What changed in this filing

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Item 1. Financial Statements

2024-05-14 compared with 2023-11-14 · 130 added, 352 removed, 264 unchanged (65% of the section changed)

3 unchanged sentences

(In Thousands)

September 30,

2024 December 31,

29 unchanged sentences

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In Thousands, Except Per Share Amounts)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Real estate operations $ 22,123 $ 2,493

7 unchanged sentences

General and administrative expenses 4,465 4,719

Impairment of real estate — 720 — 720

Gain on sale of assets — — — ( 4,812 )

Total 22,822 11,395

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

Interest expense, net — — — ( 15 )

Operating income (loss) 3,685 ( 5,593 )

Loss on extinguishment of debt ( 59 ) —

Other income, net 173 485

Loss before income taxes and equity in unconsolidated affiliate's loss ( 2,857 ) ( 2,150 ) ( 12,773 ) ( 63 )

Income (loss) before income taxes and equity in unconsolidated affiliates' loss 3,799 ( 5,108 )

Provision for income taxes ( 102 ) ( 1,162 )

Equity in unconsolidated affiliate's loss ( 4 ) ( 4 ) ( 10 ) ( 8 )

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

Net income from discontinued operations — — — 96,300

Net (loss) income and total comprehensive (loss) income ( 3,217 ) ( 2,574 ) ( 14,799 ) 96,070

Equity in unconsolidated affiliates' loss — ( 3 )

Net income (loss) and total comprehensive income (loss) 3,697 ( 6,273 )

Total comprehensive loss attributable to noncontrolling interests 855 472

Net (loss) income and total comprehensive (loss) income attributable to common stockholders $ ( 2,844 ) $ ( 2,360 ) $ ( 13,946 ) $ 96,533

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

Continuing operations

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 0.03

Discontinued operations — — — 11.65

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 11.68

Diluted net (loss) income per share attributable to common stockholders:

Continuing operations

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 0.03

Discontinued operations — — — 11.47

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 11.50

Net income (loss) and total comprehensive income (loss) attributable to common stockholders $ 4,552 $ ( 5,801 )

Basic net income (loss) per share attributable to common stockholders $ 0.57 $ ( 0.73 )

Diluted net income (loss) per share attributable to common stockholders $ 0.56 $ ( 0.73 )

Weighted-average shares of common stock outstanding:

8,240 8,275 8,230 8,266

Diluted 8,151 7,986

Dividends declared per share of common stock $ — $ 4.67 $ — $ 4.67

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

2 unchanged sentences

(In Thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flow from operating activities:

Net (loss) income $ ( 14,799 ) $ 96,070

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

Net income (loss) $ 3,697 $ ( 6,273 )

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

Depreciation and amortization 1,401 928

Cost of real estate sold 13,191 2,010

Impairment of real estate — 720

Gain on sale of discontinued operations — ( 119,695 )

Gain on sale of assets — ( 4,812 )

Debt issuance cost amortization and stock-based compensation 2,110 1,898

Loss on extinguishment of debt 59 —

Stock-based compensation 442 529

Debt issuance cost amortization 238 184

Equity in unconsolidated affiliate’s loss — 3

Deferred income taxes — 5,962

Purchases and development of real estate properties ( 8,957 ) ( 9,027 )

Decrease in other assets 2,223 4,858

Increase (decrease) in accounts payable, accrued liabilities and other 908 ( 26,213 )

Net cash used in operating activities ( 39,300 ) ( 49,324 )

Decrease (increase) in other assets 948 ( 2,945 )

Decrease in accounts payable, accrued liabilities and other ( 4,472 ) ( 3,813 )

Net cash provided by (used in) operating activities 6,547 ( 18,404 )

Cash flow from investing activities:

Proceeds from sale of discontinued operations — 105,813

Capital expenditures ( 8,141 ) ( 10,006 )

Payments on master lease obligations ( 251 ) ( 248 )

Other 5 ( 8 )

Net cash (used in) provided by investing activities ( 36,903 ) 66,174

Net cash used in investing activities ( 8,392 ) ( 10,232 )

Cash flow from financing activities:

Borrowings from revolving credit facility — 30,000

Payments on revolving credit facility — ( 30,000 )

Borrowings from project loans 9,330 11,618

4 unchanged sentences

Noncontrolling interest contributions

40,000 15,032

Purchases of treasury stock — ( 894 )

Financing costs ( 67 ) ( 1,058 )

Net cash provided by (used in) financing activities 66,884 ( 9,676 )

Net cash (used in) provided by financing activities ( 9,059 ) 42,711

Net (decrease) increase in cash, cash equivalents and restricted cash ( 10,904 ) 14,075

6 unchanged sentences

Stockholders’ Equity

Retained Earnings (Accumulated Deficit) Common Stock

Held in Treasury Total Noncontrolling Interests in Subsidiaries

Common Stock Capital in Excess of Par Value

Held in Treasury Total

Common Stock Capital in Excess of Par Value Retained Earnings Noncontrolling Interests in Subsidiaries

of Shares At Par

Balance at December 31, 2023 9,586 $ 96 $ 197,735 $ 26,645 1,583 $ ( 32,997 ) $ 191,479 $ 103,126 $ 294,605

Exercised and vested stock-based awards 40 — — — — — — — —

Vested stock-based awards 78 1 ( 1 ) — — — — — —

Director fees paid in shares of common stock — — 6 — — — 6 — 6

Stock-based compensation — — 442 — — — 442 — 442

Grant of restricted stock units (RSUs) under the Profit Participation Incentive Plan (PPIP) — — 1,492 — — — 1,492 — 1,492

Tender of shares for stock-based awards

— — — — 16 ( 376 ) ( 376 ) — ( 376 )

Common stock repurchases — — — — 44 ( 894 ) ( 894 ) — ( 894 )

Contributions from noncontrolling interests — — — — — — — 40,000 40,000

Total comprehensive loss — — — ( 5,801 ) — — ( 5,801 ) ( 472 ) ( 6,273 )

Excise tax on 2023 common stock repurchases — — — — — ( 22 ) ( 22 ) — ( 22 )

Total comprehensive income (loss) — — — 4,552 — — 4,552 ( 855 ) 3,697

Balance at March 31, 2024 9,664 $ 97 $ 199,674 $ 31,197 1,599 $ ( 33,395 ) $ 197,573 $ 102,271 $ 299,844

Exercised and vested stock-based awards 93 2 — — — — 2 — 2

Director fees paid in shares of common stock — — 6 — — — 6 — 6

Stock-based compensation — — 505 — — — 505 — 505

Tender of shares for stock-based awards — — — — 28 ( 573 ) ( 573 ) — ( 573 )

Common stock repurchases — — — — 31 ( 695 ) ( 695 ) — ( 695 )

Total comprehensive loss — — — ( 5,301 ) — — ( 5,301 ) ( 8 ) ( 5,309 )

Balance at June 30, 2023 9,572 96 196,819 30,350 1,562 ( 32,449 ) 194,816 104,345 299,161

Exercised and vested stock-based awards 14 — — — — — — — —

Director fees paid in shares of common stock — — 6 — — — 6 — 6

Stock-based compensation — — 468 — — — 468 — 468

Common stock repurchases — — — 18 ( 475 ) ( 475 ) — ( 475 )

Total comprehensive loss — — — ( 2,844 ) — — ( 2,844 ) ( 373 ) ( 3,217 )

Balance at September 30, 2023 9,586 $ 96 $ 197,293 $ 27,506 1,580 $ ( 32,924 ) $ 191,971 $ 103,972 $ 295,943

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Continued)

(In Thousands)

Stockholders’ Equity

Retained Earnings (Accumulated Deficit) Common Stock

Held in Treasury Total Noncontrolling Interests in Subsidiaries

Common Stock Capital in Excess of Par Value

Held in Treasury Total

Common Stock Capital in Excess of Par Value Retained Earnings Noncontrolling Interests in Subsidiaries

of Shares At Par

Balance at December 31, 2022 9,439 $ 94 $ 195,773 $ 41,452 1,448 $ ( 30,071 ) $ 207,248 $ 64,825 $ 272,073

Exercised and vested stock-based awards 39 — — — — — — — —

Vested stock-based awards 40 — — — — — — — —

Director fees paid in shares of common stock — — 6 — — — 6 — 6

Stock-based compensation — — 529 — — — 529 — 529

1 unchanged sentence

— — — — 11 ( 216 ) ( 216 ) — ( 216 )

Total comprehensive income (loss) — — — 2,272 — — 2,272 ( 85 ) 2,187

Balance at March 31, 2022 9,427 94 188,971 ( 6,691 ) 1,154 ( 22,205 ) 160,169 50,391 210,560

Stock-based compensation — — 347 — — — 347 — 347

Grant of restricted stock units (RSUs) under the Profit Participation Incentive Plan (PPIP) — — 5,292 — — — 5,292 — 5,292

Total comprehensive income (loss) — — — 96,621 — — 96,621 ( 164 ) 96,457

Balance at June 30, 2022 9,427 94 194,610 89,930 1,154 ( 22,205 ) 262,429 50,227 312,656

Exercised and vested stock-based awards 8 — — — — — — — —

Stock-based compensation — — 513 — — — 513 — 513

Common stock repurchases — — — — 44 ( 894 ) ( 894 ) — ( 894 )

Cash dividend — — — ( 40,011 ) — — ( 40,011 ) — ( 40,011 )

Contributions from noncontrolling interests — — — — — — — 40,000 40,000

Total comprehensive loss — — — ( 5,801 ) — — ( 5,801 ) ( 472 ) ( 6,273 )

Balance at September 30, 2022 9,435 $ 94 $ 195,123 $ 47,559 1,188 $ ( 23,004 ) $ 219,772 $ 65,045 $ 284,817

Balance at March 31, 2023 9,479 $ 94 $ 196,308 $ 35,651 1,503 $ ( 31,181 ) $ 200,872 $ 104,353 $ 305,225

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

5 unchanged sentences

The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year.

Refer to Note 4 for a discussion of Stratus' discontinued operations.

Related Party Transactions.

Through the first quarter of 2022, Stratus had an arrangement with Whitefish Partners, LLC (Whitefish Partners), formerly known as Austin Retail Partners, LLC, for services provided by a consultant of Whitefish Partners who is the son of Stratus' President and Chief Executive Officer.

Payments to Whitefish Partners for the consultant’s consulting services and expense reimbursements totaled $ 185 thousand for first-quarter 2022, which included $ 20 thousand as an annual incentive award for 2021 and a $ 135 thousand cash payment under Stratus’ Profit Participation Incentive Plan (PPIP).

In April 2022, Stratus hired the consultant as an employee at an annual salary of $ 100 thousand.

As an employee, he is eligible for the same health and retirement benefits provided to all Stratus employees and is also eligible for annual incentive awards and for awards under the PPIP and the Long-Term Incentive Plan (LTIP).

In April 2022, Stratus hired the son of Stratus' President and Chief Executive Officer as an employee at an annual salary of $ 100 thousand.

He is eligible for the same health and retirement benefits provided to all Stratus employees and is also eligible for annual incentive awards and for awards under the Profit Participation Incentive Plan (PPIP) and the Long-Term Incentive Plan (LTIP).

In first-quarter 2023, he received $ 22 thousand as an annual incentive award for 2022, and his annual salary was increased to $ 120 thousand.

As of September 30, 2023, the employee has two outstanding awards under the PPIP.

The liability associated with these awards at September 30, 2023 is nominal in amount relative to the consolidated financial statements.

In first-quarter 2024, he received $ 22 thousand as an annual incentive award for 2023, and his annual salary was increased to $ 124 thousand.

As of March 31, 2024, the employee had two outstanding awards under the PPIP.

The liability associated with these awards at March 31, 2024 was nominal in amount relative to the consolidated financial statements.

Refer to Note 7 for discussion of the PPIP and LTIP.

1 unchanged sentence

EARNINGS PER SHARE

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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

Net income from discontinued operations — — — 96,300

Net (loss) income and total comprehensive (loss) income ( 3,217 ) ( 2,574 ) ( 14,799 ) 96,070

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

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

Three Months Ended

Net income (loss) and total comprehensive income (loss) 3,697 ( 6,273 )

Total comprehensive loss attributable to noncontrolling interests 855 472

Net (loss) income and total comprehensive (loss) income attributable to common stockholders $ ( 2,844 ) $ ( 2,360 ) $ ( 13,946 ) $ 96,533

Net income (loss) and total comprehensive income (loss) attributable to common stockholders $ 4,552 $ ( 5,801 )

Basic weighted-average shares of common stock outstanding

8,240 8,275 8,230 8,266

Add shares issuable upon vesting of dilutive restricted stock units (RSUs) a

Diluted weighted-average shares of common stock outstanding

8,240 8,275 8,230 8,397

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

Continuing operations $ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 0.03

Discontinued operations — — — 11.65

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 11.68

Diluted net (loss) income per share attributable to common stockholders:

Continuing operations $ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 0.03

Discontinued operations — — — 11.47

$ ( 0.35 ) $ ( 0.29 ) $ ( 1.69 ) $ 11.50

Excludes 178 thousand shares for third-quarter 2023, 296 thousand shares for third-quarter 2022 and 232 thousand shares for the first nine months of 2023 of common stock associated with RSUs that were anti-dilutive as a result of net losses.

Excludes 6 thousand shares for the first nine months of 2022 of common stock associated with RSUs that were anti-dilutive.

Basic net income (loss) per share attributable to common stockholders $ 0.57 $ ( 0.73 )

Diluted net income (loss) per share attributable to common stockholders $ 0.56 $ ( 0.73 )

For the first three months of March 31, 2024, excludes 21 thousand shares of common stock associated with RSUs that were anti-dilutive.

For the first three months of March 31, 2023, excludes 295 thousand shares of common stock associated with RSUs that were anti-dilutive as a result of the net loss.

LIMITED PARTNERSHIPS

7 unchanged sentences

percent indirect equity interest).

For additional information regarding Stratus' partnerships, refer to Notes 2 and 4 in the Stratus 2022 Form 10-K.

Holden Hills, L.P.

In first-quarter 2023, Holden Hills, L.P.

(the Holden Hills partnership), a Texas limited partnership and subsidiary of Stratus, was formed for the development of Holden Hills, Stratus’ final large residential development within the Barton Creek community in Austin, Texas, consisting of 495 acres and designed to feature 475 unique residences (Holden Hills Project).

The Holden Hills partnership is governed by a limited partnership agreement between a wholly owned subsidiary of Stratus as Class A limited partner and an unaffiliated equity investor as Class B limited partner, and another wholly owned subsidiary of Stratus which serves as general partner.

The partners made the following initial capital contributions to the Holden Hills partnership:

(i) Stratus contributed the Holden Hills land and related personal property at an agreed value of $ 70.0 million and (ii) The Class B limited partner contributed $ 40.0 million in cash.

Immediately following the Class B limited partner's initial capital contribution, $ 30.0 million of cash was distributed by the Holden Hills partnership to Stratus.

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

As a result of these transactions, Stratus holds, indirectly through its wholly owned subsidiaries, a 50.0 percent equity interest in the Holden Hills partnership, and the Class B limited partner holds the remaining 50.0 percent equity interest in the Holden Hills partnership.

Stratus’ potential returns on its equity investment in the Holden Hills partnership may increase above its relative equity interest as negotiated return hurdles are achieved.

Refer to “Potential Returns” below for further discussion.

Stratus consolidates the Holden Hills partnership;

therefore, its contribution of the Holden Hills land and related personal property was recorded at historical cost and the contribution from the Class B limited partner was accounted for as a noncontrolling interest in subsidiary.

In addition to each partner’s initial capital contribution, upon the call of the general partner from time to time, Stratus is obligated to make capital contributions up to an additional $ 10.0 million, and the Class B limited partner is also obligated to make capital contributions up to an additional $ 10.0 million.

Stratus has the authority to manage the day-to-day operations of the Holden Hills partnership, subject to approval rights of the Class B limited partner for specified “major decisions,” including project and operating budgets, the business plan and amendments thereto;

sales, leases or transfers of any portion of the Holden Hills Project to any partner, affiliate of any partner, or to any unaffiliated third party other than as contemplated in the business plan;

incurring any debt, mortgage or guaranty;

capital calls in excess of those previously agreed upon;

admitting a new partner;

and certain transfers of direct or indirect interests in the Holden Hills partnership.

The business plan includes rights of first refusal in favor of the Class B limited partner for sale of luxury residence sites to be developed in distinct communities or “pods” to a third party.

A “deadlock” may be declared by any partner if any limited partner does not approve any two major decisions proposed by the general partner within any 12-month period.

Prior to the third anniversary of the effective date of the limited partnership agreement, a buy-sell provision can be triggered only if there is a deadlock.

On or after the third anniversary, any partner can initiate a buy-sell at any time by written notice to the other partner, specifying the buyout price.

Stratus has entered into a development agreement with the Holden Hills partnership pursuant to which the Holden Hills partnership will construct certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Section N land owned by Stratus from its current terminus to Southwest Parkway, estimated to cost approximately $ 14.7 million (the Tecoma Improvements), and Stratus will reimburse the partnership for 60 percent of the costs.

The Tecoma Improvements will enable access and provide utilities necessary for the development of both Holden Hills and Section N.

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

The Holden Hills partnership has agreed to pay Stratus a development management fee of 4.00 percent of certain construction costs for Phase I of the project, and an asset management fee of $ 150 thousand per year starting 15 months after construction starts on the project payable from available cash flow after debt service.

In first-quarter 2023, the Holden Hills partnership entered into a loan agreement with Comerica Bank to finance the development of Phase I of the project.

Refer to Note 6 for discussion of the loan agreement.

For additional information regarding Stratus' partnerships, refer to Note 2 in the Stratus 2023 Form 10-K.

Operating Loans to Partnerships.

1 unchanged sentence

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

In August 2023, Stratus 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 Bloomberg Short-Term Bank Yield Index (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.

In August 2023 and February 2024, Stratus made additional operating loans of $ 800 thousand and $ 2.4 million, respectively, to Stratus Block 150, L.P.

The loans are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners.

Until February 2024, the interest rate on the loans was the one-month Bloomberg Short Term Bank Yield Index (BSBY) Rate plus 5.00 percent.

In February 2024, the interest rate on the loans was changed to the one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent.

In June 2023, Stratus made an operating loan of $ 750 thousand to The Saint June, L.P.

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.

In October 2023, Stratus made an additional advance of $ 250 thousand under the operating loan to The Saint June, L.P., and the Class B Limited Partner made a $ 250 thousand operating loan 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 October 2023 and January 2024, Stratus made additional operating loans of $ 250 thousand and $ 339 thousand, respectively, to The Saint June, L.P., and the Class B Limited Partner made operating loans of $ 250 thousand and $ 339 thousand, respectively, to The Saint June, L.P.

In April 2024, Stratus made an additional operating loan of $ 85 thousand to The Saint June, L.P., and the Class B Limited Partner made an additional operating loan of $ 165 thousand to The Saint June, L.P.

The loans bear interest at the one-month Term SOFR plus 5.00 percent, are subordinate to The Saint June construction loan and must be repaid before distributions may be made to the partners.

Potential Returns.

18 unchanged sentences

and Holden Hills, L.P.

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

are variable interest entities (VIEs) and that Stratus is the primary beneficiary of each VIE.

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

2 unchanged sentences

Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships, net of intercompany balances (including the operating loans made by Stratus), which are eliminated (in thousands):

September 30,

2024 December 31,

Cash and cash equivalents $ 2,835 $ 5,531

2 unchanged sentences

Land available for development 1,912 1,911

Real estate held for investment c

85,011 31,415

Real estate held for investment 83,316 87,005

Lease right-of-use assets 353 420

8 unchanged sentences

Net assets $ 122,405 $ 122,968

Includes the assets and liabilities of the Holden Hills partnership, which was formed in January 2023.

Substantially all of the assets are available to settle only obligations of the partnerships.

In third-quarter 2023, construction of The Saint June was substantially completed, and the carrying value of the asset was reclassified from real estate under development to real estate held for investment.

All of the debt is guaranteed by Stratus until certain conditions are met as provided in the applicable loan agreements.

The Kingwood Place construction loan has a 25.0 percent repayment guaranty and The Saint George construction loan has a completion guaranty and a 25.0 percent repayment guaranty.

The guaranty of The Saint June construction loan converted to a 50.0 percent repayment guaranty upon completion of the project in fourth-quarter 2023.

All of the rest of the debt is subject to a full repayment guaranty.

Certain of the guaranties terminate if the project meets specified financial and other conditions.

The creditors for the remaining liabilities do not have recourse to the general credit of Stratus.

Block 21 - Discontinued Operations.

Block 21 was Stratus’ wholly owned mixed-use real estate property in downtown Austin, Texas containing the 251 -room W Austin Hotel and Austin City Limits Live at the Moody Theater, a 2,750 -seat entertainment venue, Class A office space, retail space and the 3TEN ACL Live entertainment venue.

On May 31, 2022, Stratus completed the previously announced sale of Block 21 to Ryman Hospitality Properties, Inc.

(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.

A portion of the proceeds, $ 6.9 million, was escrowed and held in restricted cash at December 31, 2022.

These proceeds were released from restriction in June 2023 and disbursed in full to Stratus and reclassified to the operating account.

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

In accordance with accounting guidance, Stratus reported the results of operations of Block 21 as discontinued operations in the consolidated statement of comprehensive income for second-quarter 2022 and the first nine months of 2022 because the disposal represents a strategic shift that had a major effect on operations.

Block 21 did not have any other comprehensive income and Stratus' consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.

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

Two Months Ended Five Months Ended

Hotel $ 6,782 $ 12,653

Entertainment 4,650 9,990

Leasing operations and other 206 932

Total revenue 11,638 23,575

Cost of sales:

Hotel 4,487 9,230

Entertainment 3,624 7,763

Leasing operations and other 331 802

Depreciation b

Total cost of sales 8,442 17,795

General and administrative expenses 136 236

Gain on sale of assets ( 119,695 ) ( 119,695 )

Operating income 122,755 125,239

Interest expense, net ( 1,291 ) ( 3,236 )

Provision for income taxes ( 25,539 ) ( 25,703 )

Net income from discontinued operations $ 95,925 $ 96,300

In accordance with accounting guidance, amounts are net of eliminations of intercompany sales totaling $ 189 thousand for the two months ended May 31, 2022 and $ 510 thousand for the five months ended May 31, 2022.

In accordance with accounting guidance, depreciation is not recognized subsequent to classification as assets held for sale, which occurred in the fourth quarter of 2021.

Capital expenditures associated with discontinued operations totaled $ 213 thousand the first nine months of 2022.

See Note 6 of the Stratus 2023 Form 10-K for additional information.

The Oaks at Lakeway.

In 2017, Stratus sold The Oaks at Lakeway to FHF I Oaks at Lakeway, LLC for $ 114.0 million in cash.

The Oaks at Lakeway is an H-E-B, L.P.-anchored retail project located in Lakeway, Texas.

The parties entered into three master lease agreements at closing:

(1) one covering unleased in-line retail space, with a 5 -year term (the In-line Master Lease), (2) one covering the hotel pad with a 99 -year term (the Hotel Master Lease) and (3) one covering four unleased pad sites, three of which have 10 -year terms, and one of which has a 15 -year term (the Pad Site Master Lease).

The In-Line Master Lease expired in February 2022 and the Hotel Master Lease was terminated in November 2020.

As such, Stratus has no further obligations under these two master leases.

With respect to the Pad Site Master Lease, Stratus has leased the one pad site with a 15 -year term, reducing the monthly rent payment net of rent collections for this pad site to approximately $ 2,500 .

Stratus may assign this lease to the purchaser and terminate the obligation under the Pad Site Master Lease for this pad site with a payment of $ 560 thousand to the purchaser.

The lease for the remaining three unleased pad sites under the Pad Site Master Lease expires in February 2027.

To the extent leases are executed for the remaining three unleased pad sites, tenants open for business, and the leases are then assigned to the purchaser, the master lease obligation could be reduced further.

In first-quarter 2022, Stratus reassessed its plans with respect to construction of the remaining buildings on the three remaining unleased pad sites and determined that, rather than execute leases and build the buildings, it is less costly to continue to pay the monthly rent (approximately $ 73 thousand per month) pursuant to the Pad Site Master Lease until the lease expires in February 2027.

In connection with this determination, Stratus reversed an accrual of costs to lease and construct these buildings, resulting in recognition of an additional $ 4.8 million of pre-tax gain in first-quarter 2022.

A contract liability is presented as a deferred gain in the consolidated balance sheets in the amount of $ 2.9 million at September 30, 2023 and $ 3.5 million at December 31, 2022.

Stratus has remaining lease obligations pursuant to Pad Site Master Leases entered into in connection with the sale of The Oaks at Lakeway, as described in Note 9 of the Stratus 2023 Form 10-K under the heading “Deferred Gain on Sale of The Oaks at Lakeway.” A related contract liability is presented as a deferred gain in the consolidated balance sheets in the amount of $ 2.5 million at March 31, 2024 and $ 2.7 million at December 31, 2023.

The reduction in the deferred gain balance primarily reflects Pad Site Master Lease payments.

The remaining deferred gain balance is expected to be reduced primarily by future Pad Site Master Lease payments.

Kingwood Place Land.

In fourth-quarter 2022, Stratus sold a multi-family tract of land at Kingwood Place for $ 5.5 million.

In third-quarter 2022, Stratus recorded a $ 70 thousand impairment charge due to selling costs in excess of the previous estimate.

Amarra Villas.

In third-quarter 2022, Stratus recorded a $ 650 thousand impairment charge related to one of the Amarra Villas homes that was sold in first-quarter 2023 for $ 2.5 million.

The charge was due to estimated total project costs and costs of sale for the home under construction that exceeded its contractual sale price.

In first-quarter 2024, Stratus sold two of the Amarra Villas homes for a total of $ 7.6 million.

In first-quarter 2023, Stratus sold one of the Amarra Villas homes for $ 2.5 million.

Magnolia Place.

In first-quarter 2024, Stratus completed the sale of approximately 47 acres of undeveloped land planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $ 14.5 million.

In connection with the sale, the Magnolia Place construction loan, which had a balance of $ 8.8 million, was repaid.

FAIR VALUE MEASUREMENTS

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

September 30,

2024 December 31,

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The Annie B land loan 12,532 13,983

New Caney land loan — 4,047

Construction loans:

Kingwood Place 27,984 27,507

The Saint George 31,553 24,657

The Saint June 28,594 27,668

Kingwood Place 28,150 28,160

Lantana Place

22,887 22,961

The Saint George 15,095 —

Amarra Villas revolving credit facility 9,888 15,682

Magnolia Place 8,605 6,816

West Killeen Market

Holden Hills 6,983 5,736

West Killeen Market

Magnolia Place — 8,731

$ 168,174 $ 175,168

Includes net reductions for unamortized debt issuance costs of $ 2.4 million at September 30, 2023, and $ 1.1 million at December 31, 2022.

Includes net reductions for unamortized debt issuance costs of $ 1.9 million at March 31, 2024, and $ 2.2 million at December 31, 2023.

Comerica Bank revolving credit facility.

As of September 30, 2023, Status had $ 40.5 million available under the Comerica Bank revolving credit facility net of letters of credit totaling $ 13.3 million, $ 11.0 million of which was issued to secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N.

In March 2023, Stratus entered into a modification of the revolving credit facility, which extended the maturity date of the revolving credit facility to March 27, 2025, and increased the floor of the one-month BSBY Rate.

As amended, advances under the revolving credit facility bear interest at the one-month BSBY Rate (with a floor of 0.50 percent) plus 4.00 percent.

In May 2023, Stratus entered into a 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, Stratus entered into a $ 2.3 million letter of credit to secure its obligations, which are

subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, estimated to cost approximately $ 2.3 million.

As of March 31, 2024, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $ 52.9 million, resulting in availability of $ 39.6 million, net of letters of credit.

Letters of credit, totaling $ 13.3 million, have been issued under the revolving credit facility, $ 11.0 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N and $ 2.3 million of which secure Stratus’ obligation to construct and pay for certain utility infrastructure in Lakeway, Texas.

Jones Crossing loan.

The Jones Crossing loan requires the Jones Crossing project to meet a debt service coverage ratio (DSCR) test of 1.15 to 1.00 measured quarterly, and starting June 30, 2023, on a rolling 12 month basis.

If the DSCR falls below 1.15 to 1.00, it is not an event of default, but a “Cash Sweep Period” (as defined in the Jones Crossing loan) results, which limits Stratus’ ability to receive cash from its Jones Crossing subsidiary, unless a principal payment is made on the loan to restore the DSCR to the required threshold.

The DSCR fell below 1.15 to 1.00 in each of fourth-quarter 2022 and first-quarter 2023, and the Jones Crossing subsidiary made principal payments of $ 231 thousand and $ 1.7 million in February 2023 and May 2023, respectively, to bring the DSCR back above 1.15 to 1.00 and a Cash Sweep Period did not occur.

If the DSCR falls below 1.15 to 1.00, 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 DSCR fell below 1.15 to 1.00 in each of fourth-quarter 2022 and first-quarter 2023, and the Jones Crossing subsidiary made principal payments of $ 231 thousand and $ 1.7 million in February 2023 and May 2023, respectively, to bring the DSCR back above the threshold and a Cash Sweep Period did not occur.

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.

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

In fourth-quarter 2023, the DSCR was slightly below the threshold, and a $ 13 thousand principal payment was made in first-quarter 2024 to bring the DSCR back above the threshold and a Cash Sweep Period did not occur.

The Annie B land loan.

In February 2023, Stratus Block 150, L.P.

entered into a modification agreement that extended the maturity date of The Annie B land loan to March 1, 2024, and changed the interest rate to the one-month BSBY Rate (with a floor of 0.50 percent) plus 3.00 percent.

In connection with the modification agreement, Stratus Block 150, LP, escrowed an interest reserve of $ 0.6 million with the lender.

New Caney land loan.

In March 2023, the New Caney land loan was repaid.

Kingwood Place construction loan.

The Kingwood Place construction loan currently matures on December 6, 2023.

Stratus Kingwood Place, L.P.

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

Stratus Kingwood Place, L.P.

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

The Saint June construction loan.

In January 2023, The Saint June construction loan was amended to change the interest rate for the loan to SOFR with a floor of 0.75 percent plus 2.85 percent, subject to an overall 3.50 percent floor.

In February 2024, The Annie B land loan was modified to extend the maturity to September 1, 2025, and change the interest rate to the Term SOFR Rate plus 3.00 percent.

Under the Annie B land loan, the Term SOFR Rate is defined as one-month Term SOFR plus 0.10 percent and is subject to a floor of 0.50 percent.

In connection with the modification, Stratus made a $ 1.4 million principal payment on the loan and is required to make another principal payment of $ 630 thousand in February 2025.

Amarra Villas revolving credit facility.

In March 2023, Stratus made a $ 2.2 million principal payment on the Amarra Villas revolving credit facility upon the closing of a sale of one of the Amarra Villas homes.

In first-quarter 2024, Stratus made principal payments totaling $ 7.2 million on the credit facility upon the closing of the sales of two of the Amarra Villas homes.

In first-quarter 2023, Stratus made a $ 2.2 million principal payment on the credit facility upon the closing of a sale of one of the Amarra Villas homes.

Magnolia Place construction loan.

In May 2023, the Magnolia Place construction loan was amended to change the interest rate for the loan to Term SOFR with a floor of 0.00 percent plus 3.36 percent, subject to an overall 3.50 percent floor.

Holden Hills construction loan.

In February 2023, the Holden Hills partnership entered into a loan agreement with Comerica Bank to finance the development of Phase I of the Holden Hills Project.

The loan agreement provides for a senior secured construction loan in the aggregate principal amount of the least of (i) $ 26.1 million, (ii) 23 percent of the total development costs for Phase I or (iii) the amount that would result in a maximum loan-to-value ratio of 28 percent.

The loan has a maturity date of February 8, 2026.

Advances under the loan bear interest at the one-month BSBY Rate (with a floor of 0.50 percent), plus 3.00 percent.

Payments of interest only on the loan are due monthly until the maturity date with the outstanding principal due at maturity.

The Holden Hills partnership may prepay all or any portion of the loan without premium or penalty.

Amounts repaid under the loan may not be reborrowed.

The loan is secured by the Holden Hills Project, including the land related to both Phase I and Phase II, and the Phase I improvements.

After completion of construction of Phase I, the Holden Hills partnership may sell and obtain releases of the liens on single-family platted home sites, individual pods or the Phase II land, subject to specified conditions, and upon payment to the lender of specified amounts related to the parcel to be released.

The Holden Hills partnership is not permitted to make distributions to its partners, including Stratus, while the loan is

The Holden Hills partnership must apply all Municipal Utility District (MUD) reimbursements it receives and is entitled to retain as payments of principal on the loan.

Stratus entered into a guaranty for the benefit of the lender pursuant to which Stratus guaranteed the payment of the loan and the completion of Phase I, including the Tecoma Improvements (which benefit both the Holden Hills Project and Section N).

Stratus is also liable for customary carve-out obligations and an environmental indemnity.

Stratus must maintain, on a consolidated basis, a net asset value not less than $ 125.0 million, and a debt-to-gross-asset value not more than 50 percent (in each case as defined in the guaranty).

In February 2024, this loan was repaid in full in connection with the sale of approximately 47 acres of undeveloped land.

For additional information regarding Stratus’ debt, refer to Note 6 in the Stratus 2023 Form 10-K.

Interest Expense and Capitalization.

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

Substantially all of these 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.

Interest costs (before capitalized interest) totaled $ 4.0 million in first-quarter 2024 and $ 2.4 million in first-quarter 2023.

All of Stratus’ interest costs during first-quarter 2024 and first-quarter 2023 were capitalized.

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 both periods presented.

The 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.

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

Accrued liabilities included $ 0.6 million as of September 30, 2023, and $ 1.3 million as of December 31, 2022, representing dividends accrued for unvested RSUs in accordance with the terms of the awards.

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

Accrued liabilities included $ 0.3 million as of March 31, 2024, and $ 0.6 million as of December 31, 2023, representing dividends accrued for unvested RSUs in accordance with the terms of the awards.

The accrued dividends are paid to the holders of the RSUs as the RSUs vest.

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

During the first nine months of 2023, Stratus acquired 91,919 shares of its common stock under the share repurchase program for a total cost of $ 2.1 million at an average price of $ 22.43 per share.

Share Repurchase Programs.

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

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

In October 2023, Stratus completed the share repurchase program.

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

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

As required by the Inflation Reduction Act of 2022 (IR Act), Stratus recorded $ 22 thousand in excise tax in first-quarter 2024 for the 2023 share repurchases.

The excise tax liability is included in accrued liabilities in the consolidated balance sheet.

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

The repurchase program authorizes Stratus, 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.

As of March 31, 2024, Stratus had not purchased any shares under the new program.

PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN

In July 2018, the Compensation Committee adopted the PPIP.

In July 2018, the Compensation Committee (the Committee) adopted the PPIP.

In February 2023, the Committee approved the LTIP, which amends and restates the PPIP, and is effective for participation interests awarded under development projects on or after its effective date.

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Refer to Notes 1 and 8 of the Stratus 2023 Form 10-K for further discussion.

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

During February 2022, $ 2.1 million was paid in cash to eligible participants.

In September 2021, Lantana Place reached a valuation event under the PPIP.

The profit pool was $ 3.9 million, of which $ 0.2 million was paid in cash during February 2022 and the remaining $ 3.7 million was settled in RSUs with a three-year vesting period awarded to eligible participants during second-quarter 2022 following stockholder approval of Stratus’ new stock incentive plan.

The sale of The Santal in December 2021 was a capital transaction under the PPIP.

The profit pool was $ 6.7 million, of which $ 5.0 million was paid in cash to eligible participants during February 2022.

The PPIP contains limits on

cash compensation paid to certain officers and amounts due above the limits are converted to an equivalent number of RSUs with a one-year vesting period.

Of the remaining amount, $ 1.6 million was settled in RSUs awarded to one participant during second-quarter 2022 following stockholder approval of Stratus’ new stock incentive plan.

During first-quarter 2022, the Compensation Committee designated The Saint June as an approved project under the PPIP, and awards of participation interests were granted in August 2022.

In July 2023, Kingwood Place reached a valuation event under the PPIP and Stratus obtained an appraisal of the property to determine the payout under the PPIP.

The accrued liability under the PPIP related to Kingwood Place was reduced to $ 1.5 million at September 30, 2023, and is expected to be settled in RSUs with a three-year vesting period awarded to eligible participants in the first quarter of 2024.

In August 2023, the Compensation Committee designated The Saint George as an approved project under the LTIP and granted awards of participation interests to participants.

The accrued liability under the PPIP related to Kingwood Place was reduced to $ 1.6 million at December 31, 2023, and was settled in RSUs with a three-year vesting period awarded to eligible participants in first-quarter 2024.

Under the terms of the PPIP and LTIP, the number of RSUs granted in connection with settlement of approved projects is determined by reference to the 12-month trailing average stock price for the year the project reaches a payment event, whereas the grant date fair value of the RSUs for accounting purposes is based on the grant date closing price.

For the RSUs awarded in connection with Lantana Place and The Santal, the aggregate grant date value was $ 2.1 million greater than the accrued liability for the two projects as a result of this different valuation methodology.

During second-quarter 2022, Stratus transferred the $ 5.3 million accrued liability balance under the PPIP for Lantana Place and The Santal that was settled in RSUs to capital in excess of par value and is amortizing the $ 2.1 million excess of the grant-date value over the former accrued liability with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year or one-year vesting periods of the related RSUs.

A summary of PPIP costs follows (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Charged (credited) to general and administrative expense

$ ( 205 ) $ 135 $ 84 $ 269

Capitalized (credited) to project development costs 136 107 237 209

Total PPIP costs

$ ( 69 ) $ 242 $ 321 $ 478

The accrued liability for the PPIP totaled $ 3.3 million at September 30, 2023, and $ 3.0 million at December 31, 2022 (included in other liabilities).

A summary of PPIP and LTIP costs follows (in thousands):

Three Months Ended

Charged to general and administrative expense

Capitalized to project development costs 111 110

Total PPIP and LTIP costs

At March 31, 2024, the PPIP included Amarra Villas, Jones Crossing, Magnolia Place Phase I and The Saint June, and the LTIP included The Saint George.

The accrued liability for the PPIP and LTIP totaled $ 1.8 million at March 31, 2024, and $ 3.1 million at December 31, 2023 (included in other liabilities).

Stratus’ accounting policy for and other information regarding its income taxes are further described in Notes 1 and 7 in the Stratus 2023 Form 10-K.

Stratus has a full valuation allowance against its U.S.

Federal net deferred tax assets as of both September 30, 2023 and December 31, 2022.

Stratus has recorded a deferred tax asset totaling $ 38 thousand at both September 30, 2023 and December 31, 2022 related to state income taxes.

Federal net deferred tax assets as of both March 31, 2024 and December 31, 2023.

Stratus has recorded a deferred tax asset totaling $ 173 thousand at both March 31, 2024 and December 31, 2023 related to state income taxes.

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

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

During 2023, Stratus expects to incur current state income taxes in addition to U.S.

Federal current income taxes primarily associated with taxable income generated from cash received in the Holden Hills transaction discussed in Note 3.

The difference between Stratus' consolidated effective income tax rate of ( 16 ) percent for the first nine months of 2023 and the U.S.

The difference between Stratus’ consolidated effective income tax rate of 3 percent for the first three months of 2024 and the U.S.

Federal statutory income tax rate of 21 percent was primarily attributable to state income taxes, noncontrolling interests in subsidiaries, the presence of a valuation allowance against its U.S.

Federal net deferred tax assets as of September 30, 2023, and the executive compensation limitation.

The difference between Stratus' consolidated effective income tax rate of ( 13 ) percent for the first nine months of 2022 and the U.S.

Federal net deferred tax assets as of March 31, 2024, and the executive compensation limitation.

The difference between Stratus’ consolidated effective income tax rate of ( 23 ) percent for the first three months of 2023 and the U.S.

Federal statutory income tax rate of 21 percent was primarily attributable to state income taxes, noncontrolling interests in subsidiaries, the presence of a valuation allowance against certain U.S.

Federal deferred tax assets as of September 30, 2022, and the release of a reserve on uncertain tax positions related to the 2015 through 2017 U.S.

Federal tax audit, which was closed in first-quarter 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 (the IR Act) was enacted in the United States.

Among other provisions, the IR Act imposes a new 1 percent excise tax on the fair market value of net corporate stock repurchases made by covered corporations, effective for tax years beginning after December 31, 2022.

Stratus does not expect the IR Act to have a material impact on its consolidated financial statements.

Federal deferred tax assets as of March 31, 2023, and the executive compensation limitation.

On August 16, 2022, the IR Act was enacted in the United States.

Among other provisions, the IR Act imposes a new one percent excise tax on the fair market value of net corporate stock repurchases made by covered corporations, effective for tax years beginning after December 31, 2022.

Stratus recorded $ 22 thousand in such excise taxes in first-quarter 2024 for share repurchases in 2023.

Refer to Note 6 for discussion of Stratus’ share repurchase programs.

BUSINESS SEGMENTS

As a result of the sale of Block 21, Stratus has two operating segments:

Stratus has two operating segments:

Real Estate Operations and Leasing Operations.

Block 21, which encompassed Stratus’ Hotel and Entertainment segments, along with some leasing operations, is presented as discontinued operations.

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, which includes Section N, Holden Hills, Amarra multi-family and commercial land, Amarra Villas, Amarra Drive lots and other vacant land;

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in Lakeway, Texas, located in the greater Austin area (Lakeway);

in College Station, Texas (land for future phases of retail and multi-family development and retail pad sites at Jones Crossing);

and in Magnolia, Texas (land for a future phase of retail development and for future multi-family use and retail pad sites at Magnolia Place), Kingwood, Texas (a retail pad site) and New Caney, Texas (New Caney), each located in the greater Houston area.

The Leasing Operations segment is comprised of Stratus’ real estate assets held for investment that are leased or available for lease and includes The Saint June, West Killeen Market, Lantana Place, Kingwood Place and the completed portions of Jones Crossing and Magnolia Place and retail pad sites subject to ground leases at Lantana Place, Kingwood Place and Jones Crossing.

in College Station, Texas (land for future

phases of retail and multi-family development and retail pad sites at Jones Crossing);

and in Magnolia, Texas (potential development of approximately 11 acres planned for future multi-family use), Kingwood, Texas (a retail pad site) and New Caney, Texas (New Caney), each located in the greater Houston area.

The Leasing Operations segment is comprised of Stratus’ real estate assets held for investment that are leased or available for lease and includes The Saint June, West Killeen Market, Kingwood Place, the retail portions of Lantana Place and Magnolia Place, the completed retail portion of Jones Crossing and retail pad sites subject to ground leases at Lantana Place, Kingwood Place and Jones Crossing.

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Real Estate Operations:

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Undeveloped property sales 14,500 —

Commissions and other — — 58 118

— 6,887 2,551 14,831

Leasing Operations:

Rental revenue 4,384 3,309

3,669 3,090 10,450 9,370

Total revenues from contracts with customers $ 26,507 $ 5,802

Financial Information by Business Segment.

Summarized financial information by segment for the three months ended September 30, 2023, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Leasing Operations Corporate, Eliminations and Other b

Unaffiliated customers $ — $ 3,669 $ — $ 3,669

Cost of sales, excluding depreciation and amortization

( 1,467 ) ( 1,381 ) — ( 2,848 )

Depreciation and amortization ( 38 ) ( 934 ) 5 ( 967 )

General and administrative expenses — — ( 3,183 ) ( 3,183 )

Operating (loss) income $ ( 1,505 ) $ 1,354 $ ( 3,178 ) $ ( 3,329 )

Capital expenditures and purchases and development of real estate properties

$ 13,613 $ 12,701 $ — $ 26,314

Total assets at September 30, 2023 c

302,927 164,565 34,529 502,021

Includes sales commissions and other revenues together with related expenses.

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

Corporate, eliminations and other includes cash and cash equivalents and restricted cash of $ 34.3 million.

The remaining cash and cash equivalents and restricted cash is reflected in the operating segments’ assets.

Summarized financial information by segment for the three months ended September 30, 2022, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Summarized financial information by segment for the three months ended March 31, 2024, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Leasing Operations Corporate, Eliminations and Other b

Unaffiliated customers $ 22,123 $ 4,384 $ — $ 26,507

Cost of sales, excluding depreciation and amortization

( 6,232 ) ( 1,350 ) 4 ( 7,578 )

Cost of sales, excluding depreciation ( 15,278 ) ( 1,678 ) — ( 16,956 )

Depreciation and amortization ( 44 ) ( 1,373 ) 16 ( 1,401 )

General and administrative expenses — — ( 4,465 ) ( 4,465 )

Impairment of real estate c

( 720 ) — — ( 720 )

Operating (loss) income $ ( 89 ) $ 853 $ ( 3,594 ) $ ( 2,830 )

Operating income (loss) $ 6,801 $ 1,333 $ ( 4,449 ) $ 3,685

Capital expenditures and purchases and development of real estate properties

$ 8,957 $ 8,141 $ — $ 17,098

Total assets at September 30, 2022 d

Total assets at March 31, 2024 c

329,062 160,759 19,696 509,517

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

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.

Corporate, eliminations and other includes $ 73.9 million of cash and cash equivalents and restricted cash, primarily received from the May 2022 sale of Block 21.

The remaining cash and cash equivalents and restricted cash is reflected in the operating segments’ assets.

Summarized financial information by segment for the first nine months ended September 30, 2023, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Corporate, eliminations and other includes cash, cash equivalents and restricted cash of $ 19.4 million.

Summarized financial information by segment for the three months ended March 31, 2023, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Leasing Operations Corporate, Eliminations and Other b

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Cost of sales, excluding depreciation and amortization ( 4,487 ) ( 1,261 ) — ( 5,748 )

( 8,651 ) ( 3,786 ) — ( 12,437 )

Depreciation and amortization ( 27 ) ( 906 ) 5 ( 928 )

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$ 9,027 $ 10,006 $ — $ 19,033

Includes sales commissions and other revenues together with related expenses.

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

Summarized financial information by segment for the first nine months ended September 30, 2022, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):

Leasing Operations Corporate, Eliminations and Other b

Unaffiliated customers $ 14,831 $ 9,370 $ — $ 24,201

Intersegment 6 — ( 6 ) —

Cost of sales, excluding depreciation and amortization

( 3,204 ) 4 ( 16,230 )

Depreciation and amortization ( 73 ) ( 2,604 ) 13 ( 2,664 )

General and administrative expenses — — ( 10,213 ) ( 10,213 )

Gain on sale of assets c

— 4,812 — 4,812

Impairment of real estate d

( 720 ) — — ( 720 )

Operating income (loss) $ 1,014 $ 8,374 $ ( 10,202 ) $ ( 814 )

Capital expenditures and purchases and development of real estate properties

Total assets at March 31, 2023 c

307,571 109,748 62,400 479,719

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

Represents a pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that Stratus entered into in connection with its sale of The Oaks at Lakeway in 2017.

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

Refer to Note 4.

Corporate, eliminations and other includes cash, cash equivalents and restricted cash of $ 57.0 million.

SUBSEQUENT EVENTS

Stratus evaluated events after September 30, 2023, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

Stratus evaluated events after March 31, 2024, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

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

What changed 10-Q

Item 1. Financial Statements