure we are required to build, subject to certain conditions, which is secured by the $2.3 million letter of credit under our revolving credit facility.

The multi-family project is expected to utilize the road, drainage and utility infrastructure we are required to build, subject to certain conditions, which is secured by a $2.3 million letter of credit under our revolving credit facility.

Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.

Other Residential

In October 2022, we entered into a contract to sell approximately 11 acres planned for 275 multi-family units in Magnolia Place for $4.3 million, which is currently expected to close by mid-2024.

Upon the anticipated closing of the sale, we would have 18 acres planned for up to 600 multi-family units remaining in Magnolia Place.

In October 2022, we entered into a contract to sell approximately 11 acres planned for 275 multi-family units in Magnolia Place for $4.3 million.

The buyer terminated the contract in September 2023.

In August 2023, we entered into a contract to sell approximately 47 acres planned for up to 600 multi-family units, a second phase of retail development and up to seven remaining pad sites in Magnolia Place for $14.5 million, which is currently not expected to close before first-quarter 2024.

We continue to evaluate options for the 21-acre multi-family component of Jones Crossing, an H-E-B grocery anchored, mixed-use development located in College Station, Texas.

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Except for a storm water drainage pond and certain City of Magnolia water supply upgrades, which are expected to be completed by the end of 2024, the first phase of development was completed in third-quarter 2022, and the two retail buildings were turned over to our retail tenants to begin their finish-out process.

As of June 30, 2023, we had signed leases for all the retail space in the first phase of development, and tenants representing 89 percent of the space were open for business.

We sold two retail pad sites in 2022 for a total of $3.4 million, leaving up to seven additional pad sites available for lease or sale.

As of September 30, 2023, we had signed leases for all the retail space in the first phase of development, and all tenants were open for business.

As discussed above, in August 2023, we entered into a contract to sell approximately 47 acres planned for a second phase of retail development, up to seven remaining pad sites and up to 600 multi-family units, for $14.5 million.

We sold two retail pad sites in 2022 for a total of $3.4 million.

Jones Crossing

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We also own and operate the following stabilized retail projects that we developed:

• West Killeen Market is our H-E-B shadow-anchored retail project in West Killeen, Texas, near Fort Hood.

As of June 30, 2023, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.

• At Jones Crossing , as of June 30, 2023, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,117 square feet, and a ground lease on one retail pad site.

• West Killeen Market is our H-E-B shadow-anchored retail project in West Killeen, Texas, near Fort Cavazos.

As of September 30, 2023, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.

• At Jones Crossing , as of September 30, 2023, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,117 square feet, and a ground lease on one retail pad site.

Four retail pad sites remain available for lease.

• Lantana Place is our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas.

As of June 30, 2023, we had signed leases for approximately 92 percent of the 99,379-square-foot retail space, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott that opened in November 2021.

As of September 30, 2023, we had signed leases for approximately 92 percent of the

99,379-square-foot retail space, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott that opened in November 2021.

• Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area).

We have constructed 151,855 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and as of June 30, 2023, we had signed leases for approximately 96 percent of the retail space, including the H-E-B grocery store.

We have constructed 151,855 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and as of September 30, 2023, we had signed leases for substantially all of the retail space, including the H-E-B grocery store.

We have also signed ground leases on four of the retail pad sites.

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however, it has remained at historically high levels.

In response, the Federal Reserve has raised the federal funds target interest rate by an aggregate of 525 basis points during 2022 and through July 2023, to a target range between 5.25 percent and 5.50 percent, the highest level in over 20 years, and it may increase rates again during the remainder of 2023.

In response, the Federal Reserve has raised the federal funds target interest rate by an aggregate of 525 basis points during 2022 and through September 2023, to a target range between 5.25 percent and 5.50 percent, the highest level in over 20 years, and it may increase rates again during the remainder of 2023 and thereafter.

Because all of our debt is variable rate, these increases in market interest rates have substantially increased our borrowing costs.

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We use operating income or loss to measure the performance of our operating segments.

Corporate, eliminations and other include consolidated general and administrative expenses, which primarily consist of employee compensation and other costs described herein.

Corporate, eliminations and other

include consolidated general and administrative expenses, which primarily consist of employee compensation and other costs described herein.

The following table summarizes our operating results (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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(3,178) (3,594) (11,959) (10,202)

Operating (loss) income (5,352) 495 (10,945) 2,016

Operating loss (3,329) (2,830) (14,274) (814)

Interest expense, net — — — (15)

Net (loss) income from continuing operations (5,309) 532 (11,582) 2,344

Net loss from continuing operations (3,217) (2,574) (14,799) (230)

Net income from discontinued operations d

— 95,925 — 96,300

Total comprehensive loss attributable to noncontrolling interests 373 214 853 463

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Includes sales commissions and other revenues together with related expenses.

The first six months of 2022 includes a $4.8 million pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

For both 2022 periods, includes a $650 thousand impairment charge related to one of the Amarra Villas homes that was sold for $2.5 million in first-quarter 2023 and $70 thousand for the multi-family tract of land at Kingwood Place sold for $5.5 million in fourth-quarter 2022.

Refer to Note 4.

The first nine months of 2022 includes a $4.8 million pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

Refer to Note 4 under the heading “The Oaks at Lakeway” for additional discussion.

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

The 2022 periods include a $119.7 million pre-tax gain on the May 2022 sale of Block 21.

The first nine months of 2022 includes a $119.7 million pre-tax gain on the May 2022 sale of Block 21.

As a result of the sale of Block 21, we currently have two operating segments:

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The following table summarizes our Real Estate Operations results (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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Cost of sales, including depreciation (1,505) (6,256) (8,766) (13,103)

Impairment of real estate — (720) — (720)

Operating (loss) income $ (1,505) $ (89) $ (6,215) $ 1,014

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The following table summarizes our developed property sales (dollars in thousands):

Three Months Ended June 30,

Homes Revenues Average Cost Per Home Lots Revenues Average Cost Per Lot

Amarra Drive:

Amarra Villas homes — $ — $ — 1 $ 2,382 $ 2,382

Total Residential — $ — 1 $ 2,382

Six Months Ended June 30,

Nine Months Ended September 30,

Homes Revenues Average Cost Per Home Lots/Units Revenues Average Cost Per Lot/Unit

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Total Residential 1 $ 2,493 1 $ 2,382

We had no sales of developed properties in second-quarter 2023.

We had no developed property sales in third-quarter 2023 or 2022.

During the periods presented, we sold one Amarra Villas home in the second quarter of 2022 and one in the first quarter of 2023.

Undeveloped Property Sales.

In second-quarter 2022 and the first six months of 2022, we closed $5.4 million of undeveloped property sales consisting of (i) a six-acre multi-family tract of land in Amarra Drive for $2.5 million, (ii) a completed pad site at Magnolia Place for $2.3 million and (iii) a tract of land in Austin for $0.6 million.

In third-quarter 2022, we closed $6.9 million of undeveloped property sales consisting of (i) 28 acres of residential land for $3.2 million at Magnolia Place, (ii) a 0.3 acre tract of land in Austin for $1.6 million, (iii) a pad site at Magnolia Place for $1.1 million and (iv) a pad site at West Killeen Market for $1.0 million.

During the first nine months of 2022, we also closed $5.4 million of undeveloped property sales consisting of (i) a six-acre multi-family tract of land in Amarra Drive for $2.5 million, (ii) a completed pad site at Magnolia Place for $2.3 million and (iii) a tract of land in Austin for $0.6 million.

We had no undeveloped property sales in third-quarter 2023 or for the first nine months of 2023.

Cost of Sales.

Cost of sales includes costs of property sold, project operating and marketing expenses and allocated overhead costs.

Cost of sales decreased to $2.7 million in second-quarter 2023, compared to $5.5 million in second-quarter 2022, primarily due to the sale of an Amarra Villas home and the undeveloped property sold in second-quarter 2022 while there were no property sales in second-quarter 2023.

In addition, second-quarter 2023 cost of sales includes a $1.2 million charge to write off a forfeited earnest money deposit and other pursuit costs associated with terminating a contract to purchase land.

Cost of sales increased to $7.3 million for the first six months of 2023, compared to $6.8 million for the first six months of 2022, primarily due to the $1.2 million charge discussed above and $1.0 million of expenses related to the formation of the Holden Hills partnership in first-quarter 2023.

Cost of sales decreased to $1.5 million in third-quarter 2023, compared to $6.3 million in third-quarter 2022, primarily due to the undeveloped property sales in third-quarter 2022 while there were no property sales in third-quarter 2023.

Cost of sales decreased to $8.8 million for the first nine months of 2023, compared to $13.1 million for the first nine months of 2022, primarily due to higher real estate revenues in the first nine months of 2022 partially offset by a $1.2 million charge to write off a forfeited earnest money deposit and other pursuit costs associated with terminating a contract to purchase land and $1.0 million of expenses related to the formation of the Holden Hills partnership in the first nine months of 2023.

Impairment of Real Estate.

In third-quarter 2022, we recorded impairment charges totaling $720 thousand.

These included a $650 thousand impairment charge related to one of the Amarra Villas homes that sold for $2.5 million in first-quarter 2023 and a $70 thousand impairment charge for the multi-family tract of land at Kingwood Place that sold for $5.5 million in fourth-quarter 2022.

Refer to Note 4 for further discussion.

Leasing Operations

The following table summarizes our Leasing Operations results (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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Rental Revenue.

In the 2023 periods, rental revenue primarily included revenue from Lantana Place, Kingwood Place, Jones Crossing, West Killeen Market and Magnolia Place.

In the 2023 periods, rental revenue primarily included revenue from Lantana Place, Kingwood Place, Jones Crossing, West Killeen Market, Magnolia Place and The Saint June.

In the 2022 periods, rental revenue primarily included revenue from Lantana Place, Jones Crossing, Kingwood Place and West Killeen Market.

The increase in rental revenue in the 2023 periods, compared with the 2022 periods, primarily reflects revenue from Magnolia Place, which had no rental revenue in either period for 2022, and increased revenue at Kingwood Place.

Rental Cost of Sales and Depreciation.

Rental cost of sales and depreciation expense increased in the 2023 periods compared with the 2022 periods, primarily as a result of The Saint June and Magnolia Place, both of which had no operating expenses in the 2022 periods, and costs of landscaping repairs and replacements at retail properties following the Texas winter storm in February 2023.

The increase in rental revenue in the 2023 periods, compared with the 2022 periods, primarily reflects revenue from Magnolia Place and The Saint June, both of which had no rental revenue in the 2022 periods, as well as increased revenue at Kingwood Place and West Killeen Market.

Rental Cost of Sales and Depreciation and Amortization.

Rental cost of sales and depreciation and amortization expense increased in the 2023 periods compared with the 2022 periods, primarily as a result of The Saint June, which had no operating expenses in the 2022 periods, and Magnolia Place, which began operations in third-quarter 2022, and costs of landscaping repairs and replacements at retail properties following the Texas winter storm in February 2023.

Gain on Sale of Assets.

For the first six months of 2022, we recognized a $4.8 million pre-tax gain on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

For the first nine months of 2022, we recognized a $4.8 million pre-tax gain on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that we entered into in connection with our sale of The Oaks at Lakeway in 2017.

Refer to Note 4 under the heading “The Oaks at Lakeway” for further discussion.

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Corporate, eliminations and other (refer to Note 9) includes consolidated general and administrative expenses, which primarily consist of employee compensation and other costs.

Consolidated general and administrative expenses increased to $4.1 million in second-quarter 2023 and $8.8 million for the first six months of 2023, compared to $3.4 million in second-quarter 2022 and $6.6 million for the first six months of 2022 primarily as a result of higher compensation costs for salary increases and estimated cash incentive awards for 2023, as well as charges for restricted stock units (RSUs) granted in second-quarter 2022 in connection with the Profit Participation Incentive Plan (PPIP) payouts for Lantana Place and The Santal.

Fees related to a new consulting arrangement in 2023 to help raise third-party equity capital and office rent, which was eliminated in consolidation prior to the sale of Block 21, also contributed to the increases in the 2023 periods.

Consolidated general and administrative expenses were $3.2 million in third-quarter 2023 and $12.0 million for the first nine months of 2023, compared to $3.6 million in third-quarter 2022 and $10.2 million for the first nine months of 2022.

The decrease in the third-quarter 2023 compared to the third-quarter 2022 was primarily a result from a reduction in the employee incentive compensation costs associated with the Profit Participation Incentive Plan (PPIP) resulting from a decreased valuation for Kingwood Place.

The increase in the first nine months of 2023 compared to the first nine months of 2022 was primarily a result of higher compensation costs for salary increases and estimated cash incentive awards for 2023, as well as charges for restricted stock units (RSUs) granted in second-quarter 2022 in connection with the PPIP payouts for Lantana Place and The Santal.

Non-Operating Results

Interest Expense, Net.

Interest costs (before capitalized interest) totaled $2.9 million in second-quarter 2023 and $5.3 million for the first six months of 2023, compared with $1.5 million in second-quarter 2022 and $2.6 million for the first six months of 2022.

Interest costs (before capitalized interest) totaled $3.4 million in third-quarter 2023 and $8.7 million for the first nine months of 2023, compared with $1.8 million in third-quarter 2022 and $4.4 million for the first nine months of 2022.

Interest costs in the 2023 periods were higher, compared to the 2022 periods, primarily reflecting rising interest rates as well as an increase in average debt balances.

As of June 30, 2023, all of our debt was variable-rate debt, and for all of such debt, the interest rates have increased over the past year, including the first six months of 2023, and may continue to rise in the future if prevailing market interest rates continue to climb.

Substantially all of the interest costs were capitalized for the periods presented.

As of September 30, 2023, all of our debt was variable-rate debt, and for all of such debt, the interest rates have increased during 2022 and the first nine months of 2023, and may continue to rise in the future if prevailing market interest rates continue to climb.

Substantially all of the interest costs were capitalized for all periods presented.

Capitalized interest is primarily related to development activities at Barton Creek (primarily Holden Hills, Section N and The Saint June), The Saint George and The Annie B for all periods presented.

(Provision for) Benefit from Income Taxes.

We recorded a (provision for) benefit from income taxes of $(0.5) million in second-quarter 2023 and $(1.7) million for the first six months of 2023, compared to less than $(0.1) million in second-quarter 2022 and $0.3 million for the first six months of 2022.

Provision for Income Taxes.

We recorded a provision for income taxes of $(0.4) million in third-quarter 2023 and $(2.0) million for the first nine months of 2023, compared to $(0.4) million in third-quarter 2022 and $(0.2) million for the first nine months of 2022.

The provision for income taxes in 2023 is primarily a result from the taxable income generated from cash received in the Holden Hills transaction discussed in Note 3.

Refer to Note 8 for further discussion of income taxes.

Net Income from Discontinued Operations.

As a result of the sale of Block 21 in May 2022, we did not have any net income from discontinued operations in second-quarter 2023 or the first six months of 2023.

Net income from discontinued operations totaled $95.9 million in second-quarter 2022 and $96.3 million for the first six months of 2022.

As a result of the sale of Block 21 in May 2022, we did not have any net income from discontinued operations in the 2023 periods.

Net income from discontinued operations totaled $96.3 million for the first nine months of 2022.

The net income in the 2022 periods primarily reflects a $119.7 million pre-tax gain on the sale of Block 21.

Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries .

Our partners' share of losses totaled less than $0.1 million in second-quarter 2023 and $0.5 million for the first six months of 2023, compared to $0.2 million in both second-quarter 2022 and for the first six months of 2022.

Our partners' share of losses totaled $0.4 million in third-quarter 2023 and $0.9 million for the first nine months of 2023, compared to $0.2 million in third-quarter 2022 and $0.5 million for the first nine months of 2022.

CAPITAL RESOURCES AND LIQUIDITY

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However, we believe that the unique nature and location of our assets will provide us positive cash flows over time.

Comparison of Cash Flows for the Six Months Ended June 30, 2023 and 2022

Comparison of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

Operating Activities.

Cash used in operating activities totaled $26.8 million for the first six months of 2023, compared with $43.6 million for the first six months of 2022.

Expenditures for purchases and development of real estate properties totaled $21.1 million for the first six months of 2023 and $12.1 million for the first six months of 2022, both primarily related to development of our Barton Creek properties, particularly Amarra Villas and Holden Hills.

The cash outflow resulting from the decrease in accounts payable, accrued liabilities and other for the first six months of 2022 is primarily related to the payment of awards under our PPIP and the timing of tax payments, including property taxes.

Cash used in operating activities totaled $39.3 million for the first nine months of 2023, compared with $49.3 million for the first nine months of 2022.

Expenditures for purchases and development of real estate properties totaled $34.7 million for the first nine months of 2023 and $18.3 million for the first nine months of 2022, both primarily related to development of our Barton Creek properties, particularly Amarra Villas and Holden Hills.

The cash outflow resulting from the decrease in accounts payable, accrued liabilities and other for the first nine months of 2022 is primarily related to the payment of awards under our PPIP and the timing of tax payments, including property taxes.

Investing Activities.

Cash (used in) provided by investing activities totaled $(24.0) million for the first six months of 2023 and $77.8 million for the first six months of 2022.

During the first six months of 2022, we received net proceeds from the sale of Block 21 of $105.8 million (excluding the release of reserves previously presented as restricted cash but including $6.9 million escrowed at closing).

Cash (used in) provided by investing activities totaled $(36.9) million for the first nine months of 2023 and $66.2 million for the first nine months of 2022.

During the first nine months of 2022, we received net proceeds from the sale of Block 21 of $105.8 million (excluding the release of reserves previously presented as restricted cash but including $6.9 million escrowed at closing).

As no claims were made against the escrowed amounts, the $6.9 million was disbursed in full to us in June 2023.

Capital expenditures totaled $23.5 million for the first six months of 2023, primarily for The Saint George and The Saint June, and $27.6 million for the first six months of 2022, primarily for The Saint June and Magnolia Place projects.

Capital expenditures totaled $36.2 million for the first nine months of 2023, primarily for The Saint George and The Saint June, and $38.9 million for the first nine months of 2022, primarily for The Saint June, The Saint George and Magnolia Place projects.

Financing Activities.

Cash provided by financing activities totaled $50.1 million for the first six months of 2023 and $6.2 million for the first six months of 2022.

During both the first six months of 2023 and 2022, we had no net borrowings on the Comerica Bank revolving credit facility.

During the first six months of 2023, net borrowings on other project and term loans totaled $14.5 million, primarily reflecting borrowings on The Saint June construction loan and the Amarra Villas revolving credit facility, partially offset by the payoff of the New Caney land loan.

During the first six months of 2022, net repayments on other project and term loans totaled $6.9 million, primarily reflecting borrowings on the Magnolia Place and The Saint June construction loans.

Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at June 30, 2023.

During the first six months of 2023, we received a contribution from a noncontrolling interest owner of $40.0 million, related to the Holden Hills partnership.

Cash provided by (used in) financing activities totaled $66.9 million for the first nine months of 2023 and $(9.7) million for the first nine months of 2022.

During both the first nine months of 2023 and 2022, we had no net borrowings on the Comerica Bank revolving credit facility.

During the first nine months of 2023, net borrowings on other project and term loans totaled $33.2 million, primarily reflecting borrowings on The Saint George construction loan, The Saint June construction loan and the Amarra Villas revolving credit facility, partially offset by the payoff of the New Caney land loan.

During the first nine months of 2022, net repayments on other project and term loans totaled $16.0 million, primarily reflecting borrowings on the Magnolia Place and The Saint June construction loans.

Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at September 30, 2023.

During the first nine months of 2023, we received a contribution from a noncontrolling interest owner of $40.0 million, related to the Holden Hills partnership.

During the first nine months of 2022, we received contributions from a noncontrolling interest owner of $15.0 million, related to The Saint George partnership.

On September 1, 2022, after receiving written consent from Comerica Bank, our Board declared a special cash dividend of $4.67 per share (totaling $40.0 million) on our common stock, which was paid on September 29, 2022 to shareholders of record as of September 19, 2022.

During the first six months of 2023, $0.6 million of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $0.7 million of dividends accrued for unvested RSUs presented in accrued liabilities as of June 30, 2023.

During the first nine months of 2023, $0.7 million of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $0.6 million of dividends accrued for unvested RSUs presented in accrued liabilities as of September 30, 2023.

The remaining accrued dividends will be paid to the holders of the RSUs as the RSUs vest.

In 2022, with written consent from Comerica Bank, our Board also approved a share repurchase program, which authorizes repurchases of up to $10.0 million of our common stock.

The repurchase program authorizes us, in management’s discretion, to repurchase shares from time to time, subject to market conditions and other factors.

As of June 30, 2023, we repurchased 369,006 shares of our common stock for a total of $9.5 million at an average price of $25.61.

Through August 9, 2023, we have acquired 381,889 shares of our common stock for a total cost of $9.8 million at an average price of $25.65 per share, and $0.2 million remains available for repurchases under the program.

The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management.

In 2022, with written consent from Comerica Bank, our Board also approved a share repurchase program, which authorized repurchases of up to $10.0 million of our common stock.

As of September 30, 2023, we repurchased 386,619 shares of our common stock for a total of $9.9 million at an average price of $25.67.

In October 2023, we completed the share repurchase program.

In total, under the completed share repurchase program, we acquired 389,378 shares of our common stock for a cost of $10.0 million at an average price of $25.68 per share.

In November 2023, with written consent from Comerica Bank, our Board approved a new share repurchase program, which authorizes repurchases of up to $5.0 million of our common stock.

The repurchase program authorizes us, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors.

The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management and the Capital Committee of the Board.

Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws.

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Revolving Credit Facility and Other Financing Arrangements

As of June 30, 2023, we had $44.1 million in cash and cash equivalents and restricted cash of $1.0 million, and no amount was borrowed under our revolving credit facility.

Of the $44.1 million in consolidated cash and cash equivalents at June 30, 2023, $4.7 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.

As of September 30, 2023, we had $35.2 million in cash and cash equivalents and restricted cash of $1.2 million, and no amount was borrowed under our revolving credit facility.

Of the $35.2 million in consolidated cash and cash equivalents at September 30, 2023, $2.9 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.

We have taken steps to obtain Federal Deposit Insurance Corporation (FDIC) protection for much of our deposits;

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Any loss of uninsured deposits could have a material adverse effect on our future financial condition, liquidity and operations.

As of June 30, 2023, $31.4 million was invested in an FDIC insured cash sweep platform.

As of June 30, 2023, we had total debt of $139.4 million based on the principal amounts outstanding compared with $123.9 million at December 31, 2022.

As of June 30, 2023, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $53.7 million, resulting in availability of $42.7 million, net of letters of credit totaling $11.0 million issued under the revolving credit facility to secure our obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N.

As of September 30, 2023, $30.1 million was invested in an FDIC insured cash sweep platform.

As of September 30, 2023, we had total debt of $158.5 million based on the principal amounts outstanding compared with $123.9 million at December 31, 2022.

As of September 30, 2023, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $53.8 million, resulting in availability of $40.5 million, net of letters of credit totaling $13.3 million issued under the revolving credit facility, $11.0 million of which secure our obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N.

In March 2023, we entered into a modification of the revolving credit facility, which extended the maturity date to March 27, 2025 and increased the floor of the facility’s benchmark rate.

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In May 2023, we entered into another modification of the revolving credit facility to increase the maximum amount of letters of credit that may be issued under the revolving credit facility from $11.5 million to $13.3 million.

In July 2023, we entered into a $2.3 million letter of credit to secure our obligations to construct and pay for certain utility infrastructure in Lakeway,

Texas, estimated to cost approximately $2.3 million.

The amount available under the revolving credit facility, net of letters of credit issued, was $40.4 million as of August 9, 2023.

In July 2023, we entered into a $2.3 million letter of credit to secure our obligations to construct and pay for certain utility infrastructure in Lakeway, Texas, estimated to cost approximately $2.3 million.

Refer to Note 6 for additional discussion.

Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of June 30, 2023.

Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of September 30, 2023.

In April 2023, we made an operating loan of $1.5 million to Stratus Block 150, L.P.

to facilitate the partnership’s ability to pay ongoing costs of The Annie B project during the pre-construction period.

In August 2023, we made an additional advance of $800 thousand under the operating loan to Stratus Block 150, L.P.

The loan bears interest at the one-month BSBY Rate plus 5.00 percent, is subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners.

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to support the partnership’s ability to pay its construction loan interest, which has risen above the amount originally budgeted due to rising interest rates.

The loan bears interest at the Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, is subordinate to The Saint June construction loan and must be repaid before distributions may be made to the partners.

In October 2023, we made an additional advance of $250 thousand under the operating loan to The Saint June, L.P., and the Class B Limited Partner made an operating loan of $250 thousand to The Saint June, L.P.

The loans bear interest at the Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, is subordinate to The Saint June construction loan and must be repaid before distributions may be made to the partners.

In February 2023, The Annie B land loan’s maturity was extended to March 1, 2024.

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In March 2023, we repaid the $4.1 million New Caney land loan.

In response to the phase-out of London Interbank Offered Rate (LIBOR) as a benchmark interest rate, in the first six months of 2023, interest terms were modified for The Saint June construction loan, The Annie B land loan, and the Magnolia Place construction loan to replace the LIBOR benchmark rate with either Term SOFR or the one-month BSBY Rate.

In response to the phase-out of London Interbank Offered Rate (LIBOR) as a benchmark interest rate, in the first nine months of 2023, interest terms were modified for The Saint June construction loan, The Annie B land loan, and the Magnolia Place construction loan to replace the LIBOR benchmark rate with either Term SOFR or the one-month BSBY Rate.

Refer to Note 6 for further discussion.

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Refer to Note 6 and MD&A in our 2022 Form 10-K for a discussion of the financial covenants in our debt agreements.

As of June 30, 2023, we were in compliance with all of our financial covenants.

As of September 30, 2023, we were in compliance with all of our financial covenants.

However, our Jones Crossing project did not pass the debt service coverage ratio (DSCR) test under the Jones Crossing loan in each of fourth-quarter 2022 and first-quarter 2023.

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however, to avoid a “Cash Sweep Period,” as defined in the loan agreement, we made principal payments of $231 thousand and $1.7 million in February 2023 and May 2023, respectively, to restore the DSCR to the required threshold.

The DSCR fell below 1.15 to 1.00 in second-quarter 2023 and we must make an additional principal payment of approximately $1.2 million in August 2023 or allow a Cash Sweep Period to commence.

If the $1.2 million principal payment is made in August 2023, based on our current estimates of the Jones Crossing project’s operating income and interest rates, we project that we will meet the DSCR test over the next 12 months.

A Cash Sweep Period limits our ability to receive cash from our Jones Crossing subsidiary, and is projected not to be material to our overall liquidity position over the next 12 months.

Once a Cash Sweep Period has commenced, it is terminated when the DSCR is at least 1.20 to 1.00 at the end of any two consecutive fiscal quarters (or by making additional principal payments to achieve that level).

As permitted under the loan agreement, in August 2023 the Jones Crossing subsidiary separated the ground lease for the multi-family parcel from the primary ground lease, and the multi-family parcel has been released from the loan collateral .

As permitted under the Jones Crossing loan agreement, in August 2023 the Jones Crossing subsidiary separated the ground lease for the multi-family parcel (the Multi-Family Phase) from the primary ground lease, and the Multi-Family Phase was released from the loan collateral .

In October 2023, the Jones Crossing loan was modified effective August 1, 2023 to remove the Multi-Family Phase from certain defined terms and to revise the DSCR calculation to exclude the Multi-Family Phase from expenses on a retroactive basis beginning in second-

quarter 2023.

Accordingly, the DSCR met the threshold in second-quarter and third-quarter 2023.

Based on our current estimates of the Jones Crossing project’s operating income and interest rates, we project that we will meet the DSCR test over the next 12 months.

Stratus’ and its subsidiaries’ debt arrangements contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things:

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and engage in mergers, consolidations or other business combinations.

Our Comerica Bank revolving credit facility, Amarra Villas revolving credit facility, The Annie B land loan, The Saint George construction loan, Kingwood Place construction loan and Holden Hills construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments, which was obtained in 2022 in connection with the special cash dividend and share repurchase program.

Any future declaration of dividends or decision to repurchase our common stock is at the discretion of our Board, subject to restrictions under our Comerica Bank debt agreements, and will depend on our financial results, cash requirements, projected compliance with covenants in our debt agreements, outlook and other factors deemed relevant by our Board.

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Debt Maturities and Other Contractual Obligations

The following table summarizes our debt maturities based on the principal amounts outstanding as of June 30, 2023 (in thousands):

The following table summarizes our debt maturities based on the principal amounts outstanding as of September 30, 2023 (in thousands):

2023 2024 2025 2026 2027 Thereafter Total

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Lantana Place 73 298 327 354 20,784 — 21,836

The Saint George — — — 16,097 — — 16,097

Amarra Villas revolving credit facility — 14,242 — — — — 14,242

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15 58 5,198 — — — 5,271

The Saint George — — — 3,597 — — 3,597

$ 28,221 $ 58,250 $ 5,463 $ 26,480 $ 20,985 $ — $ 139,399

Holden Hills — — — 1,711 — — 1,711

Total $ 28,099 $ 63,308 $ 5,525 $ 40,756 $ 20,784 $ — $ 158,472

In March 2023, we entered into a modification of the revolving credit facility, which extended the maturity date of the revolving credit facility to March 27, 2025.

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The maturity date is December 6, 2023.

We have the option to extend the maturity date for one additional 12-month period, subject to certain debt service coverage conditions;

we project that we will meet the conditions and expect to exercise the option to extend the maturity.

The Holden Hills construction loan did not have an outstanding balance at June 30, 2023.

We exercised our option to extend the maturity date for one additional 12-month period, which the lender has approved.

We are working with the lender to document the extension and modification of the loan agreement.

The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022 a

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Lantana Place 7.66 4.74 7.33 3.67

The Saint George e

7.66 — 7.63 —

Amarra Villas revolving credit facility 8.27 5.07 7.95 4.19

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7.98 4.95 7.64 3.72

The Saint George e

Holden Hills f

8.36 — 8.36 —

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The PPP loan matured and the remaining balance was repaid on April 15, 2022.

We did not have an outstanding balance during second-quarter 2023 or the first six months of 2023.

At June 30, 2023, the interest rate for the revolving credit facility was 9.20 percent.

We did not have an outstanding balance during third-quarter 2023, third-quarter 2022 or the first nine months of 2023.

At September 30, 2023, the interest rate for the revolving credit facility was 9.40 percent.

In March 2023, we repaid this loan.

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We did not have an outstanding balance during either period in 2022 or during first-quarter 2023.

We did not have an outstanding balance during either period in 2022 or during first-quarter and second-quarter 2023.

Liquidity Outlook

We had firm commitments totaling approximately $75 million at June 30, 2023 primarily related to construction of The Saint George, Holden Hills and Amarra Villas.

We have construction loans, as well as remaining equity capital contributed to The Saint George and Holden Hills partnerships, to fund the projected cash outlays for these projects over the next 12 months except for 60 percent of the costs of the Tecoma Improvements for which we have agreed to reimburse the Holden Hills partnership.

As of June 30, 2023, we had $10.6 million remaining to complete the Tecoma Improvements.

We had firm commitments totaling approximately $54 million at September 30, 2023 primarily related to construction of The Saint George, Holden Hills and Amarra Villas.

We have construction loans, as well as remaining equity capital contributed to the Holden Hills partnership, to fund these projected cash outlays for the projects over the next 12 months except for anticipated operating loans to The Saint George Apartments, L.P.

described below and 60 percent of the costs of the Tecoma Improvements for which we have agreed to reimburse the Holden Hills partnership.

As of September 30, 2023, we had $9.2 million remaining to complete the Tecoma Improvements.

Refer to "Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills” above for further discussion of the Tecoma Improvements.

Also, we anticipate making additional operating loans to Stratus Block 150, L.P.

of up to $3 million over the next 12 months to enable the partnership to pay debt service and project costs during the pre-construction period.

Also, we anticipate making future operating loans to Stratus Block 150, L.P.

and The Saint George Apartments, L.P.

totaling up to $3.4 million over the next 12 months to enable the partnerships to pay debt service and project costs.

The operating loans would bear interest at the one-month BSBY Rate plus 5.00 percent and would be repaid before distributions may be made to the partners.

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Our stabilized commercial properties (West Killeen Market, Jones Crossing, Lantana Place and Kingwood Place) are projected to generate sufficient cash flow to cover debt service over the next 12 months.

As discussed above, we may be required to make additional principal payments on the Jones Crossing loan over the next 12 months or allow a Cash Sweep Period to commence.

For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements and projected operating loans to partnerships and general and administrative expenses, we had cash on hand of $44.1 million at June 30, 2023 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $40.4 million as of August 9, 2023 in amounts expected to be sufficient to fund these cash requirements for the next 12 months.

For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements, the projected operating loans to partnerships and general and administrative expenses, we had cash on hand of $35.2 million at September 30, 2023 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $40.5 million as of September 30, 2023 in amounts expected to be sufficient to fund these cash requirements for the next 12 months.

We expect to successfully extend the maturities or refinance our debt that matures in the next 12 months.

For future potential significant development projects, we would not plan to enter into commitments to incur material costs for the projects until we obtain what we project to be adequate financing to cover anticipated cash outlays.

As discussed under “Business Strategy” above, our main source of revenue and cash flow is expected to come from sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are

difficult to predict and depend on market conditions and other factors.

We also generate cash flow from rental revenue in our leasing operations and from development and asset management fees received from our properties.

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In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements.

For additional information regarding these types of activities, refer to the discussion about our firm commitments in “Capital Resources and Liquidity – Liquidity Outlook” above and Note 9 to our consolidated financial statements in our 2022 Form 10-K.

For additional information regarding these types of

activities, refer to the discussion about our firm commitments in “Capital Resources and Liquidity – Liquidity Outlook” above and Note 9 to our consolidated financial statements in our 2022 Form 10-K.

CAUTIONARY STATEMENT

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The words “anticipate,” “may,” “can,” “plan,” “believe,” “potential,” “estimate,” “expect,” “project,” "target," “intend,” “likely,” “will,” “should,” “to be” and any similar expressions and/or statements are intended to identify those assertions as forward-looking statements.

Under our Comerica Bank debt agreements, we are not permitted to repurchase our common stock in excess of $1.0 million or pay dividends on our common stock without Comerica Bank's prior written consent, which was obtained in connection with the special cash dividend and share repurchase program.

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We caution readers that forward-looking statements are not guarantees of future performance, and our actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements.

Important factors that can cause our actual results to differ materially from those anticipated in the

forward-looking statements include, but are not limited to, our ability to implement our business strategy successfully, including our ability to develop, construct and sell or lease properties on terms our Board considers acceptable, increases in operating and construction costs, including real estate taxes and the cost of building materials and labor, increases in inflation and interest rates, supply chain constraints, tightening bank credit, defaults by contractors and subcontractors, declines in the market value of our assets, market conditions or corporate developments that could preclude, impair or delay any opportunities with respect to plans to sell, recapitalize or refinance properties, a decrease in the demand for real estate in select markets in Texas where we operate, particularly in Austin, changes in economic, market, tax and business conditions, including as a result of the war in Ukraine, potential U.S.

Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, our ability to implement our business strategy successfully, including our ability to develop, construct and sell or lease properties on terms our Board considers acceptable, increases in operating and construction costs, including real estate taxes and the cost of building materials and labor, increases in inflation and interest rates, supply chain constraints, tightening bank credit, defaults by contractors and subcontractors, declines in the market value of our assets, market conditions or corporate developments that could preclude, impair or delay any opportunities with respect to plans to sell, recapitalize or refinance properties, a decrease in the demand for real estate in select markets in Texas where we operate, particularly in Austin, changes in economic, market, tax, business and geopolitical conditions, including as a result of the conflicts in Ukraine and Israel, potential U.S.

or local economic downturn or recession, the availability and terms of financing for development projects and other corporate purposes, the failure of any bank in which we deposit our funds, any major public health crisis, our ability to collect anticipated rental payments and close projected asset sales, loss of key personnel, our ability to enter into and maintain joint ventures, partnerships, or other strategic relationships, including risks associated with such joint ventures, our ability to pay or refinance our debt, extend maturity dates of our loans or comply with or obtain waivers of financial and other covenants in debt agreements and to meet other cash obligations, eligibility for and potential receipt and timing of receipt of MUD reimbursements, industry risks, changes in buyer preferences, potential additional impairment charges, competition from other real estate developers, our ability to obtain various entitlements and permits, changes in laws, regulations or the regulatory environment affecting the development of real estate, opposition from special interest groups or local governments with respect to development projects, weather- and climate-related risks, environmental and litigation risks, the failure to attract buyers or tenants for our developments or such buyers’ or tenants’ failure to satisfy their purchase commitments or leasing obligations, cybersecurity incidents and other factors described in more detail under the heading “Risk Factors” in Part I, Item 1A.

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Further, we may make changes to our business plans that could affect our results.

We caution investors that we undertake no obligation to update our forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, business plans, actual experience, or other changes.

We caution investors that we undertake no obligation to update our

forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, business plans, actual experience or other changes.

Quantitative and Qualitative Disclosures About Market Risk .

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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 2. Management’s Discussion and Analysis