What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-13 · 169 added, 154 removed, 352 unchanged (48% of the section changed)

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Refer to Note 3.

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.

We expect to continue to limit 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.

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.

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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.

As of June 30, 2024, the Holden Hills partnership had $5.2 million remaining to complete the Tecoma Improvements.

However, during 2023 and the first six months of 2024, we made operating loans totaling $3.3 million and $2.9 million, respectively, to the limited partnerships for The Annie B and for The Saint June.

The Class B limited partner also made operating loans of $250 thousand and $503 thousand during 2023 and the first six months of 2024, respectively, to the limited partnership for The Saint June.

As of September 30, 2024, the Holden Hills partnership had $4.4 million remaining to complete the Tecoma Improvements.

However, during 2023 and the first nine months of 2024, we made operating loans totaling $3.3 million and $3.9 million, respectively, to the limited partnerships for The Annie B and for The Saint June.

The Class B limited partner also made operating loans of $250 thousand and $504 thousand during 2023 and the first nine months of 2024, respectively, to the limited partnership for The Saint June.

In third-quarter 2024, we contributed additional capital of $400 thousand in cash representing our 10 percent equity share, and the Class B limited partner contributed additional capital of $3.6 million in cash, each to the limited partnership for The Saint George.

We anticipate making future operating loans to the limited partnership for The Annie B totaling up to $2.6 million over the next 12 months.

Our estimates of future operating loans are based on estimates of future costs of the partnership.

We also anticipate contributing additional capital of $400 thousand to the limited partnership for The Saint George representing our 10 percent equity share needed by the partnership to cover interest on the construction loan.

Refer to Note 3 and “Capital Resources and Liquidity” for further discussion.

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

As of June 30, 2024, consolidated cash totaled $13.5 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.

As of September 30, 2024, consolidated cash totaled $19.6 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.

We were challenged by difficult conditions in the real estate business in 2023.

Interest rates, which began rising in 2022, continued to increase, and costs remained elevated.

During the first half of 2024, interest rates stabilized but costs remain elevated.

During the first nine months of 2024, interest rates stabilized but costs remain elevated.

We saw limited opportunities for transactions on favorable terms.

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.

During 2023 and the first half of 2024, among other things, we completed construction and began and substantially completed the 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.

Although 2023 and the first half of 2024 were challenging, we see reasons for optimism regarding improving real estate market conditions in our markets over the next 12 months.

Among other things, interest rates are widely expected to decline.

As of June 30, 2024, our retail and multi-family portfolio consisted of six stabilized projects, namely The Saint June, Jones Crossing – Retail, Kingwood Place, Lantana Place – Retail, Magnolia Place – Retail and West Killeen Market.

As previously disclosed, we have been testing the market for potential sales of West Killeen Market, Magnolia Place – Retail, Lantana Place – Retail and Kingwood Place.

During 2023 and the first nine months of 2024, among other things, we completed construction and began and substantially completed the 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.

In addition, during 2023 and the first nine months of 2024, we sold five Amarra Villas homes for a total of $17.7 million, 47 acres of undeveloped land at Magnolia Place for $14.5 million and Magnolia Place – Retail for $8.9 million, described further below.

As of September 30, 2024, our retail and multi-family portfolio consisted of five stabilized projects, namely The Saint June, Jones Crossing – Retail, Kingwood Place, Lantana Place – Retail and West Killeen Market.

As previously disclosed, we had been testing the market for potential sales of West Killeen Market, Magnolia Place – Retail, Lantana Place – Retail and Kingwood Place.

In first-quarter 2024, we entered into a contract to sell West Killeen Market for $12.8 million;

however, in June 2024 the buyer failed to close and we elected to terminate the contract.

In June 2024, we entered into a contract to sell Magnolia Place – Retail for $8.9 million.

The sale is expected to close in mid-August 2024 and generate pre-tax net cash proceeds of approximately $8.7 million.

We continue to explore a sale of Kingwood Place.

We have paused exploring the sales of West Killeen Market and Lantana Place – Retail, deciding to retain these cash-flowing properties at this time.

We believe market conditions will improve for the sale of our remaining retail properties over the next 12 months, and are optimistic that we will be able to sell these properties at attractive prices during that time.

In connection with these sales, we anticipate returning capital to stockholders, subject to obtaining required consents from Comerica Bank.

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.

In third-quarter 2024, we closed on the sale of Magnolia Place – Retail for $8.9 million.

The sale generated pre-tax net cash proceeds of approximately $8.6 million and a pre-tax gain of $1.6 million.

We have paused exploring the sales of West Killeen Market, Lantana Place – Retail and Kingwood Place, deciding to retain these cash-flowing properties at this time.

Although 2023 and the first nine months of 2024 were challenging, we see reasons for optimism regarding improving real estate market conditions in our markets over the next 12 months.

Among other things, the Federal Reserve lowered interest rates in September 2024 for the first time in four years, lowered interest rates again in November 2024, and there could be additional cuts in the future.

In October 2024, we extended the maturity of The Saint June construction loan at a lower rate and with additional proceeds of approximately $1.5 million after closing costs.

We are currently discussing options to refinance the Kingwood Place construction loan, the Lantana Place construction loan and the Jones Crossing loan, with the expectation of tighter spreads and with potential additional proceeds.

We expect to refinance the Kingwood Place construction loan on or before the December 6, 2024 maturity date.

We also expect that, if market rates continue to decline, interest on our outstanding debt, all of which is variable rate, will continue to decline.

We believe we have sufficient liquidity and access to capital to sell properties when market conditions are favorable to us and to hold or refinance our properties or to continue to

develop our properties, as applicable, through the market cycle.

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.

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

Multi-family and retail rental properties that we develop are

reclassified to our Leasing Operations segment when construction is completed and they are ready for occupancy.

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

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.

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Our Leasing Operations segment does not have exposure to office space.

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

Summary financial results for the second-quarter and first six months of 2024.

Our revenues totaled $8.5 million in second-quarter 2024 and $35.0 million for the first six months of 2024, compared with $3.5 million in second-quarter 2023 and $9.3 million for the first six months of 2023.

The $23.2 million increase in revenues from our Real Estate Operations segment in the first six months of 2024, compared to first six months of 2023, is primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and three Amarra Villas homes for a total of $11.3 million in the first six months of 2024, compared with the sale of one Amarra Villas home in the first six months of 2023 for $2.5 million.

The $3.6 million increase in revenues in our Real Estate Operations segment in second-quarter 2024, compared to second-quarter 2023, is primarily a result of the sale of one Amarra Villas home in the second quarter of 2024 compared to no sales in the prior period.

In addition, revenues from our Leasing Operations segment increased in both the three and six-month 2024 periods, primarily reflecting new revenue from The Saint June, which had no rental revenue in the 2023 periods, as well as increased revenue from Kingwood Place, Lantana Place – Retail and Magnolia Place – Retail primarily due to new leases.

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

Summary financial results for the third-quarter and first nine months of 2024.

Our revenues totaled $8.9 million in third-quarter 2024 and $43.9 million for the first nine months of 2024, compared with $3.7 million in third-quarter 2023 and $13.0 million for the first nine months of 2023.

The $27.2 million increase in revenues from our Real Estate Operations segment in the first nine months of 2024, compared to the first nine months of 2023, is primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and four Amarra Villas homes for an aggregate of $15.2 million in the first nine months of 2024, compared with the sale of one Amarra Villas home in the first nine months of 2023 for $2.5 million.

The $4.0 million in revenues in our Real Estate Operations segment in third-quarter 2024, compared to no revenues in third-quarter 2023, is primarily a result of the sale of one Amarra Villas home in the third quarter of 2024 for $4.0 million compared to no sales in the prior period.

In addition, revenues from our Leasing Operations segment increased in both the three and nine-month 2024 periods, primarily reflecting new revenue from The Saint June, which had minimal rental revenue in the 2023 periods as it commenced operations in mid-2023, as well as increased revenue from Kingwood Place and Lantana Place – Retail primarily due to new leases.

During the three and nine months ended September 30, 2024, we recorded a $1.6 million pre-tax gain on the sale of Magnolia Place – Retail.

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

Our net loss attributable to common stockholders totaled $1.7 million, or $0.21 per diluted share in second-quarter 2024, compared to $5.3 million, or $0.66 per diluted share, in second-quarter 2023.

During the first six months of 2024 our net income attributable to common stockholders totaled $2.8 million, or $0.35 per diluted share, compared to net loss attributable to common stockholders of $11.1 million, or $1.39 per diluted share, during the first six months of 2023.

Our net loss attributable to common stockholders totaled $0.4 million, or $0.05 per diluted share in third-quarter 2024, compared to $2.8 million, or $0.36 per diluted share, in third-quarter 2023.

During the first nine months of 2024 our net income attributable to common stockholders totaled $2.5 million, or $0.30 per diluted share, compared to net loss attributable to common stockholders of $13.9 million, or $1.74 per diluted share, during the first nine months of 2023.

RECENT DEVELOPMENT ACTIVITIES

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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.

In second-quarter 2024, we sold another Amarra Villas home for $3.6 million, leaving one completed home in inventory as of June 30, 2024.

In July 2024, we sold one Amarra Villas home for $4.0 million.

Construction on the last five homes continues to progress and is expected to be completed in fourth-quarter 2024.

As of August 9, 2024, one home was under contract to sell for $3.8 million and five homes remain available for sale.

In second-quarter 2024, we sold another Amarra Villas home for $3.6 million.

In third-quarter 2024, we sold one Amarra Villas home for $4.0 million, leaving one completed home in inventory as of September 30, 2024.

In November 2024, we sold one Amarra Villas home

for $3.8 million.

Construction on the last four homes continues to progress and is expected to be completed in fourth-quarter 2024.

As of November 8, 2024, five homes remain available for sale.

The Saint June.

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

As of August 9, 2024, occupancy of The Saint June was approximately 98 percent.

As of November 8, 2024, occupancy of The Saint June was approximately 97 percent.

Holden Hills.

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A number of cities in Texas have brought lawsuits challenging the ETJ Law.

A hearing has been scheduled for September 19, 2024 and any decision rendered may be appealed.

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.

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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.

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.

Our goal is to commence construction on the multi-family project or to sell the site, as soon as infrastructure construction, which has not yet started, 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.

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.

with 316 luxury residential units.

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

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

Following the sale, we retained our existing two retail buildings totaling 18,582 square feet, which are currently under contract of sale for $8.9 million, 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).

Following the sale, we retained our 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

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Stabilized Retail Projects

As of June 30, 2024, we also owned and operated the following stabilized retail projects that we developed:

As of September 30, 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.

As of June 30, 2024, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.

As of September 30, 2024, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.

• Jones Crossing - Retail is part of our H-E-B-anchored mixed-use project in College Station, Texas, the location of Texas A&M University.

As of June 30, 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.

As of September 30, 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.

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

As of June 30, 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.

As of September 30, 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).

We have constructed 151,877 square feet of retail space at Kingwood Place, including an H-E-B grocery store.

As of June 30, 2024, we had signed leases for substantially all of the retail space, including the H-E-B grocery store.

As of September 30, 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.

• Magnolia Place – Retail is part of our H-E-B shadow-anchored, mixed-use development project in Magnolia, Texas.

We have constructed 18,582 square feet of retail space at Magnolia Place.

As of June 30, 2024, we had signed leases for all the retail space in the first phase of development, and all tenants were open for business.

As discussed above, in February 2024, we sold the land planned for a second phase of retail development and all remaining pad sites.

As previously disclosed, we have been testing the market for potential sales of West Killeen Market, Magnolia Place – Retail, Lantana Place – Retail and Kingwood Place.

As previously disclosed, we had been testing the market for potential sales of West Killeen Market, Magnolia Place – Retail, Lantana Place – Retail and Kingwood Place.

In first-quarter 2024, we entered into a contract to sell West Killeen Market for $12.8 million;

however, in June 2024 the buyer failed to close and we elected to terminate the contract.

In June 2024, we entered into a contract to sell Magnolia Place – Retail for $8.9 million.

The sale is expected to close in mid-August 2024 and generate pre-tax net cash proceeds of approximately $8.7 million.

We continue to explore a sale of Kingwood Place.

We have paused exploring the sales of West Killeen Market and Lantana Place – Retail, deciding to retain these cash-flowing properties at this time.

We believe market conditions will improve for the sale of our remaining retail properties over the next 12 months, and are optimistic that we will be

able to sell these properties at attractive prices during that time.

In connection with these sales, we anticipate returning capital to stockholders, subject to obtaining required consents from Comerica Bank.

In third-quarter 2024, we closed on the sale of Magnolia Place – Retail for $8.9 million.

The sale generated pre-tax net cash proceeds of approximately $8.6 million and a pre-tax gain of $1.6 million.

We have paused

exploring the sales of West Killeen Market, Lantana Place – Retail and Kingwood Place, deciding to retain these cash-flowing properties at this time.

Potential Development Projects and Pipeline

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however, it has remained above the U.S.

Federal Reserve’s target inflation rate of two percent through July 2024.

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.

Federal Reserve’s target inflation rate of two percent through October 2024.

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 (although in September and November 2024, the Federal Reserve lowered the federal funds target rate by 50 basis points and 25 basis points, respectively).

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 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.

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however, rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors.

Also, as discussed elsewhere in this report, higher costs and project delays have required us to make operating loans to some of our joint ventures, and we expect to make additional operating loans and an equity contribution during the next 12 months.

Also, as discussed elsewhere in this report, higher costs and project delays have required us to make operating loans and an equity contribution 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.

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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.

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.

Although prices and demand for residential real estate in the Austin area generally moderated and in some submarkets declined during 2023 and the first nine months of 2024, we believe the residential market in Austin remains attractive compared to other U.S.

urban markets.

Federal Reserve has signaled that it may lower rates in the second half of 2024, which is widely expected to occur, although there is no certainty with respect to the timing and pace of potential decreases or if such decreases will occur.

Federal Reserve lowered rates by 50 basis points in September 2024 and by 25 basis points in November 2024, and there could be additional cuts in the future, although there is no certainty with respect to the timing and pace of potential decreases or if such decreases will occur.

We continue to see reasons for optimism regarding improving real estate market conditions in our Texas markets over the next 12 months.

RESULTS OF OPERATIONS

We are continually evaluating the development and sale potential of our properties and will continue to consider opportunities to enter into transactions involving our properties, including possible sales, joint ventures or other arrangements.

As a result, and because of numerous factors affecting our business activities as described herein and in our 2023 Form 10-K, our past operating results are not necessarily indicative of our future results.

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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(3,347) (3,178) (11,622) (11,959)

Operating (loss) income (2,920) (5,352) 765 (10,945)

Operating loss (1,519) (3,329) (754) (14,274)

Total comprehensive loss attributable to noncontrolling interests 1,050 373 2,958 853

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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The following tables summarize our developed property sales (dollars in thousands):

Three Months Ended June 30,

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

Three Months Ended September 30,

Homes Revenues Average Cost Per Home Homes Revenues Average Cost Per Home

Amarra Drive:

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Total Residential 1 $ 3,950 — $ —

Six Months Ended June 30,

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

Nine Months Ended September 30,

Homes Revenues Average Cost Per Home Homes Revenues Average Cost Per Home

Amarra Drive:

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Total Residential 4 $ 15,198 1 $ 2,493

The increase in revenues from developed property sales for second-quarter 2024, compared to second-quarter 2023, reflects the sale of one Amarra Villas home in second-quarter 2024 compared to no sales in second-quarter 2023.

The increase in revenues for the first six months of 2024 compared to the first six months of 2023, reflects the sales of three Amarra Villas homes in the 2024 period compared to one sale in the 2023 period, as well as an increase in average sales price by approximately 50 percent, from $2.5 million per home in the first six months of 2023 to $3.7 million per home in the first six months of 2024.

In July 2024, we sold one Amarra Villas home for $4.0 million.

We have entered into a contract to sell another Amarra Villas home for $3.8 million.

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.

The increase in revenues from developed property sales for third-quarter 2024, compared to third-quarter 2023, reflects the sale of one Amarra Villas home in third-quarter 2024 for $4.0 million compared to no sales in third-quarter 2023.

The increase in revenues for the first nine months of 2024 compared to the first nine months of 2023, reflects the sales of four Amarra Villas homes in the 2024 period compared to the sale of one Amarra Villas home in the 2023 period, as well as an increase in average sales price by approximately 52 percent, from $2.5 million per home in the first nine months of 2023 to $3.8 million per home in the first nine months of 2024.

In November 2024, we sold another Amarra Villas home for $3.8 million.

No assurances can be given that future sale prices will be as high as sale prices to date in 2024.

Undeveloped Property Sales.

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

Cost of sales increased to $4.4 million in second-quarter 2024, compared to $2.7 million in second-quarter 2023, primarily reflecting the sale of one Amarra Villas home in second-quarter 2024 while there were no property sales in second-quarter 2023.

Cost of sales increased to $19.7 million for the first six months of 2024, compared to $7.2 million for the first six months of 2023, primarily reflecting the sale of undeveloped property at Magnolia Place and the sales of three Amarra Villas homes in the first six months of 2024 compared with no undeveloped property sales and the sale of one Amarra Villas home in the first six months of 2023.

Cost of sales increased to $5.3 million in third-quarter 2024, compared to $1.5 million in third-quarter 2023, primarily reflecting the sale of one Amarra Villas home in third-quarter 2024 while there were no property sales in third-quarter 2023.

Cost of sales increased to $25.0 million for the first nine months of 2024, compared to $8.7 million for the first nine months of 2023, primarily reflecting the sale of undeveloped property at Magnolia Place and the sales of four Amarra Villas homes in the first nine months of 2024 compared with no undeveloped property sales and the sale of one Amarra Villas home in the first nine months of 2023.

In addition, the average cost of the Amarra Villas homes sold increased by approximately 41 percent.

Cost of sales for the three and nine-month periods in 2024 include a $721 thousand charge to write off previously capitalized costs related to a change in development plans for one of our properties.

Leasing Operations

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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Depreciation (1,333) (934) (4,080) (2,764)

Gain on sale of assets 1,626 — 1,626 —

Operating income $ 3,249 $ 1,354 $ 6,327 $ 3,900

Rental Revenue.

In the 2024 periods, rental revenue primarily included revenue from Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail, West Killeen Market, Magnolia Place and The Saint June.

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

The increase in rental revenue in the 2024 periods, compared with the 2023 periods, primarily reflects revenue from The Saint June, which had no rental revenue in the 2023 periods, as well as increased revenue at Kingwood Place, Lantana Place – Retail and Magnolia Place – Retail, primarily due to new leases.

In the 2024 periods, rental revenue primarily included revenue from Lantana Place – Retail, Kingwood Place, The Saint June, Jones Crossing – Retail, West Killeen Market and Magnolia Place – Retail.

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

The increase in rental revenue in the 2024 periods, compared with the 2023 periods, primarily reflects revenue from The Saint June, which had minimal rental revenue in the 2023 periods as it commenced operations in mid-2023, as well as increased revenue at Kingwood Place and Lantana Place – Retail, primarily due to new leases.

Rental Cost of Sales and Depreciation.

Rental cost of sales and depreciation expense increased in the 2024 periods compared with the 2023 periods, primarily as a result of The Saint June, which had minimal operating expenses in the 2023 periods, partially offset by the costs of landscaping repairs and replacements at retail properties following the Texas winter storm in February 2023.

Gain on Sale of Assets.

In third-quarter 2024, we closed on the sale of Magnolia Place – Retail for $8.9 million.

The sale generated pre-tax net cash proceeds of approximately $8.6 million and a pre-tax gain of $1.6 million.

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.

Consolidated general and administrative expenses were $3.8 million in second-quarter 2024 and $8.3 million for the first six months of 2024, compared to $4.1 million in second-quarter 2023 and $8.8 million for the first six months of 2023.

The decreases in the 2024 periods were primarily related to lower compensation costs for estimated cash incentive awards for 2024.

In 2023, we also had fees related to a consulting arrangement to help raise third-party equity capital.

Consolidated general and administrative expenses were $3.4 million in third-quarter 2024 and $11.7 million for the first nine months of 2024, compared to $3.2 million in third-quarter 2023 and $12.0 million for the first nine months of 2023.

Non-Operating Results

Interest Expense, Net.

Interest costs (before capitalized interest) totaled $3.9 million in second-quarter 2024 and $7.9 million for the first six months of 2024, compared with $2.9 million in second-quarter 2023 and $5.3 million for the first six months of 2023.

Interest costs (before capitalized interest) totaled $4.0 million in third-quarter 2024 and $11.9 million for the first nine months of 2024, compared with $3.4 million in third-quarter 2023 and $8.7 million for the first nine months of 2023.

Interest costs in the 2024 periods were higher, compared to the 2023 periods, primarily reflecting higher interest rates as well as an increase in average debt balances.

As of June 30, 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 the first six months of 2024.

As of September 30, 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 the first nine months of 2024, although interest rates on our loans have declined slightly since the Federal Reserve lowered interest rates by 50 basis points in September 2024.

In November 2024, the Federal Reserve further lowered interest rates by 25 basis points.

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

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

Capitalized interest is primarily related to development activities at our Barton Creek properties (primarily Amarra Villas, Holden Hills and Section N) and The Saint George for the 2024 periods.

Capitalized interest was primarily related to development activities at our Barton Creek properties (primarily Holden Hills, Section N and The Saint June), The Saint George and The Annie B for the 2023 periods.

Provision for Income Taxes.

We recorded a provision for income taxes of $44 thousand in second-quarter 2024 and $0.1 million for the first six months of 2024, compared to $0.5 million in second-quarter 2023 and $1.7 million for the first six months of 2023.

We recorded a provision for income taxes of $58 thousand in third-quarter 2024 and $0.2 million for the first nine months of 2024, compared to $0.4 million in third-quarter 2023 and $2.0 million for the first nine months of 2023.

Refer to Note 8 for further discussion of income taxes.

Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries .

Our partners’ share of losses totaled $1.1 million in second-quarter 2024 and $1.9 million for the first six months of 2024, compared to $8 thousand in second-quarter 2023 and $0.5 million for the first six months of 2023.

Our partners’ share of losses totaled $1.1 million in third-quarter 2024 and $3.0 million for the first nine months of 2024, compared to $0.4 million in third-quarter 2023 and $0.9 million for the first nine months of 2023.

The increases in both periods were primarily

due to increased interest expense for Stratus Block 150, L.P., and The Saint June, L.P., and initial operating expenses for The Saint George Apartments, L.P., which is expected to be substantially completed in fourth-quarter 2024.

CAPITAL RESOURCES AND LIQUIDITY

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

Comparison of Cash Flows for the Six Months Ended June 30, 2024 and 2023

Comparison of Cash Flows for the Nine Months Ended September 30, 2024 and 2023

Operating Activities.

Cash used in operating activities totaled $1.7 million for the first six months of 2024, compared with $26.8 million for the first six months of 2023.

Expenditures for purchases and development of real estate properties totaled $16.3 million for the first six months of 2024 and $21.1 million for the first six months of 2023, both primarily related to development of our Barton Creek properties, particularly Amarra Villas and Holden Hills.

Cash used in operating activities totaled $2.4 million for the first nine months of 2024, compared with $39.3 million for the first nine months of 2023.

Operating cash flow improved as a result of higher revenue from property sales in the first nine months of 2024.

Expenditures for purchases and development of real estate properties totaled $22.9 million for the first nine months of 2024 and $34.7 million for the first nine months of 2023, both primarily related to development of our Barton Creek properties, particularly Amarra Villas and Holden Hills.

Investing Activities.

Cash used in investing activities totaled $16.5 million for the first six months of 2024 and $24.0 million for the first six months of 2023.

Capital expenditures totaled $16.1 million for the first six months of 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail, and $23.5 million for the first six months of 2023, primarily for The Saint George and The Saint June.

Cash used in investing activities totaled $15.0 million for the first nine months of 2024 and $36.9 million for the first nine months of 2023.

Capital expenditures totaled $23.0 million for the first nine months of 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail, and $36.2 million for the first nine months of 2023, primarily for The Saint George and The Saint June.

These uses of cash in the first nine months of 2024 were partially offset by $8.6 million in proceeds from the sale of Magnolia Place – Retail.

Financing Activities.

Cash (used in) provided by financing activities totaled $(0.2) million for the first six months of 2024 and $50.1 million for the first six months of 2023.

During both the first six months of 2024 and 2023, we had no net borrowings on the Comerica Bank revolving credit facility.

During the first six months of 2024, net borrowings on other project and term loans totaled $0.5 million, primarily reflecting borrowings on The Saint George and Holden Hills construction loans and the Amarra Villas credit facility partially offset primarily by the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and the Annie B land loan.

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

Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at June 30, 2024.

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

Cash provided by financing activities totaled $5.3 million for the first nine months of 2024 and $66.9 million for the first nine months of 2023.

During both the first nine months of 2024 and 2023, we had no net borrowings on the Comerica Bank revolving credit facility.

During the first nine months of 2024, net borrowings on other project and term loans totaled $2.6 million, primarily reflecting borrowings on The Saint George and Holden Hills construction loans and the Amarra Villas credit facility partially offset primarily by the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and The Annie B land loan.

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 credit facility, partially offset by the payoff of the New Caney land loan.

Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at September 30, 2024.

During the first nine months of 2024, we contributed additional capital of $400 thousand in cash, and the Class B limited partner contributed additional capital of $3.6 million in cash, each to The Saint George Apartments, L.P.

to support the partnership’s ability to pay its construction loan interest, which had exceeded the amount budgeted due to interest rate increases over the past two years.

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.

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

During the first six months of 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 June 30, 2024.

During the first nine months of 2024 and 2023, $0.4 million and $0.7 million, respectively, 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 September 30, 2024.

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

In 2022, after receiving 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.

During the first six months of 2023, we spent $1.6 million on share repurchases under the program.

During the first nine months of 2023, we spent $2.1 million on share repurchases under the program.

In October 2023, we completed the share repurchase program.

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

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

The timing, price and number of shares that may

be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management and the Capital Committee of the Board.

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

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.

As of June 30, 2024, we had not repurchased any shares under the new program.

As of September 30, 2024, we had not repurchased any shares under the new program.

Revolving Credit Facility and Other Financing Arrangements

As of June 30, 2024, we had $13.5 million in cash and cash equivalents and restricted cash of $0.5 million, and no amount was borrowed under our revolving credit facility.

Of the $13.5 million in consolidated cash and cash equivalents at June 30, 2024, $2.9 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.

As of June 30, 2024, we had total debt of $180.0 million based on the principal amounts outstanding compared with $177.4 million at December 31, 2023.

As of June 30, 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.

Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of June 30, 2024.

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

As of September 30, 2024, we had $19.6 million in cash and cash equivalents and restricted cash of $0.7 million, and no amount was borrowed under our revolving credit facility.

Of the $19.6 million in consolidated cash and cash equivalents at September 30, 2024, $7.8 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.

As of September 30, 2024, we had total debt of $182.9 million based on the principal amounts outstanding compared with $177.4 million at December 31, 2023.

As of September 30, 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.

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, 2024.

In 2023, we made operating loans totaling $2.3 million to Stratus Block 150, L.P.

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

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

In February 2024 and August 2024, we made additional operating loans of $2.4 million and $1.1 million, respectively, to Stratus Block 150, L.P.

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

Until February 2024, the interest rate on the loans was the one-month Bloomberg Short Term Bank Yield

Index (BSBY) Rate plus 5.00 percent.

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

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

In June 2023, 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.

to support the partnership’s ability to pay its construction loan interest, which had risen above the amount budgeted due to interest rate increases over the past two years.

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.

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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.

In third-quarter 2024, we contributed additional capital of $400 thousand in cash, and the Class B limited partner contributed additional capital of $3.6 million in cash, each to The Saint George Apartments, L.P.

to support the partnership’s ability to pay its construction loan interest, which had exceeded the amount budgeted due to interest rate increases over the past two years.

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

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Paydowns made in connection with a sale of an Amarra Villas home reduce the commitment amount by the amount of the payment, and such amounts may not be re-borrowed.

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 credit facility in connection with our sales of two Amarra Villas homes.

During second-quarter 2024, we made a principal payment of $3.5 million on our Amarra Villas credit facility in connection with the sale of one Amarra Villas home.

During the first six months of 2024, we increased borrowings under The Saint George, The Saint June and Holden Hills construction loans.

In October 2024, The Saint June construction loan was modified to (i) extend the maturity date of the loan to October 2, 2025;

(ii) increase the aggregate commitment under the loan by $2.0 million to $32.3 million;

(iii) decrease the interest rate applicable margin from 2.85 percent to 2.35 percent;

and (iv) require payment of an exit fee for prepayments and repayments of the loan of 1.00 percent of the principal amount of such amounts repaid, subject to certain exceptions.

Accordingly, the loan bears interest at the one-month Term SOFR plus 2.35 percent, subject to a 3.50 percent floor.

The loan is payable in monthly installments of principal and interest of approximately $40,000, with the outstanding principal due at maturity.

The Saint June, L.P.

has an option to extend the maturity of the loan for an additional 12-month term if certain conditions are met.

After closing costs, The Saint June, L.P.

intends to use the remaining portion of the $1.5 million proceeds of the loan primarily for partial repayment of operating loans to the partnership from Stratus and the Class B Limited Partner.

During the first nine months of 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 $14.4 million on our Amarra Villas credit facility in connection with our sales of four Amarra Villas homes.

We also increased borrowings under The Saint George, Holden Hills and The Saint June construction loans.

Refer to Note 6 for further discussion.

We expect to refinance the Kingwood Place construction loan on or before the December 6, 2024 maturity date.

We also expect that, if market rates continue to decline, interest on our outstanding debt, all of which is variable rate, will continue to decline.

Our debt agreements require compliance with specified financial covenants.

Refer to Note 6 and MD&A in our 2023 Form 10-K for a discussion of the financial covenants in our debt agreements.

As of June 30, 2024, we were in compliance with all of our financial covenants.

As of September 30, 2024, we were in compliance with all of our financial covenants.

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:

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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.

loan guaranty, which has generally been limited to non-recourse carve-out obligations since inception of the loan.

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.

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.

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Debt Maturities

The following table summarizes our debt maturities based on the principal amounts outstanding as of June 30, 2024 (in thousands):

The following table summarizes our debt maturities based on the principal amounts outstanding as of September 30, 2024 (in thousands):

2024 2025 2026 2027 2028 Thereafter Total

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Holden Hills — — 12,395 — — — 12,395

Amarra Villas credit facility

— — 7,743 — — — 7,743

West Killeen Market

16 5,197 — — — — 5,213

Amarra Villas credit facility

— — 4,654 — — — 4,654

Total $ 59,566 $ 18,152 $ 83,217 $ 21,982 $ — $ — $ 182,917

Includes operating loans from our third-party partner of $753 thousand.

The maturity date of The Saint June construction loan is October 2, 2024.

We have options to extend the maturity for two additional 12-month terms if certain conditions are met.

We expect to extend the loan on or before the maturity date and the extension may require a paydown on the loan.

The maturity date of The Saint June construction loan was October 2, 2024.

In October 2024, The Saint June construction loan was modified to extend the maturity to October 2, 2025.

We have the option to extend the maturity for an additional 12-month terms if certain conditions are met.

The maturity date is December 6, 2024.

We expect to refinance the loan on or before the maturity date.

We are currently discussing options to refinance the loan and expect to extend the loan on or before the maturity date.

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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8.34 8.36 8.36 8.36

Amarra Villas credit facility

8.36 7.98 8.38 7.74

West Killeen Market

8.01 7.98 8.06 7.64

Amarra Villas credit facility

8.40 8.27 8.38 7.95

Magnolia Place d

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We did not have an outstanding balance during any of the periods presented.

At June 30, 2024, the interest rate for the revolving credit facility was 9.37 percent.

At September 30, 2024, the interest rate for the revolving credit facility was 8.88 percent.

We did not have an outstanding balance during first-quarter 2023.

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Liquidity Outlook

We had firm commitments totaling approximately $22.3 million at June 30, 2024 primarily related to construction of The Saint George, Holden Hills and Amarra Villas.

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.

and capital contribution to The Saint George Apartments, L.P.

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

As of June 30, 2024, the Holden Hills partnership had $5.2 million remaining to complete the Tecoma Improvements.

We had firm commitments totaling approximately $15.3 million at September 30, 2024 primarily related to construction of The Saint George and Holden Hills.

We have construction loans to fund these projected cash outlays for the projects over the next 12 months.

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

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

As of September 30, 2024, the Holden Hills partnership had $4.4 million remaining to complete the Tecoma Improvements.

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

totaling up to $2.6 million over the next 12 months to enable the partnership to pay debt service and project costs.

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

We also anticipate contributing additional capital of $400 thousand to The Saint George Apartments, L.P.

representing our 10 percent equity share needed by the partnership to cover interest on the construction loan.

The operating loans would bear interest at the one-month SOFR Rate plus 5.00 percent, would be subordinate to The Annie B land loan 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.

Our stabilized retail and multi-family properties (West Killeen Market, Jones Crossing – Retail, Magnolia Place – Retail, Lantana Place – Retail, Kingwood Place and The Saint June) are projected to generate sufficient cash flow to cover debt service over the next 12 months.

In June 2024, we entered into a contract to sell Magnolia Place – Retail for $8.9 million.

The sale is expected to close in mid-August 2024 and generate pre-tax net cash proceeds of approximately $8.7 million.

We also expect to sell additional Amarra Villas homes and may sell certain lots or tracts of undeveloped land.

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 $13.5 million at June 30, 2024 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $39.6 million as of June 30, 2024 which is expected to be sufficient to fund these cash requirements for the next 12 months.

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

Our stabilized retail and multi-family properties (West Killeen Market, Jones Crossing – Retail, Lantana Place – Retail, Kingwood Place and The Saint June) are projected to generate sufficient cash flow to cover debt service over the next 12 months.

We expect to sell additional Amarra Villas homes and may sell certain lots or tracts of undeveloped land.

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 $19.6 million at September 30, 2024 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $39.6 million as of September 30, 2024 which is expected to be sufficient to fund these cash requirements for the next 12 months.

We expect to successfully extend the maturities of, or to refinance, our outstanding debt that matures in the next 12 months, and to successfully extend or refinance our revolving credit facility prior to maturity.

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.

As discussed under “Business Strategy” above, our main source of revenue and cash flow is expected to come from sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors.

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

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This Quarterly Report on Form 10-Q contains forward-looking statements in which we discuss factors we believe may affect our future performance.

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 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.

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, our ability to pay or refinance our debt obligations as they become due, availability of bank credit, our ability to meet our future debt service and other cash obligations, projected future operating loans or capital contributions to our joint ventures, 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 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.

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.

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

Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, our ability to implement our business strategy successfully, including our ability to develop, construct and sell or lease properties on terms our Board considers acceptable, increases in operating and construction costs, including real estate taxes, 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.

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.

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, 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, 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.

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, 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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What changed 10-Q

Item 2. Management’s Discussion and Analysis