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We are a diversified real estate company with headquarters in Austin, Texas.
−Removed: We are engaged primarily in the acquisition, entitlement, development, management, leasing and sale of multi-family and single-family residential and commercial real estate properties in the Austin, Texas area and other select markets in Texas.
+Added: We are engaged primarily in the entitlement, development, management, leasing and sale of multi-family and single-family residential and commercial real estate properties in the Austin, Texas area and other select markets in Texas.
In addition to our developed properties, we have a development portfolio that consists of approximately 1,600 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use.
+Added: We generate revenues and cash flows from the sale of our developed and undeveloped properties, the lease of our retail, mixed-use and multi-family properties and development and asset management fees received from our properties.
Refer to Note 9 for discussion of our operating segments and “Business Strategy” below for a discussion of our business strategy.
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Our primary business objective is to create value for stockholders by methodically developing and enhancing the value of our properties and then selling them or holding them for lease.
−Removed: Our successful development program of acquiring properties, securing and maintaining development entitlements, developing and stabilizing properties, and selling them or holding them as part of our leasing operations is a key element of our strategy.
−Removed: We may also seek to refinance properties in order to benefit from, when available, an increase in the value of the property or from lower interest rates or for other reasons.
+Added: We endeavor to sell properties at times when we believe market conditions are favorable to us.
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.
−Removed: 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.
+Added: Our successful development program of securing and maintaining development entitlements, developing and stabilizing properties, and selling them or holding them as part of our leasing operations is a key element of our strategy.
+Added: We may also seek to refinance properties, in order to benefit from, when available, an increase in the value of the property or from lower interest rates, or for other reasons.
+Added: From time to time, when deemed appropriate by our Board of Directors (the Board) and permitted pursuant to the terms of our debt agreements, we may return capital to stockholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million respectively, and as we did during 2022 and 2023 through our $10.0 million share repurchase program, which was completed in October 2023.
In November 2023, our Board approved a new $5.0 million share repurchase program.
−Removed: Refer to “Business Strategy” in MD&A in our 2022 Form 10-K for a discussion of the evolution of our strategy during 2022.
−Removed: 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.
−Removed: (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.
−Removed: and The Saint June, L.P., and we anticipate making future operating loans to Stratus Block 150, L.P.
−Removed: and The Saint George Apartments, L.P.
−Removed: totaling up to $3.4 million over the next 12 months.
−Removed: 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.
−Removed: In addition, our development plans for future projects require significant additional capital.
Our investment strategy focuses on projects that we believe will provide attractive long-term returns, while limiting our financial risk.
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Refer to Note 3.
−Removed: 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.
−Removed: Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or
−Removed: distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors.
+Added: We expect to continue our limited use of our revolving credit facility and to 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.
+Added: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We will re-evaluate our strategy as development progresses on the projects in our pipeline and as market conditions continue to evolve.
+Added: However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, have provided and will continue to provide us with positive cash flows and net income over time, as evidenced by our sales of The Santal and The Saint Mary in
+Added: 2021 and Block 21 in 2022, the cash distribution from the Holden Hills partnership in 2023 and our property sales in first-quarter 2024.
+Added: Further, we believe our investment strategy, current liquidity and portfolio of projects provide us with many opportunities to increase value for our stockholders.
+Added: 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 our Holden Hills joint venture and our share (related to Section N) of the cost of the Tecoma Improvements.
+Added: However, during 2023 and first-quarter 2024, we made operating loans totaling $3.3 million and $2.7 million, respectively, to the limited partnerships for The Annie B and for The Saint June.
+Added: In April 2024, we made an additional operating loan of $85 thousand to the limited partnership of The Saint June and the Class B limited partner made an additional operating loan of $165 thousand to the limited partnership of The Saint June.
+Added: We anticipate making future operating loans to the limited partnerships for The Annie B and The Saint George totaling up to $3.6 million over the next 12 months.
+Added: Our estimates of future operating loans are based on estimates of future costs of the partnerships and anticipated future operating loans from the Class B limited partner of approximately $2.5 million.
+Added: Refer to Note 3 and “Capital Resources and Liquidity” for further discussion.
+Added: In addition, our development plans for future projects require significant additional capital.
+Added: Largely as a result of our property sales in 2021 and 2022, the cash distribution from the Holden Hills partnership in 2023, our property sales in first-quarter 2024 and focused liquidity management on our part, as of March 31, 2024, consolidated cash totaled $20.7 million and we had $39.6 million available under our revolving credit facility, net of $13.3 million of letters of credit committed against the facility, with no amounts drawn on the facility.
+Added: We were challenged by difficult conditions in the real estate business in 2023.
+Added: Interest rates, which began rising in 2022, continued to increase, and costs remained elevated.
+Added: We saw limited opportunities for transactions on favorable terms.
+Added: Accordingly, during this market cycle, we have been working to maintain our business, advance our projects under construction or development, control costs and advance entitlements, relationships and opportunities to position us to capture value when market conditions improve.
+Added: During 2023, among other things, we completed construction and began lease-up of The Saint June multi-family project, continued construction of The Saint George multi-family project, advanced road and utility infrastructure construction on the Holden Hills project, managed our completed retail projects and advanced entitlements on other projects.
+Added: Although 2023 was challenging, we see reasons for optimism regarding improving real estate market conditions in our markets as the year 2024 progresses.
+Added: At March 31, 2024, our retail portfolio consisted of five stabilized projects, namely Jones Crossing, Kingwood Place, Lantana Place – Retail, Magnolia Place – Retail and West Killeen Market.
+Added: In first-quarter 2024, we entered into a contract to sell West Killeen Market for $12.8 million, which we expect to close in second-quarter 2024.
+Added: After repaying the project loan, we expect the sale to generate approximately $7.2 million of pre-tax net cash proceeds.
+Added: We have engaged brokers to explore the sale of Lantana Place – Retail, Magnolia Place – Retail and Kingwood Place.
+Added: In connection with such sales, we anticipate returning capital to stockholders, subject to obtaining required consents from Comerica Bank.
+Added: We believe we have sufficient liquidity and access to capital to sell properties when market conditions are favorable to us and to hold our properties or to continue to develop our properties, as applicable, through the market cycle.
+Added: We expect to re-evaluate our strategy as sales and development progress on the projects in our portfolio and as market conditions continue to evolve.
OVERVIEW OF FINANCIAL RESULTS
Sources of revenue and income.
−Removed: Our Real Estate Operations encompass our activities associated with our acquisition, entitlement, development, and sale of real estate.
+Added: Our Real Estate Operations segment encompass our activities associated with our entitlement, development, and sale of real estate.
The current focus of our real estate operations is multi-family and single-family residential properties and residential-centric mixed-use properties.
−Removed: We may sell or lease the real estate we develop, depending on market conditions.
−Removed: 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.
−Removed: 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.
−Removed: Developed property sales can include an individual tract of land that has been developed and permitted for residential use or a developed lot with a residence built on it.
−Removed: Revenue in our Leasing Operations is generated from the lease of space at retail and mixed-use properties and residences in the multi-family properties that we developed.
+Added: We may sell or lease the properties we develop, depending on market conditions.
+Added: 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.
+Added: Revenue in our Real Estate Operations segment may be generated from the sale of properties that are developed, undeveloped or under development, depending on market conditions.
+Added: Developed property sales can include an individual tract of land that has been developed and permitted for residential use, or a developed lot with a residence already built on it.
+Added: In addition to our developed properties, we have a development portfolio that consists of approximately 1,600 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use.
+Added: Revenue in our Leasing Operations segment is generated from the lease of space at retail and mixed-use properties that we developed and the lease of residences in the multi-family projects that we developed.
We may also generate income from the sale of our leased properties, depending on market conditions.
−Removed: Summary Financial Results for the Third-Quarter and First Nine Months of 2023
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Refer to "Results of Operations" below for further discussion of our segments.
−Removed: 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.
−Removed: 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.
−Removed: Our results for the first nine months of 2022 include a $119.7 million pre-tax gain on the sale of Block 21.
−Removed: Refer to Note 4 under the heading “Block 21 - Discontinued Operations” for additional discussion.
−Removed: 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.
−Removed: Refer to Note 4 under the heading “The Oaks at Lakeway” for additional discussion.
−Removed: Holden Hills Partnership and Cash Distribution in First-Quarter 2023
−Removed: In first-quarter 2023, we obtained third-party equity and debt financing for and commenced construction on Holden Hills, our final large residential development within the Barton Creek community in Austin, Texas.
−Removed: 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.
−Removed: The partnership distributed and paid $35.8 million in cash to us in connection with these transactions.
−Removed: Refer to Note 11 in our 2022 Form 10-K, and “Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills” and Note 3 in this report for further discussion.
−Removed: Sale of Block 21 in May 2022
−Removed: 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.
−Removed: Our net cash proceeds totaled approximately $112 million (including $6.9 million escrowed at closing and disbursed in full to Stratus in June 2023).
−Removed: We recorded a pre-tax gain on the sale of $119.7 million in second-quarter 2022.
−Removed: Block 21 was our wholly owned mixed-use real estate property in downtown Austin, Texas, containing the 251-room W Austin Hotel, 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.
−Removed: The sale of Block 21 eliminated our Hotel and Entertainment segments.
−Removed: As a result, our hotel and entertainment operations, as well as the leasing operations associated with Block 21, are reported as discontinued operations for the 2022 periods presented in the consolidated financial statements included in this Form 10-Q.
−Removed: Refer to Note 4 for further discussion.
+Added: Summary financial results for first-quarter 2024.
+Added: Our revenues totaled $26.5 million in first-quarter 2024 compared with $5.8 million in first-quarter 2023.
+Added: The $19.6 million increase in revenues from our Real Estate Operations segment in first-quarter 2024, compared to first-quarter 2023, is primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and two Amarra Villas homes for a total of $7.6 million, compared with the sale of one Amarra Villas home in first-quarter 2023 for $2.5 million.
+Added: In addition, revenues from our Leasing Operations segment increased by $1.1 million, primarily reflecting new revenue from The Saint June, which had no rental revenue in first-quarter 2023, as well as increased revenue from Lantana Place – Retail and Kingwood Place, primarily due to new leases.
+Added: Refer to “Results of Operations” below for further discussion of the results of operations of our segments.
+Added: Our net income attributable to common stockholders totaled $4.6 million, or $0.56 per diluted share in first-quarter 2024, compared to net loss attributable to common stockholders of $5.8 million, or $0.73 per diluted share, in first-quarter 2023, with the increase due primarily to the increase in revenues.
RECENT DEVELOPMENT ACTIVITIES
−Removed: Current Residential Activities
+Added: Recent Residential Activities
The discussion below focuses on our recent significant residential activity.
For a description of our properties containing additional information, refer to Items 1.
−Removed: “Business and Properties” in our 2022 Form 10-K.
−Removed: Amarra Drive Phase III.
−Removed: In second-quarter 2022, we sold a six-acre undeveloped multi-family tract of land for $2.5 million.
−Removed: As of September 30, 2023, two developed Amarra Drive Phase III lots remained unsold.
+Added: “Business and Properties” and to “Recent Development Activities” in MD&A in our 2023 Form 10-K.
Amarra Villas.
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In first-quarter 2023, we completed and sold one home for $2.5 million.
−Removed: Construction on the last ten homes continues to progress with four of the homes expected to be completed in fourth-quarter 2023.
−Removed: As of November 8, 2023, one home was under contract to sell and nine homes remain available for sale.
+Added: In first-quarter 2024, we completed construction on two of the homes, and we sold two of the homes for a total of $7.6 million, leaving two completed homes in inventory as of March 31, 2024.
+Added: Construction on the last six homes continues to progress and is expected to be completed in second-quarter 2024.
+Added: As of May 10, 2024, one home was under contract to sell for $3.6 million and seven 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.
−Removed: The first units were available for occupancy in July 2023, and construction was completed in November 2023.
−Removed: As of September 30, 2023, we had signed leases for approximately 25 percent of the units.
+Added: The first units were available for occupancy in July 2023, and construction was completed in fourth-quarter 2023.
+Added: As of May 10, 2024, we had signed leases for approximately 90 percent of the units.
Holden Hills.
−Removed: Our final large residential development within the Barton Creek community, Holden Hills, consists of 495 acres and the community is designed to feature 475 unique residences to be developed in two phases with a focus on health and wellness, sustainability and energy conservation.
−Removed: Phases I and II of the Holden Hills development plan encompass the development of the home sites.
−Removed: Phase I is expected to consist of 337 luxury residence sites to be developed in nine distinct communities or “pods,” and 12 single-family platted home sites or “estate lots” and includes related amenities and infrastructure.
−Removed: Phase I also includes the Tecoma Improvements, described below.
−Removed: Phase II is expected to consist of 63 luxury residence sites to be developed in five pods and 63 single-family platted estate lots, and includes related amenities and infrastructure.
−Removed: The luxury residences are expected to range in size from 2,000 square feet to 4,600 square feet.
−Removed: The estate lots are expected to range in size from 0.9 acres to 2.7 acres.
+Added: Our final large residential development within the Barton Creek community, Holden Hills, consists of 495 acres.
+Added: The community has been designed to feature unique residences to be developed in multiple phases with a focus on health and wellness, sustainability and energy conservation.
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.
−Removed: We contributed to the partnership the Holden Hills land and related personal property at an agreed
−Removed: value of $70.0 million, and our 50.0 percent partner contributed $40.0 million in cash.
−Removed: Immediately thereafter, the Holden Hills partnership distributed $30.0 million of cash to us.
−Removed: Further, the Holden Hills partnership reimbursed us for certain initial project costs and closing costs of approximately $5.8 million.
−Removed: We consolidate the Holden Hills partnership, and the contribution from our partner was accounted for as a noncontrolling interest in subsidiary.
−Removed: Refer to Notes 3 and 6 for further discussion.
−Removed: We and the equity investor have agreed to contribute up to an additional $10.0 million each to the partnership if called upon by the general partner.
−Removed: The initial and potential additional equity contributions are projected to constitute a sufficient amount of equity capital to develop both Phase I and Phase II of the Holden Hills project.
−Removed: The partnership anticipates securing additional debt financing for the development of Phase II.
−Removed: The construction of homes on the pods or estate lots would require additional capital.
−Removed: We expect to complete site work for Phase I, including the construction of road, utility, drainage and other required infrastructure, in late 2024.
−Removed: Accordingly, our current projections anticipate that we could start building homes and/or selling home sites in late 2024 or 2025.
−Removed: We may sell the developed pods and estate lots or may elect to build and sell, or build and lease, homes on some or all of the pods and estate lots, depending on financing and market conditions.
−Removed: Pods and estate lots may also be acquired from the Holden Hills partnership by a limited partner for further development under procedures approved by the partners.
−Removed: We entered into a development agreement with the Holden Hills partnership (Development Agreement) that provides that, as part of Phase I, 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 us from its current terminus to Southwest Parkway, estimated to cost approximately $14.7 million (the Tecoma Improvements).
−Removed: The Tecoma Improvements will enable access and provide utilities necessary for the development of both Holden Hills and Section N.
−Removed: Pursuant to the Development Agreement, we will reimburse the Holden Hills partnership for 60 percent of the costs of the Tecoma Improvements.
−Removed: 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.
−Removed: As of September 30, 2023, we had $9.2 million remaining to complete the Tecoma Improvements.
−Removed: 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.
−Removed: The Holden Hills partnership has agreed to deliver to us 60 percent of any MUD reimbursements for Tecoma Improvement costs paid directly by us, when such reimbursements are received by the partnership.
−Removed: The amount and timing of MUD reimbursements depends upon, among other factors, the amount and timing of actual costs incurred, the MUD having a sufficient tax base within its district to issue bonds and obtaining the necessary state approval for the sale of the bonds.
−Removed: Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain.
+Added: Construction is progressing well for Holden Hills’ road and utility infrastructure.
+Added: We are currently continuing development of Phase I of our Holden Hills project according to our previously disclosed plans and anticipate that we could start building homes and/or selling home sites in late 2025, assuming regulators timely fulfill their permit processing obligations .
+Added: As a result of the ETJ (as defined below) process described below, our development plans for Holden Hills are under review.
+Added: For additional discussion, refer to Items 1.
+Added: “Business and Properties” in our 2023 Form 10-K.
Using an entitlement strategy similar to that used for Holden Hills, we continue to progress the development plans for Section N, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community adjacent to Holden Hills.
−Removed: We are designing a dense, mid-rise, mixed-use project, with extensive multi-family and retail components, coupled with limited office, entertainment and hospitality uses, surrounded by extensive outdoor recreational and greenspace amenities, which is expected to result in a significant increase in development density as compared to our prior plans.
+Added: We are designing a dense, mid-rise, mixed-use project, with extensive multi-family and retail components, coupled with limited office, entertainment and hospitality uses, surrounded by extensive outdoor recreational and greenspace amenities, which is expected to
+Added: result in a significant increase in development density as compared to our prior plans.
+Added: In addition, due to the ETJ process described below, our development plans for Section N are under review.
+Added: ETJ Process .
+Added: Texas Senate Bill 2038 (the ETJ Law) became effective September 1, 2023.
+Added: We have completed the statutory process to remove all of our relevant land subject to development, including primarily Holden Hills and Section N from the extraterritorial jurisdiction (ETJ) of the City of Austin, as permitted by the ETJ Law.
+Added: We have also made filings with Travis County to grandfather the Holden Hills and Section N projects under most laws in effect in Travis County at the time of the filings.
+Added: A number of cities in Texas have brought lawsuits challenging the ETJ Law.
+Added: If the ETJ Law is upheld, we expect that the removal of our properties from the ETJ of the City of Austin will streamline the development permitting process, allow greater flexibility in the design of projects, potentially decrease certain development costs, and potentially permit meaningful increases in development density.
+Added: In light of the ETJ Law, we have begun work on assessing potential revisions to our development plans for Holden Hills and Section N.
+Added: For additional discussion, refer to Item 1A.
+Added: “Risk Factors” in our 2023 Form 10-K.
The Saint George
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We entered into a construction loan for this project and began construction in third-quarter 2022.
−Removed: We currently expect to achieve substantial completion by mid-2024.
−Removed: 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.
−Removed: 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.
−Removed: Our goal is to commence construction as soon as financing and other market conditions warrant.
−Removed: The Saint Julia
−Removed: 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.
−Removed: Our goal is to commence construction as soon as financing and other market conditions warrant.
+Added: We currently expect to achieve substantial completion by third-quarter 2024.
Lakeway Multi-Family
−Removed: 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.
+Added: After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, during 2023 we secured the right to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area.
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.
+Added: Our goal is to commence construction on the multi-family project or to sell the site, as soon as infrastructure construction is complete and market conditions warrant.
Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.
+Added: 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.
+Added: 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.
+Added: Our goal is to commence construction as soon as financing and other market conditions warrant.
+Added: Magnolia Place
+Added: In February 2024, we completed the sale of approximately 47 acres of undeveloped land in Magnolia, Texas planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million.
+Added: In connection with the sale, the Magnolia Place construction loan, which had a balance of $8.8 million was repaid.
+Added: Following the sale, we have retained our existing two retail buildings totaling 18,582 square feet, potential development of approximately 11 acres planned for 275 multi-family units and approximately $12 million of potential future reimbursement from the municipal utility district (MUD).
Other Residential
−Removed: 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.
−Removed: The buyer terminated the contract in September 2023.
−Removed: 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.
+Added: 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.
+Added: Our goal is to commence construction or sell the site, as soon as financing and/or market conditions warrant.
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.
−Removed: Current Commercial Activities
+Added: During 2023, we separated the ground lease for the multi-family parcel from the primary ground lease.
+Added: Recent Commercial Activities
The discussion below focuses on our recent significant commercial activity.
For a description of our properties containing additional information, refer to Items 1.
−Removed: “Business and Properties” in our 2022 Form 10-K.
−Removed: Magnolia Place
−Removed: The retail component of Magnolia Place, our H-E-B shadow-anchored retail project in Magnolia, Texas, is currently planned to consist of up to four retail buildings totaling approximately 34,000 square feet and up to nine retail pad sites to be sold or ground leased.
−Removed: The first phase of development consists of two retail buildings totaling 18,582 square feet, all pad sites, and the road, utility and drainage infrastructure necessary to support the entire development.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We sold two retail pad sites in 2022 for a total of $3.4 million.
−Removed: Jones Crossing
−Removed: Jones Crossing, our H-E-B shadow-anchored mixed-use project in College Station, Texas, the location of Texas A&M University, has additional commercial development potential of approximately 104,750 square feet of commercial space.
−Removed: Other Commercial
−Removed: We also own and operate the following stabilized retail projects that we developed:
+Added: “Business and Properties” and to “Recent Development Activities” in MD&A in our 2023 Form 10-K.
+Added: As described above under the heading “Recent Residential Activities,” our Section N project has been envisioned to include a significant commercial component.
+Added: Due to the ETJ process, our development plans for Section N are under review.
+Added: Stabilized Retail Projects
+Added: As of March 31, 2024, we also owned and operated 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 Cavazos.
−Removed: As of September 30, 2023, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.
−Removed: • 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.
+Added: As of March 31, 2024, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.
+Added: • Jones Crossing is our H-E-B-anchored mixed-use project in College Station, Texas, the location of Texas A&M University.
+Added: As of March 31, 2024, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,092 square feet, and a ground lease on one retail pad site.
Four retail pad sites remain available for lease.
−Removed: • Lantana Place is our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas.
−Removed: As of September 30, 2023, we had signed leases for approximately 92 percent of the
−Removed: 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.
+Added: The Jones Crossing site has additional commercial development potential of approximately 104,750 square feet of commercial space.
+Added: • Lantana Place – Retail is part of our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas.
+Added: As of March 31, 2024, we had signed leases for substantially all of the 99,377-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).
−Removed: 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.
+Added: We have constructed 151,877 square feet of retail space at Kingwood Place, including an H-E-B grocery store.
+Added: As of March 31, 2024, 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.
One retail pad site remains available for lease.
+Added: • Magnolia Place – Retail is our H-E-B shadow-anchored, mixed-use development project in Magnolia, Texas.
+Added: We have constructed 18,582 square feet of retail space at Magnolia Place.
+Added: As of March 31, 2024, we had signed leases for all the retail space in the first phase of development, and all tenants were open for business.
+Added: As discussed above, in February 2024, we sold the land planned for a second phase of retail development and all remaining pad sites.
+Added: In first-quarter 2024, we entered into a contract to sell West Killeen Market for $12.8 million, which we expect to close in second-quarter 2024.
+Added: After repaying the project loan, we expect the sale to generate approximately $7.2 million of pre-tax net cash proceeds.
+Added: We have engaged brokers to explore the sale of Lantana Place – Retail, Magnolia Place – Retail and Kingwood Place.
Potential Development Projects and Pipeline
2 unchanged sentences
We are also pursuing other development projects.
−Removed: These potential development projects and projects in our pipeline could require extensive additional permitting and will be dependent on market conditions and financing.
+Added: These potential development projects and projects in our portfolio could require extensive additional permitting and will be dependent on market conditions and financing.
Because of the nature and cost of the approval and development process and uncertainty regarding market demand for a particular use, there is uncertainty regarding the nature of the final development plans and whether we will be able to successfully execute the plans.
Market Conditions
−Removed: Inflation reached a near 40-year high in late 2021, driven in large part by economic recovery from the ongoing COVID-19 pandemic, and continued rising through June 2022.
−Removed: Since then, the rate of inflation has generally decelerated;
−Removed: however, it has remained at historically high levels.
−Removed: 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.
−Removed: Because all of our debt is variable rate, these increases in market interest rates have substantially increased our borrowing costs.
−Removed: Refer to “Capital Resources and Liquidity – Debt Maturities and Other Contractual Obligations” below for further discussion.
−Removed: In addition, we, along with our industry, have been experiencing tightening bank credit, higher costs and more limited availability of equity capital, and a weak market for real estate sales.
−Removed: Higher construction and labor costs, supply chain disruptions and constraints and labor shortages have persisted.
−Removed: These factors are having an adverse impact on the cash flows of our existing projects and the projected profitability of our new projects, and on our asset values.
−Removed: These factors have also caused delays in projects under construction and a pause in sales processes and the start of new development projects.
+Added: Our industry has been experiencing inflation, higher borrowing costs, tightened bank credit, more limited availability of equity capital, increased construction costs, higher labor costs, labor shortages, and supply chain constraints.
+Added: Inflation in the U.S.
+Added: increased rapidly during 2021 through June 2022.
+Added: Since June 2022, the rate of inflation generally has declined;
+Added: however, it has remained at high levels compared to recent historical periods.
+Added: In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023, by 525 basis points on a cumulative basis.
+Added: These factors have increased our costs, adversely impacted the projected profitability of our new projects, delayed the start of or completion of projects, adversely impacted our ability to raise
+Added: equity capital on attractive terms and in our desired time frame and adversely impacted our ability to sell some properties at attractive prices in our desired time frame.
To manage the risks of rising construction and labor costs, we go through extensive pricing exercises culminating with competitive bids from reputable contractors based on final plans and specifications.
1 unchanged sentence
however, rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors.
+Added: Also, as discussed elsewhere in this report, higher costs have required us to make operating loans to some of our joint ventures, and we expect to make additional operating loans during the next 12 months.
Refer to Part I, Item 1A.
“Risk Factors” of our 2023 Form 10-K for more information regarding our risk factors.
−Removed: Although current market conditions are challenging, we believe our liquidity position, experienced team and development opportunities in Austin and other Texas markets will enable us to capture value for our stockholders when market conditions improve.
+Added: Austin, our primary market, has experienced significant growth in demand for residential projects in recent years, particularly due to growth in the technology-related sector in the region and, during 2020 and 2021 related in part to COVID-19 pandemic-influenced in-migration.
+Added: Although prices and demand for residential real estate in the Austin area generally moderated and in some submarkets declined during 2023, we believe the residential market in Austin remains attractive compared to other U.S.
+Added: urban markets.
+Added: Federal Reserve has signaled that it may lower rates in 2024, although there is no certainty with respect to the timing and pace of potential decreases or if such decreases will occur.
+Added: We continue to see reasons for optimism regarding improving real estate market conditions in our Texas markets as the year 2024 progresses.
RESULTS OF OPERATIONS
2 unchanged sentences
We use operating income or loss to measure the performance of our operating segments.
−Removed: Corporate, eliminations and other
−Removed: include consolidated general and administrative expenses, which primarily consist of employee compensation and other costs described herein.
+Added: Corporate, eliminations and other includes 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):
−Removed: Three Months Ended Nine Months Ended
−Removed: September 30, September 30,
−Removed: 2023 2022 2023 2022
−Removed: Operating (loss) income:
+Added: Three Months Ended
+Added: Operating income (loss):
Real Estate Operations a
$ 6,801 $ (2,021)
−Removed: Leasing Operations b
−Removed: 1,354 853 3,900 8,374
−Removed: Corporate, eliminations and other c
−Removed: (3,178) (3,594) (11,959) (10,202)
−Removed: Operating loss (3,329) (2,830) (14,274) (814)
−Removed: Interest expense, net — — — (15)
−Removed: Net loss from continuing operations (3,217) (2,574) (14,799) (230)
−Removed: Net income from discontinued operations d
−Removed: Total comprehensive loss attributable to noncontrolling interests 373 214 853 463
−Removed: Net (loss) income attributable to common stockholders
+Added: Leasing Operations 1,333 1,142
+Added: Corporate, eliminations and other b
(4,449) (4,714)
+Added: Operating income (loss) $ 3,685 $ (5,593)
+Added: Net income (loss) attributable to common stockholders $ 4,552 $ (5,801)
Includes sales commissions and other revenues together with related expenses.
−Removed: 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.
−Removed: Refer to Note 4.
−Removed: 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.
−Removed: 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.
−Removed: The first nine months of 2022 includes a $119.7 million pre-tax gain on the May 2022 sale of Block 21.
−Removed: As a result of the sale of Block 21, we currently have two operating segments:
+Added: We have two operating segments:
Real Estate Operations and Leasing Operations (refer to Note 9).
1 unchanged sentence
Real Estate Operations
−Removed: The following table summarizes our Real Estate Operations results (in thousands):
−Removed: Three Months Ended Nine Months Ended
−Removed: September 30, September 30,
−Removed: 2023 2022 2023 2022
+Added: The following table summarizes our Real Estate Operations segment results (in thousands):
+Added: Three Months Ended
Developed property sales $ 7,623 $ 2,493
Undeveloped property sales 14,500 —
−Removed: Commissions and other — — 58 124
Total revenues 22,123 2,493
−Removed: Cost of sales, including depreciation (1,505) (6,256) (8,766) (13,103)
−Removed: Impairment of real estate — (720) — (720)
−Removed: Operating (loss) income $ (1,505) $ (89) $ (6,215) $ 1,014
+Added: Cost of sales, excluding depreciation and amortization (15,278) (4,487)
+Added: Depreciation and amortization (44) (27)
+Added: Operating income (loss) $ 6,801 $ (2,021)
Developed Property Sales.
The following table summarizes our developed property sales (dollars in thousands):
−Removed: Nine Months Ended September 30,
−Removed: Homes Revenues Average Cost Per Home Lots/Units Revenues Average Cost Per Lot/Unit
+Added: Three Months Ended March 31,
+Added: Homes Revenues Average Cost Per Home Homes Revenues Average Cost Per Home
Amarra Drive:
1 unchanged sentence
Total Residential 2 $ 7,623 1 $ 2,493
−Removed: We had no developed property sales in third-quarter 2023 or 2022.
−Removed: During the periods presented, we sold one Amarra Villas home in the second quarter of 2022 and one in the first quarter of 2023.
+Added: The increase in revenues from developed property sales for first-quarter 2024, compared to first-quarter 2023, reflects the sale of two Amarra Villas homes in first-quarter 2024 compared to the sale of one Amarra Villas home in first-quarter 2023, as well as an increase in average sales price by approximately 53 percent, from $2.5 million per home in first-quarter 2023 to $3.8 million per home in first-quarter 2024, reflecting higher prices per square foot in the community.
+Added: We entered into a contract in April 2024 to sell an Amarra Villas home for $3.6 million.
+Added: No assurances can be given that the pending sale will be completed or that future sale prices will be as high as sale prices to date in 2024.
Undeveloped Property Sales.
−Removed: 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.
−Removed: 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.
−Removed: We had no undeveloped property sales in third-quarter 2023 or for the first nine months of 2023.
−Removed: Cost of Sales.
−Removed: Cost of sales includes costs of property sold, project operating and marketing expenses and allocated overhead costs.
−Removed: 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.
−Removed: 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.
−Removed: Impairment of Real Estate.
−Removed: In third-quarter 2022, we recorded impairment charges totaling $720 thousand.
−Removed: 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.
−Removed: Refer to Note 4 for further discussion.
+Added: In first-quarter 2024, we completed the sale of approximately 47 acres of undeveloped land at Magnolia Place that was planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million.
+Added: Real Estate Cost of Sales.
+Added: Cost of sales, excluding depreciation and amortization, includes costs of property sold, project operating and marketing expenses and allocated overhead costs.
+Added: Cost of sales increased to $15.3 million in first-quarter 2024 compared to $4.5 million in first-quarter 2023, primarily reflecting the sale of undeveloped property at Magnolia Place and the sales of two Amarra Villas homes in first-quarter 2024 compared with no undeveloped property sales and the sale of one Amarra Villas home in first-quarter 2023.
+Added: In addition, the average cost of the Amarra Villas homes sold increased by approximately 44 percent.
Leasing Operations
−Removed: The following table summarizes our Leasing Operations results (in thousands):
−Removed: Three Months Ended Nine Months Ended
−Removed: September 30, September 30,
−Removed: 2023 2022 2023 2022
+Added: The following table summarizes our Leasing Operations segment results (in thousands):
+Added: Three Months Ended
Rental revenue $ 4,384 $ 3,309
−Removed: Rental cost of sales, excluding depreciation and amortization (1,381)
−Removed: (1,350) (3,786) (3,204)
−Removed: Depreciation and amortization (934) (887) (2,764) (2,604)
−Removed: Gain on sale of assets — — — 4,812
+Added: Rental cost of sales, excluding depreciation (1,678)
+Added: Depreciation (1,373) (906)
Operating income $ 1,333 $ 1,142
Rental Revenue.
−Removed: 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.
−Removed: In the 2022 periods, rental revenue primarily included revenue from Lantana Place, Jones Crossing, Kingwood Place and West Killeen Market.
−Removed: 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.
−Removed: Rental Cost of Sales and Depreciation and Amortization.
−Removed: 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.
−Removed: Gain on Sale of Assets.
−Removed: 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.
−Removed: Refer to Note 4 under the heading “The Oaks at Lakeway” for further discussion.
+Added: In first-quarter 2024 and first-quarter 2023, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing, West Killeen Market and Magnolia Place – Retail.
+Added: In first-quarter 2024, rental revenue also included revenue from our multi-family project, The Saint June.
+Added: The increase in rental revenue in first-quarter 2024, compared with first-quarter 2023, primarily reflects revenue from The Saint June, which had no rental revenue in first-quarter 2023, as well as increased revenue from Lantana Place – Retail and Kingwood Place, primarily due to new leases.
+Added: Rental Cost of Sales and Depreciation.
+Added: Rental cost of sales and depreciation expense increased in first-quarter 2024 compared with first-quarter 2023, primarily as a result of The Saint June, which had no operating expenses or depreciation expense in first-quarter 2023, partially offset by the costs of landscaping repairs and replacements at retail properties following the Texas winter storm in February 2023.
Corporate, Eliminations and Other
Corporate, eliminations and other (refer to Note 9) includes consolidated general and administrative expenses, which primarily consist of employee compensation and other costs.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 increase in the first nine months of 2023.
+Added: Consolidated general and administrative expenses decreased to $4.5 million in first-quarter 2024 compared to $4.7 million in first-quarter 2023 primarily as a result of lower compensation costs for estimated cash incentive awards for 2024.
+Added: In first-quarter 2023 we also had fees related to a consulting arrangement to help raise third-party equity capital.
Non-Operating Results
Interest Expense, Net.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Substantially all of the interest costs were capitalized for all periods presented.
−Removed: 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.
+Added: Interest costs (before capitalized interest) totaled $4.0 million in first-quarter 2024 compared with $2.4 million in first-quarter 2023.
+Added: Interest costs in first-quarter 2024 were higher, compared to first-quarter 2023, primarily reflecting higher interest rates as well as an increase in average debt balances.
+Added: As of March 31, 2024, all of our debt was variable-rate debt, and for all of such debt, the interest rates have increased over the past year, including for first-quarter 2024, and may continue to rise in the future if prevailing market interest rates increase.
+Added: All of our interest costs in first-quarter 2024 and first-quarter 2023 were capitalized.
+Added: 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.
Provision for Income Taxes.
−Removed: 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.
−Removed: 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.
+Added: We recorded a provision for income taxes of $0.1 million in first-quarter 2024 compared to $1.2 million in first-quarter 2023.
Refer to Note 8 for further discussion of income taxes.
−Removed: Net Income from Discontinued Operations.
−Removed: 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.
−Removed: Net income from discontinued operations totaled $96.3 million for the first nine months of 2022.
−Removed: 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 .
−Removed: 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.
+Added: Our partners' share of losses totaled $0.9 million in first-quarter 2024 compared to $0.5 million in first-quarter 2023.
CAPITAL RESOURCES AND LIQUIDITY
1 unchanged sentence
However, we believe that the unique nature and location of our assets will provide us positive cash flows over time.
−Removed: Comparison of Cash Flows for the Nine Months Ended September 30, 2023 and 2022
+Added: Comparison of Cash Flows for the Three Months Ended March 31, 2024 and 2023
Operating Activities.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Cash provided by operating activities totaled $6.5 million in first-quarter 2024, compared with cash used in operating activities of $18.4 million in first-quarter 2023.
+Added: The increase in operating cash flow is primarily due to property sales in first-quarter 2024.
+Added: Expenditures for purchases and development of real estate properties totaled $9.0 million in first-quarter 2024, primarily related to development of our Barton Creek properties, particularly Holden Hills and Amarra Villas, and $9.0 million in first-quarter 2023, primarily related to development of our Barton Creek properties, particularly Amarra Villas and, to a lesser extent, Holden Hills.
+Added: The cash outflow resulting from the decrease in accounts payable, accrued liabilities and other in first-quarter 2024 and first-quarter 2023 is primarily related to the timing of property tax payments.
Investing Activities.
−Removed: 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.
−Removed: 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).
−Removed: As no claims were made against the escrowed amounts, the $6.9 million was disbursed in full to us in June 2023.
−Removed: 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.
+Added: Cash used in investing activities totaled $8.4 million in first-quarter 2024 and $10.2 million in first-quarter 2023.
+Added: Capital expenditures totaled $8.1 million in first-quarter 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail, and $10.0 million in first-quarter 2023, primarily for The Saint June and The Saint George.
Financing Activities.
−Removed: 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.
−Removed: During both the first nine months of 2023 and 2022, we had no net borrowings on the Comerica Bank revolving credit facility.
−Removed: 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.
−Removed: 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.
−Removed: Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at September 30, 2023.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Cash used in financing activities totaled $9.1 million in first-quarter 2024 and cash provided by financing activities totaled $42.7 million in first-quarter 2023.
+Added: In both the first-quarter 2024 and first-quarter 2023, we
+Added: had no net borrowings on the Comerica Bank revolving credit facility.
+Added: In first-quarter 2024, net payments on project and term loans totaled $8.3 million, primarily reflecting the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and the Annie B land loan, partially offset primarily by borrowings on The Saint George and Holden Hills construction loans and the Amarra Villas credit facility.
+Added: In first-quarter 2023 net borrowings on project and term loans totaled $5.1 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.
+Added: Refer to “Revolving Credit Facility and Other Financing Arrangements” and “Debt Maturities and Other Contractual Obligations” below for a discussion of our outstanding debt at March 31, 2024.
+Added: In first-quarter 2023, we received a contribution from a noncontrolling interest owner of $40.0 million, related to the Holden Hills partnership.
+Added: On September 1, 2022, with 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 stockholders of record as of September 19, 2022.
+Added: During first-quarter 2023, $0.2 million of accrued dividends for unvested restricted stock units (RSUs) were paid to the holders upon the vesting of the RSUs, and during first-quarter 2024, $0.4 million of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $0.3 million of dividends accrued for unvested RSUs presented in accrued liabilities as of March 31, 2024.
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 authorized repurchases of up to $10.0 million of our common stock.
−Removed: 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.
+Added: During first-quarter 2023, we spent $0.9 million on share repurchases under the program.
In October 2023, we completed the share repurchase program.
−Removed: 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.
+Added: In total, under the completed share repurchase program, we acquired 389,378 shares of our common stock for a total 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.
3 unchanged sentences
The share repurchase program does not obligate us to repurchase any specific amount of shares, does not have an expiration date, and may be suspended, modified or discontinued at any time without prior notice.
+Added: As of March 31, 2024, we had not repurchased any shares under the new program.
Revolving Credit Facility and Other Financing Arrangements
−Removed: 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.
−Removed: 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.
−Removed: We have taken steps to obtain Federal Deposit Insurance Corporation (FDIC) protection for much of our deposits;
−Removed: however, we typically have some cash balances on deposit with banks in excess of FDIC insured limits.
−Removed: Any loss of uninsured deposits could have a material adverse effect on our future financial condition, liquidity and operations.
−Removed: As of September 30, 2023, $30.1 million was invested in an FDIC insured cash sweep platform.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: As amended, advances under the revolving credit facility bear interest at the one-month Bloomberg Short-Term Bank Yield Index (BSBY) Rate (with a floor of 0.50 percent) plus 4.00 percent.
−Removed: 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.
−Removed: 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.
−Removed: Refer to Note 6 for additional discussion.
−Removed: 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.
+Added: As of March 31, 2024, we had $20.7 million in cash and cash equivalents and restricted cash of $0.8 million, and no amount was borrowed under our revolving credit facility.
+Added: Of the $20.7 million in consolidated cash and cash equivalents at March 31, 2024, $2.8 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.
+Added: As of March 31, 2024, we had total debt of $170.1 million based on the principal amounts outstanding compared with $177.4 million at December 31, 2023.
+Added: 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 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 and $2.3 million of which secure our obligation to construct and pay for certain utility infrastructure in Lakeway, Texas.
+Added: 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 March 31, 2024.
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.
−Removed: In August 2023, we made an additional advance of $800 thousand under the operating loan to Stratus Block 150, L.P.
−Removed: 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.
+Added: In August 2023 and February 2024, we made additional operating loans of $800 thousand and $2.4 million, respectively, to Stratus Block 150, L.P.
+Added: The loans are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners.
+Added: Until February 2024, the interest rate on the loans was the one-month Bloomberg Short Term Bank Yield
+Added: Index (BSBY) Rate plus 5.00 percent.
+Added: 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, we 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.
−Removed: 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.
−Removed: 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.
−Removed: In February 2023, The Annie B land loan’s maturity was extended to March 1, 2024.
−Removed: Also in February 2023, our subsidiary Holden Hills, L.P.
−Removed: entered into a $26.1 million construction loan with Comerica Bank due February 8, 2026 to finance the development of Phase I of the Holden Hills project.
−Removed: In March 2023, we repaid the $4.1 million New Caney land loan.
−Removed: 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.
+Added: In October 2023 and January 2024, we 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.
+Added: In April 2024, we 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: In connection with the modification, we made a $1.4 million principal payment on the loan and are required to make another principal payment of $630 thousand in February 2025.
+Added: During first-quarter 2024, we paid off the $8.8 million Magnolia Place construction loan in connection with our sale of approximately 47 acres of undeveloped land, and we made principal payments of $7.2 million on our Amarra Villas revolving credit facility in connection with our sales of two Amarra Villas homes.
+Added: During the quarter, we increased borrowings under The Saint George, The Saint June and Holden Hills construction loans.
Refer to Note 6 for further discussion.
1 unchanged sentence
Refer to Note 6 and MD&A in our 2023 Form 10-K for a discussion of the financial covenants in our debt agreements.
−Removed: As of September 30, 2023, we were in compliance with all of our financial covenants.
−Removed: 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.
−Removed: The DSCR test under the Jones Crossing loan is not a financial covenant and not meeting the DSCR test is not an event of default;
−Removed: 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.
−Removed: 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 .
−Removed: 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-
−Removed: quarter 2023.
−Removed: Accordingly, the DSCR met the threshold in second-quarter and third-quarter 2023.
−Removed: 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.
−Removed: Stratus’ and its subsidiaries’ debt arrangements contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things:
+Added: As of March 31, 2024, we were in compliance with all of our financial covenants.
+Added: Stratus’ and its subsidiaries’ debt arrangements, including Stratus’ guaranty agreements contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things:
borrow additional money or issue guarantees;
7 unchanged sentences
and engage in mergers, consolidations or other business combinations.
−Removed: 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 completed $10.0 million share repurchase program, and in November 2023 in connection with the new $5.0 million share repurchase program.
+Added: 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 the 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 connection with the special cash dividend and share repurchase programs.
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.
1 unchanged sentence
Our project loans are generally secured by all or substantially all of the assets of the projects, and our Comerica Bank revolving credit facility is secured by substantially all of our assets other than those encumbered by separate project financing.
−Removed: In addition, we are typically required to guarantee all or part of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, except for the Jones Crossing loan guaranty, which is generally limited to non-recourse carve-out obligations.
−Removed: We were released as guarantor under the Lantana Place construction loan guaranty in 2022.
+Added: In addition, we are typically required to guarantee all or part of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, except for the Jones Crossing loan guaranty, which has generally been limited to non-recourse carve-out obligations since inception of the loan.
+Added: We were released as guarantor under the Lantana Place construction loan guaranty in 2022 and the guaranty of The Saint June construction loan was changed to a 50.0 percent repayment guaranty upon completion of The Saint June in fourth-quarter 2023.
+Added: 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.
+Added: The Holden Hills construction loan has a completion guaranty and a full repayment guaranty.
+Added: The Annie B land loan, the Amarra Villas revolving credit facility and the West Killeen Market construction loan each have a full repayment guaranty.
Refer to Note 6 to our consolidated financial statements in our 2023 Form 10-K for additional discussion.
3 unchanged sentences
Debt Maturities and Other Contractual Obligations
−Removed: The following table summarizes our debt maturities based on the principal amounts outstanding as of September 30, 2023 (in thousands):
+Added: The following table summarizes our debt maturities based on the principal amounts outstanding as of March 31, 2024 (in thousands):
2024 2025 2026 2027 2028 Thereafter Total
−Removed: Comerica Bank revolving credit facility a
+Added: Comerica Bank revolving credit facility
$ — $ — $ — $ — $ — $ — $ —
1 unchanged sentence
— — 22,581 — — 22,581
−Removed: The Annie B land loan b
−Removed: — 14,000 — — — — 14,000
+Added: The Annie B land loan — 12,600 — — — — 12,600
Construction loans:
−Removed: Kingwood Place c
+Added: The Saint George
— — 32,378 — — — 32,378
−Removed: The Saint June — 25,997 — — — — 25,997
+Added: The Saint June a
+Added: 28,697 — — — — — 28,697
+Added: Kingwood Place b
+Added: 28,241 — — — — — 28,241
Lantana Place 237 348 375 22,000 — — 22,960
−Removed: The Saint George — — — 16,097 — — 16,097
−Removed: Amarra Villas revolving credit facility — 14,242 — — — — 14,242
−Removed: Magnolia Place — 8,713 — — — — 8,713
−Removed: West Killeen Market
+Added: Amarra Villas revolving credit facility c
9,888 — — — — — 9,888
−Removed: Holden Hills — — — 1,711 — — 1,711
+Added: — — 7,518 — — — 7,518
+Added: West Killeen Market d
+Added: 44 5,197 — — — — 5,241
Total $ 67,107 $ 18,145 $ 62,852 $ 22,000 $ — $ — $ 170,104
−Removed: 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.
−Removed: Refer to Note 6 for further information.
−Removed: In February 2023, we extended the maturity date of this loan to March 1, 2024.
+Added: Includes operating loans from our third-party partner of $589 thousand.
+Added: The maturity date of The Saint June construction loan is October 2, 2024.
+Added: We have options to extend the maturity for two additional 12-month terms if certain conditions are met.
The maturity date is December 6, 2024.
−Removed: We exercised our option to extend the maturity date for one additional 12-month period, which the lender has approved.
−Removed: We are working with the lender to document the extension and modification of the loan agreement.
+Added: The maturity date for this credit facility is June 19, 2024, and we are in discussions with the lender about extending the loan.
+Added: We expect to pay off this loan in full in connection with the closing of the sale of the property, which is expected to occur in second-quarter 2024.
The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented:
−Removed: Three Months Ended Nine Months Ended
−Removed: September 30, September 30,
−Removed: 2023 2022 2023 2022 a
−Removed: Comerica Bank revolving credit facility b
−Removed: — % — % — % 4.97 %
+Added: Three Months Ended
+Added: Comerica Bank revolving credit facility a
Jones Crossing loan
−Removed: 7.57 4.23 7.16 3.20
The Annie B land loan 8.41 7.44
−Removed: New Caney land loan c
−Removed: — 4.76 — 3.53
Construction loans:
+Added: The Saint George b
+Added: The Saint June 8.19 7.29
Kingwood Place 8.20 7.15
−Removed: The Saint June d
−Removed: 8.13 5.01 7.76 4.96
Lantana Place 7.74 6.93
−Removed: The Saint George e
−Removed: 7.66 — 7.63 —
Amarra Villas revolving credit facility 8.39 7.45
−Removed: Magnolia Place 8.63 5.28 7.89 4.59
−Removed: West Killeen Market
−Removed: 7.98 4.95 7.64 3.72
−Removed: Holden Hills f
−Removed: 8.36 — 8.36 —
−Removed: At March 31, 2022, we had an outstanding balance of $38 thousand for the loan under the Paycheck Protection Program (PPP loan).
−Removed: The PPP loan bore interest at 1.00 percent.
−Removed: The PPP loan matured and the remaining balance was repaid on April 15, 2022.
−Removed: We did not have an outstanding balance during third-quarter 2023, third-quarter 2022 or the first nine months of 2023.
−Removed: At September 30, 2023, the interest rate for the revolving credit facility was 9.40 percent.
−Removed: In March 2023, we repaid this loan.
+Added: Holden Hills c
+Added: West Killeen Market d
+Added: Magnolia Place e
+Added: We did not have an outstanding balance during first-quarter 2024 or 2023.
+Added: At March 31, 2024, the interest rate for the revolving credit facility was 9.38 percent.
We did not have an outstanding balance during first-quarter 2023.
−Removed: We did not have an outstanding balance during either period in 2022 or during first-quarter 2023.
−Removed: We did not have an outstanding balance during either period in 2022 or during first-quarter and second-quarter 2023.
−Removed: Liquidity Outlook
−Removed: 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.
−Removed: 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.
+Added: We did not have an outstanding balance during first-quarter 2023.
+Added: We expect to pay off this loan in full in connection with the closing of the sale of the property, which is expected to occur in second-quarter 2024.
+Added: In February 2024, this loan was repaid with proceeds from the sale of approximately 47 acres of undeveloped land.
+Added: We had firm commitments totaling approximately $33.0 million at March 31, 2024 primarily related to construction of The Saint George, Holden Hills and Amarra Villas.
+Added: We have construction loans to fund these projected cash outlays for the projects over the next 12 months, except for anticipated operating loans to Stratus Block 150, L.P.
+Added: and 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.
−Removed: As of September 30, 2023, we had $9.2 million remaining to complete the Tecoma Improvements.
−Removed: Refer to "Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills” above for further discussion of the Tecoma Improvements.
+Added: As of March 31, 2024, the Holden Hills partnership had $6.4 million remaining to complete the Tecoma Improvements.
Also, we anticipate making future operating loans to Stratus Block 150, L.P.
1 unchanged sentence
totaling up to $3.6 million over the next 12 months to enable the partnerships to pay debt service and project costs.
−Removed: 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.
+Added: The operating loans would bear interest at the one-month SOFR Rate plus 5.00 percent and the one-month BSBY Rate plus 5.00 percent, respectively, would be subordinate to the project loans and would be repaid before distributions may be made to the partners.
We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months.
−Removed: 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.
−Removed: 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.
−Removed: We expect to successfully extend the maturities or refinance our debt that matures in the next 12 months.
+Added: Our stabilized commercial properties (West Killeen Market, Jones Crossing, Lantana Place – Retail, Kingwood Place and Magnolia Place – Retail) are projected to generate positive cash flow after debt service over the next 12 months.
+Added: In first-quarter 2024, we entered into a contract to sell West Killeen Market for $12.8 million, which we expect to close in second-quarter 2024.
+Added: After repaying the project loan, we expect the sale to generate approximately $7.2 million of pre-tax net cash proceeds.
+Added: For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements and projected general and administrative expenses, we have cash on hand of $20.7 million at March 31, 2024 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $39.6 million as of March 31, 2024 which is expected to be sufficient to fund these cash requirements for the next 12 months.
+Added: We expect to successfully extend the maturities of, or to 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.
−Removed: We also generate cash flow from rental revenue in our leasing operations and from development and asset management fees received from our properties.
+Added: We also generate cash flow from rental
+Added: revenue 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.
6 unchanged sentences
There have been no changes in our critical accounting estimates from those discussed in our 2023 Form 10-K.
−Removed: NEW ACCOUNTING STANDARDS
−Removed: No new accounting pronouncements adopted or issued by the Financial Accounting Standards Board had or may have a material impact on our consolidated financial statements.
+Added: RECENT ACCOUNTING STANDARDS
+Added: In August 2023, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU), No.
+Added: 2023-05, “Business Combinations – Joint Venture Formations.” This ASU addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements.
+Added: The pronouncement requires a joint venture to initially measure contributions at fair value upon formation, which is more relevant than the carrying amounts of the contributed net assets and would reduce equity method basis differences.
+Added: The ASU is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025.
+Added: We do not expect the pronouncement to have a material effect on our consolidated financial statements.
+Added: In November 2023, the FASB issued ASU No.
+Added: 2023-07, “Segment Reporting – Improvements to Reportable Segments Disclosures”, which enhances disclosures of significant segment expenses regularly provided to the chief operating decision maker, extends certain annual disclosures to interim periods and permits more than one measure of segment profit or loss to be reported under certain conditions.
+Added: The amendments are effective for fiscal years beginning after December 15, 2023 and early adoption of the amendment is permitted.
+Added: We expect adoption of the pronouncement will lead to additional segment disclosure in our consolidated financial statements beginning with our annual report for 2024.
+Added: In December 2023, the FASB issued ASU No.
+Added: 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures”.
+Added: This ASU requires public business entities to disclose a tabular rate reconciliation of both percentages and reporting currency amounts on an annual basis.
+Added: The ASU also requires disclosure of information on amount of income taxes paid disaggregated by federal, state and foreign taxes.
+Added: This ASU is effective for annual periods beginning after December 15, 2024.
+Added: We do not expect the pronouncement to have a material effect on our consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
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.
−Removed: For additional information regarding these types of
−Removed: 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.
+Added: For additional information regarding these types of activities, refer to the discussion about our firm commitments in “Capital Resources and Liquidity” above and Note 9 to our consolidated financial statements in our 2023 Form 10-K.
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains forward-looking statements in which we discuss factors we believe may affect our future performance.
−Removed: Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to the impact of inflation and interest rate changes, supply chain constraints and tightening bank credit, our ability to meet our future debt service and other cash obligations, future cash flows and liquidity, our expectations about the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, plans to sell, recapitalize, or refinance properties, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, leasing activities, tax rates, future capital expenditures and financing plans, possible joint ventures, partnerships, or other strategic relationships, other plans and objectives of management for future operations and development projects, the impacts of any major public health crisis, and future cash returns to stockholders, including the timing and amount of repurchases under our share repurchase program.
−Removed: 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.
−Removed: 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 share repurchase program.
+Added: Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to inflation, interest rates, supply chain constraints, availability of bank credit, our ability to meet our future debt service and other cash obligations, future cash flows and liquidity, the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, plans to sell, recapitalize, or refinance properties, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, including the expected impact of the ETJ Law and related ongoing litigation, leasing activities, tax rates, future capital
+Added: expenditures and financing plans, possible joint ventures, partnerships, or other strategic relationships, other plans and objectives of management for future operations and development projects, and potential future cash returns to stockholders, including the timing and amount of repurchases under our share repurchase program.
+Added: The words “anticipate,” “may,” “can,” “plan,” “believe,” “potential,” “estimate,” “expect,” “project,” “target,” “intend,” “likely,” “will,” “should,” “to be” and any similar expressions or statements are intended to identify those assertions as forward-looking statements.
+Added: 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 our current $5.0 million 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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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.
−Removed: 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.
−Removed: 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.
+Added: 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, maintenance and insurance costs, and the cost of building materials and labor, increases in inflation and interest rates, supply chain constraints, availability of 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, potential U.S.
+Added: or local economic downturn or recession, the availability and terms of financing for development projects and other corporate purposes, 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, any major public health crisis, 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 risks, litigation risks, including the timing and resolution of the ongoing litigation challenging the ETJ Law and our ability to implement any revised development plans in light of the ETJ Law, 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.
of our 2023 Form 10-K, filed with the SEC.
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Further, we may make changes to our business plans that could affect our results.
−Removed: We caution investors that we undertake no obligation to update our
−Removed: forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, business plans, actual experience or other changes.
+Added: 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.