STRATUS PROPERTIES INC 10-Q

Item 1. Financial Statements . STRATUS PROPERTIES INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) March 31, 2025 December 31, 2024 ASSETS Cash and cash equivalents $ 12,006 $ 20,178 Restricted cash 951 976 Real estate held for sale 11,359 11,211 Real estate under development 274,625 274,105 Land available for development 76,312 65,009 Real estate held for investment, net 134,963 136,252 Lease right-of-use assets 10,015 10,088 Deferred tax assets 153 153 Other assets 14,197 14,634 Total assets $ 534,581 $ 532,606 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 8,949 $ 10,061 Accrued liabilities, including taxes 3,526 7,291 Debt 207,838 194,853 Lease liabilities 15,473 15,436 Deferred gain 1,548 1,810 Other liabilities 4,664 5,588 Total liabilities 241,998 235,039 Commitments and contingencies Equity: Stockholders’ equity: Common stock 98 97 Capital in excess of par value of common stock 201,346 200,972 Retained earnings 25,726 28,601 Common stock held in treasury ( 35,711 ) ( 34,965 ) Total stockholders’ equity 191,459 194,705 Noncontrolling interests in subsidiaries 101,124 102,862 Total equity 292,583 297,567 Total liabilities and equity $ 534,581 $ 532,606 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 2 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (In Thousands, Except Per Share Amounts) Three Months Ended March 31, 2025 2024 Revenues: Real estate operations $ 25 $ 22,123 Leasing operations 5,018 4,384 Total revenues 5,043 26,507 Cost of sales: Real estate operations 1,480 15,278 Leasing operations 1,913 1,678 Depreciation and amortization 1,394 1,401 Total cost of sales 4,787 18,357 General and administrative expenses 4,051 4,465 Gain on sale of asset ( 200 ) — Total 8,638 22,822 Operating (loss) income ( 3,595 ) 3,685 Loss on interest rate cap agreements ( 13 ) — Loss on extinguishment of debt ( 183 ) ( 59 ) Other income, net 64 173 (Loss) income before income taxes ( 3,727 ) 3,799 Provision for income taxes ( 30 ) ( 102 ) Net (loss) income and total comprehensive (loss) income ( 3,757 ) 3,697 Total comprehensive loss attributable to noncontrolling interests 882 855 Net (loss) income and total comprehensive (loss) income attributable to common stockholders $ ( 2,875 ) $ 4,552 Basic net (loss) income per share attributable to common stockholders $ ( 0.36 ) $ 0.57 Diluted net (loss) income per share attributable to common stockholders $ ( 0.36 ) $ 0.56 Weighted-average shares of common stock outstanding: Basic 8,037 8,026 Diluted 8,037 8,151 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 3 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Three Months Ended March 31, 2025 2024 Cash flow from operating activities: Net (loss) income $ ( 3,757 ) $ 3,697 Adjustments to reconcile net loss (income) to net cash (used in) provided by operating activities: Depreciation and amortization 1,394 1,401 Cost of real estate sold — 13,191 Loss on interest rate cap agreements 13 — Loss on extinguishment of debt 183 59 Stock-based compensation 369 442 Debt issuance cost amortization 345 238 Gain on sale of assets ( 200 ) — Purchases and development of real estate properties ( 7,212 ) ( 8,957 ) Decrease in other assets 792 948 Decrease in accounts payable, accrued liabilities and other ( 5,422 ) ( 4,472 ) Net cash (used in) provided by operating activities ( 13,495 ) 6,547 Cash flow from investing activities: Capital expenditures ( 4,527 ) ( 8,141 ) Payments on master lease obligations ( 166 ) ( 251 ) Net cash used in investing activities ( 4,693 ) ( 8,392 ) Cash flow from financing activities: Borrowings from credit facility 4,000 — Borrowings from project loans 57,969 9,330 Payments on project and term loans ( 48,916 ) ( 17,586 ) Payment of dividends ( 236 ) ( 356 ) Finance lease principal payments ( 4 ) ( 4 ) Stock-based awards net payments ( 336 ) ( 376 ) Noncontrolling interest distributions ( 856 ) — Purchases of treasury stock ( 410 ) — Financing costs ( 1,220 ) ( 67 ) Net cash provided by (used in) financing activities 9,991 ( 9,059 ) Net decrease in cash, cash equivalents and restricted cash ( 8,197 ) ( 10,904 ) Cash, cash equivalents and restricted cash at beginning of year 21,154 32,432 Cash, cash equivalents and restricted cash at end of period $ 12,957 $ 21,528 The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements. 4 Table of Contents STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (In Thousands) Stockholders’ Equity Common Stock Held in Treasury Total Common Stock Capital in Excess of Par Value Retained Earnings Noncontrolling Interests in Subsidiaries Number of Shares At Par Value Number of Shares At Cost Total Equity Balance at December 31, 2024 9,685 $ 97 $ 200,972 $ 28,601 1,662 $ ( 34,965 ) $ 194,705 $ 102,862 $ 297,567 Vested stock-based awards 88 1 ( 1 ) — — — — — — Director fees paid in shares of common stock — — 6 — — — 6 — 6 Stock-based compensation — — 369 — — — 369 — 369 Tender of shares for stock-based awards — — — — 17 ( 336 ) ( 336 ) — ( 336 ) Common stock repurchases — — — — 21 ( 410 ) ( 410 ) — ( 410 ) Noncontrolling interest distributions — — — — — — — ( 856 ) ( 856 ) Total comprehensive loss — — — ( 2,875 ) — — ( 2,875 ) ( 882 ) ( 3,757 ) Balance at March 31, 2025 9,773 $ 98 $ 201,346 $ 25,726 1,700 $ ( 35,711 ) $ 191,459 $ 101,124 $ 292,583 Stockholders’ Equity Common Stock Held in Treasury Total Common Stock Capital in Excess of Par Value Retained Earnings Noncontrolling Interests in Subsidiaries Number of Shares At Par Value Number of Shares At Cost Total Equity Balance at December 31, 2023 9,586 $ 96 $ 197,735 $ 26,645 1,583 $ ( 32,997 ) $ 191,479 $ 103,126 $ 294,605 Vested stock-based awards 78 1 ( 1 ) — — — — — — Director fees paid in shares of common stock — — 6 — — — 6 — 6 Stock-based compensation — — 442 — — — 442 — 442 Grant of restricted stock units (RSUs) under the Profit Participation Incentive Plan (PPIP) — — 1,492 — — — 1,492 — 1,492 Tender of shares for stock-based awards — — — — 16 ( 376 ) ( 376 ) — ( 376 ) Excise tax on 2023 common stock repurchases — — — — — ( 22 ) ( 22 ) — ( 22 ) Total comprehensive income (loss) — — — 4,552 — — 4,552 ( 855 ) 3,697 Balance at March 31, 2024 9,664 $ 97 $ 199,674 $ 31,197 1,599 $ ( 33,395 ) $ 197,573 $ 102,271 $ 299,844 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 5 Table of Contents STRATUS PROPERTIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL The unaudited condensed consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K for the year ended December 31, 2024 (Stratus 2024 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission (SEC) on March 28, 2025. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported and consist of normal recurring adjustments. The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year. Related Party Transactions. In April 2022, Stratus hired the son of Stratus’ President and Chief Executive Officer as an employee. As an employee, he received the same health and retirement benefits provided to all Stratus employees, annual incentive awards and two awards under the Profit Participation Incentive Plan (PPIP). In first-quarter 2024, he received $ 22 thousand as an annual incentive award for 2024, and his annual salary was $ 124 thousand. In September 2024, the employee resigned from employment with Stratus, resulting in the forfeiture of his two outstanding awards under the PPIP. Refer to Note 7 for discussion of the PPIP. For additional information regarding Stratus’ related parties, including LCHM Holdings, LLC and JBM Trust, refer to Notes 1 and 2 in the Stratus 2024 Form 10-K. 2. EARNINGS PER SHARE Stratus’ basic net (loss) income per share of common stock was calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. A reconciliation of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating diluted net (loss) income per share follows (in thousands, except per share amounts): Three Months Ended March 31, 2025 2024 Net (loss) income and total comprehensive (loss) income ( 3,757 ) 3,697 Total comprehensive loss attributable to noncontrolling interests 882 855 Net (loss) income and total comprehensive (loss) income attributable to common stockholders $ ( 2,875 ) $ 4,552 Basic weighted-average shares of common stock outstanding 8,037 8,026 Add shares issuable upon vesting of dilutive restricted stock units (RSUs) a — 125 Diluted weighted-average shares of common stock outstanding 8,037 8,151 Basic net (loss) income per share attributable to common stockholders $ ( 0.36 ) $ 0.57 Diluted net (loss) income per share attributable to common stockholders $ ( 0.36 ) $ 0.56 a. For the first three months of March 31, 2025, excludes 161 thousand shares of common stock associated with RSUs that were anti-dilutive as a result of a net loss. For the first three months of March 31, 2024, excludes 21 thousand shares of common stock associated with RSUs that were anti-dilutive. 3. LIMITED PARTNERSHIPS Stratus has entered into strategic partnerships for certain development projects. Stratus, through its subsidiaries, is a partner in the following limited partnerships: Holden Hills, L.P. ( 50.0 percent indirect equity interest), The Saint George Apartments, L.P. ( 10.0 percent indirect equity interest), Stratus Block 150, L.P. ( 31.0 percent indirect equity interest), The Saint June, L.P. ( 34.13 percent indirect equity interest) and Stratus Kingwood Place, L.P. ( 60.0 percent indirect equity interest). For additional information regarding Stratus' partnerships, refer to Note 2 in the Stratus 2024 Form 10-K. 6 Table of Contents Operating Loans to Partnerships. Stratus has made operating loans to Stratus Block 150, L.P. to facilitate the partnership’s ability to pay ongoing costs, including debt service, of The Annie B project during the pre-construction period. The loans bear interest at one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners. In first-quarter 2024, Stratus made an operating loan of $ 2.4 million. In first-quarter 2025, Stratus made an operating loan of $ 1.5 million. As of March 31, 2025, Stratus’ operating loans outstanding to Stratus Block 150, L.P. totaled $ 7.2 million. Stratus and the Class B limited partner have made operating loans to The Saint June, L.P. to support the partnership’s ability to pay its construction loan interest, which has exceeded the amount budgeted due to interest rate increases. The loans bear interest at one-month Term SOFR plus 5.00 percent, are subordinate to The Saint June construction loan and, unless approved by all partners, no distributions may be made to the partners until the operating loans are repaid. In first-quarter 2024, Stratus made an operating loan of $ 339 thousand, and the Class B limited partner made an operating loan of $ 339 thousand. No loans were made in first-quarter 2025 . As of March 31, 2025, Stratus’ and the Class B limited partner’s operating loans outstanding to The Saint June, L.P. totaled $ 962 thousand and $ 493 thousand, respectively. Potential Returns. The following table presents the distribution percentages for the limited partnerships in which Stratus’ potential returns may increase above its relative equity interest if certain hurdles are achieved. Distribution Percentages The Saint George Apartments, L.P. The Saint June, L.P. Holden Hills, L.P. Stratus Kingwood Place, L.P. Stratus Third-party Class B Limited Partner Stratus Third-party Class B Limited Partner Stratus Third-party Class B Limited Partner Stratus Third-party Class B Limited Partners Until all partners have received a return of their capital contributions and a 9.00 percent cumulative return; 10.00 % 90.00 % 34.13 % 65.87 % 50.00 % 50.00 % 60.00 % 40.00 % Until all partners have received an 11.00 percent cumulative return; — — — — — — 68.00 32.00 Until the Class B limited partner has received a 12.00 percent cumulative return; 20.00 80.00 44.13 55.87 55.00 45.00 — — Until the Class B limited partner has received an 18.00 percent cumulative return; 30.00 70.00 — — — — — — Thereafter 50.00 50.00 54.13 45.87 65.00 35.00 76.00 24.00 Accounting for Limited Partnerships. Stratus has performed evaluations and concluded that Holden Hills, L.P., The Saint George Apartments, L.P., Stratus Block 150, L.P., The Saint June, L.P. and Stratus Kingwood Place, L.P. are variable interest entities (VIEs) and that Stratus is the primary beneficiary of each VIE. Accordingly, the partnerships’ results are consolidated in Stratus’ financial statements. Stratus will continue to re-evaluate which entity is the primary beneficiary of these partnerships in accordance with applicable accounting guidance. At March 31, 2025, cash and cash equivalents totaling $ 2.7 million held at certain of these limited partnerships are subject to restrictions on distribution to Stratus pursuant to the individual partnership loan agreements. 7 Table of Contents Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships, net of intercompany balances (including the operating loans made by Stratus), which are eliminated (in thousands): March 31, 2025 December 31, 2024 Assets: a Cash and cash equivalents $ 4,677 $ 11,096 Restricted cash 770 572 Real estate under development 152,402 143,743 Land available for development 36,655 36,509 Real estate held for investment 80,857 81,477 Lease right-of-use assets 76 148 Other assets 3,081 3,211 Total assets 278,518 276,756 Liabilities: b Accounts payable 6,710 7,399 Accrued liabilities, including taxes 1,897 3,327 Debt 144,047 140,090 Lease liabilities 77 148 Other liabilities 378 469 Total liabilities 153,109 151,433 Net assets $ 125,409 $ 125,323 a. Substantially all of the assets are available to settle obligations of the partnerships only. b. All of the debt is guaranteed by Stratus until certain conditions are met as provided in the applicable partnership loan agreements except for The Saint June construction loan, for which Stratus has a 50 percent repayment guaranty obligation, The Saint George construction loan, for which Stratus has a 25 percent repayment guaranty obligation, and the Kingwood Place loan, for which Stratus has customary non-recourse carve-out obligations and an environmental indemnification. The creditors for the remaining liabilities do not have recourse to the general credit of Stratus. See Note 6 of the Stratus 2024 Form 10-K for additional information. 4. ASSET SALES The Oaks at Lakeway. Stratus has remaining lease obligations pursuant to a Pad Sites Master Lease entered into in connection with the sale of The Oaks at Lakeway, as described in Note 9 of the Stratus 2024 Form 10-K under the heading “Deferred Gain on Sale of The Oaks at Lakeway.” In first-quarter 2025, one of the pad sites subject to the master lease was sub-leased and resulted in recognition of a portion of the previously deferred gain of $ 200 thousand due to the expected savings in the master lease rent over the remaining term. The remaining deferred gain representing the related contract liability is presented in the consolidated balance sheets in the amount of $ 1.5 million at March 31, 2025 and $ 1.8 million at December 31, 2024. The reduction in the deferred gain balance also reflects Pad Sites Master Lease payments. The remaining deferred gain balance is expected to be reduced primarily by future Pad Sites Master Lease payments. Amarra Villas. In first-quarter 2024, Stratus sold two Amarra Villas homes for a total of $ 7.6 million. Magnolia Place. In first-quarter 2024, Stratus completed the sale of 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. In connection with this sale, the Magnolia Place construction loan, which had a balance of $ 8.8 million, was repaid. 5. FAIR VALUE MEASUREMENTS Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The carrying value for certain Stratus financial instruments (i.e., cash and cash equivalents, restricted cash, accounts payable and accrued liabilities) approximates fair value because of their short-term nature and generally negligible credit losses. 8 Table of Contents A summary of the carrying amount and fair value of Stratus’ interest rate caps follows (in thousands): March 31, 2025 December 31, 2024 Carrying Value Fair Value Carrying Value Fair Value Assets Interest rate caps $ 11 $ 11 $ 19 $ 19 Interest Rate Cap Agreements. In November 2024, Stratus Kingwood Place, L.P. paid $ 27,400 to enter into an interest rate cap agreement, with a Term SOFR strike rate equal to 6.00 percent, a notional amount of $ 33.0 million (the principal amount of the Kingwood Place loan) and an expiration date of December 1, 2026. In March 2025, College Station 1892 Properties, L.L.C. paid $ 4,800 to enter into an interest rate cap agreement, with a Term SOFR strike rate equal to 5.00 percent, a notional amount of $ 24.0 million (the principal amount of the Jones Crossing loan) and an expiration date of April 1, 2026. The interest rate caps are derivative instruments that do not qualify for hedge accounting treatment. Therefore, changes in the instruments’ fair values are recorded in the consolidated statements of comprehensive (loss) income. Stratus uses an interest rate pricing model that relies on market observable inputs such as Term SOFR to measure the fair value of the agreements. Stratus also evaluated the counterparty credit risk associated with the agreements, which is considered a Level 3 input, but did not consider such risk to be significant. Therefore, the interest rate caps are classified within Level 2 of the fair value hierarchy. The fair value of the interest rate caps is presented as part of other assets in the consolidated balance sheets. Debt. The fair value of Stratus’ debt also approximates fair value, as the interest rates are variable and approximate prevailing market interest rates available for similar mortgage debt. Stratus’ debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates available for similar mortgage debt. Accordingly, Stratus’ debt is classified within Level 2 of the fair value hierarchy. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans. 6. DEBT AND EQUITY Debt The components of Stratus’ debt follow (in thousands): March 31, 2025 December 31, 2024 Comerica Bank revolving credit facility a $ 4,000 $ — Kingwood Place loan 32,453 32,408 Lantana Place loan b 29,400 25,509 Jones Crossing loan c 23,554 22,428 The Annie B land loan 11,950 12,568 Construction loans: The Saint George 50,776 47,741 The Saint June 32,017 32,109 Holden Hills Phase 1 16,851 15,265 West Killeen Market 5,175 5,194 Amarra Villas credit facility 1,662 1,631 Total debt d $ 207,838 $ 194,853 a. In January and March 2025, the Comerica Bank revolving credit facility was amended. b. In January 2025, the Lantana Place construction loan was refinanced with a four-year term loan. c. In March 2025, the Jones Crossing loan was refinanced with a three-year term loan. d. Includes net reductions for unamortized debt issuance costs of $ 2.2 million at March 31, 2025, and $ 1.8 million at December 31, 2024. 9 Table of Contents Comerica Bank revolving credit facility. As of March 31, 2025, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $ 54.1 million, resulting in availability of $ 34.5 million, net of $ 15.6 million of letters of credit and borrowings of $ 4.0 million. Letters of credit have been issued under the revolving credit facility, $ 13.3 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2 and $ 2.3 million of which secure Stratus’ obligations, which are subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, which is expected to be utilized by the planned multi-family project on Stratus’ remaining land in Lakeway. In January 2025, the Comerica Bank revolving credit facility was modified to increase the aggregate amount of letters of credit that may be committed against the facility from $ 13.3 million to $ 15.6 million. In February 2025, Stratus entered into an additional $ 2.3 million letter of credit to secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2. In March 2025, Stratus entered into an amendment to its revolving credit facility, which (i) extended the maturity date to March 27, 2027, (ii) lowered the interest rate to one-month Term SOFR plus 0.10 percent (with a floor of 0.50 percent), plus 3.00 percent and (iii) lowered the maximum loan amount to the lesser of $ 55.0 million or the borrowing base limit. Kingwood Place loan. In first-quarter 2025, in connection with the refinancing of the Kingwood Place construction loan in November 2024, which generated additional cash proceeds, Stratus paid distributions of $ 856 thousand to noncontrolling interest holders. Lantana Place loan. In January 2025, Lantana Place, L.L.C. entered into a loan with Broadway National Bank (the Lantana Place loan) to refinance the prior Lantana Place construction loan. The Lantana Place loan has a principal amount of $ 29.8 million and matures February 1, 2029, with an option to extend the maturity for an additional 12 months, subject to satisfying certain conditions. The Lantana Place loan bears interest at one-month Term SOFR plus 2.35 percent, with a floor of 0.00 percent . Payments of interest only on the Lantana Place loan are due monthly through January 31, 2026. Thereafter, principal and interest payments are due monthly based on a 30-year amortization with the remaining unpaid principal and interest due at maturity. The Lantana Place loan is secured by the Lantana Place – Retail project. Stratus has provided a guaranty limited to certain non-recourse carve-out obligations. The Lantana Place loan agreement contains a financial covenant that the Lantana Place project maintain a debt service coverage ratio of at least 1.30 to 1.00 measured by reference to a trailing 12-month period for each fiscal year beginning with the year ending December 31, 2025. After paying off the prior Lantana Place construction loan and paying property taxes and closing costs, Stratus received approximately $ 3.0 million in net cash proceeds. Jones Crossing loan. In March 2025, College Station 1892 Properties, L.L.C. entered into a loan with Brighthouse Life Insurance Company (the Jones Crossing loan) to refinance the prior Jones Crossing loan. The Jones Crossing loan has a principal amount of $ 24.0 million and matures April 1, 2028. The Jones Crossing loan bears interest at one-month Term SOFR plus 1.95 percent, with a floor of 3.00 percent. Payments of interest only on the Jones Crossing loan are due monthly with the outstanding principal due at maturity. College Station 1892 Properties, L.L.C. may prepay all, but not a portion, of the Jones Crossing loan; provided that a prepayment prior to April 1, 2026 is subject to a yield maintenance premium payment. The Jones Crossing loan is secured by the Jones Crossing – Retail project. Stratus has provided a guaranty limited to certain non-recourse carve-out obligations and an environmental indemnification. After paying off the prior Jones Crossing loan and closing costs, Stratus received approximately $ 1.2 million in net cash proceeds. For additional information regarding Stratus’ debt, refer to Note 6 in the Stratus 2024 Form 10-K. Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled $ 3.8 million in first-quarter 2025 and $ 4.0 million in first-quarter 2024. All of these interest costs were capitalized for each of the periods presented. Capitalized interest in first-quarter 2025 was primarily related to development activities at Barton Creek (primarily Holden Hills Phases 1 and 2) and The Saint George. Capitalized interest in first-quarter 2024 was primarily related to development activities at Barton Creek (primarily Holden Hills Phases 1 and 2 and The Saint June), The Saint George and The Annie B. 10 Table of Contents Equity The Comerica Bank revolving credit facility, Amarra Villas credit facility, The Annie B land loan, The Saint George construction loan and Holden Hills Phase 1 construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $ 1.0 million or any dividend payments. Dividends. On September 1, 2022, with written consent from Comerica Bank, Stratus’ Board of Directors (Board) declared a special cash dividend of $ 4.67 per share (totaling $ 40.0 million) on Stratus’ common stock, which was paid on September 29, 2022 to stockholders of record as of September 19, 2022. Accrued liabilities included $ 28 thousand as of March 31, 2025, and $ 0.3 million as of December 31, 2024, representing dividends accrued for unvested RSUs in accordance with the terms of the awards. The accrued dividends are paid to the holders of the RSUs as the RSUs vest. Share Repurchase Program. In November 2023, with written consent from Comerica Bank, Stratus’ Board approved a new share repurchase program, which authorizes repurchases of up to $ 5.0 million of Stratus’ common stock. The repurchase program authorizes Stratus, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. In first-quarter 2025, Stratus acquired 20,694 shares of its common stock for a total cost of $ 0.4 million at an average price of $ 19.78 per share. As of March 31, 2025, Stratus has acquired 83,380 shares of its common stock for a total cost of $ 2.0 million at an average price of $ 23.98 per share, and $ 3.0 million remains available for repurchases under the program. 7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN In July 2018, the Stratus Compensation Committee of the Board (the Committee) unanimously adopted the PPIP, which provides participants with economic incentives tied to the success of the development projects designated by the Committee as approved projects under the PPIP. In February 2023, the Committee approved the Long-Term Incentive Plan (LTIP), which amends and restates the PPIP, and is effective for participation interests awarded under development projects on or after its effective date. Outstanding participation interests granted under the PPIP will continue to be governed by the terms of the prior PPIP. The PPIP and LTIP provide participants with economic incentives tied to the success of the development projects designated by the Committee as approved projects under the PPIP and LTIP. Estimates related to the awards may change over time as a result of differences between projected and actual development progress and costs, market conditions and the timing of capital transactions or valuation events. Refer to Notes 1 and 8 of the Stratus 2024 Form 10-K for further discussion. In July 2023, Kingwood Place reached a valuation event under the PPIP and Stratus obtained an appraisal of the property to determine the payout under the PPIP. The accrued liability under the PPIP related to Kingwood Place was reduced to $ 1.6 million at December 31, 2023, and was settled in RSUs with a three-year vesting period awarded to eligible participants in first-quarter 2024. Under the terms of the PPIP and LTIP, the number of RSUs granted in connection with settlement of approved projects is determined by reference to the 12-month trailing average stock price for the year the project reaches a payment event, whereas the grant date fair value of the RSUs for accounting purposes is based on the grant date closing price. A summary of PPIP and LTIP costs follows (in thousands): Three Months Ended March 31, 2025 2024 Charged to general and administrative expense $ 68 $ 83 Capitalized to project development costs 8 111 Total PPIP and LTIP costs $ 76 $ 194 At March 31, 2025, outstanding awards under the PPIP included Amarra Villas, Jones Crossing – Retail, Magnolia Place and The Saint June, and outstanding awards under the LTIP included The Saint George. The accrued liability for the PPIP and LTIP totaled $ 1.9 million at both March 31, 2025 and at December 31, 2024 (included in other liabilities). 11 Table of Contents 8. INCOME TAXES Stratus’ accounting policy for and other information regarding its income taxes are further described in Notes 1 and 7 in the Stratus 2024 Form 10-K. Stratus has a full valuation allowance against its U.S. Federal net deferred tax assets as of both March 31, 2025 and December 31, 2024. Stratus has recorded a deferred tax asset totaling $ 153 thousand at both March 31, 2025 and December 31, 2024 related to state income taxes. In evaluating the recoverability of the remaining deferred tax assets, management considered available positive and negative evidence, giving greater weight to the uncertainty regarding projected future financial results. Upon a change in facts and circumstances, management may conclude that sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance in the future, which would favorably impact Stratus’ results of operations. Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets that are not more likely than not to be realized. The difference between Stratus’ consolidated effective income tax rate of ( 1 ) percent for the first three months of 2025 and the U.S. Federal statutory income tax rate of 21 percent was primarily attributable to state income taxes, noncontrolling interests in subsidiaries, the presence of a valuation allowance against its U.S. Federal net deferred tax assets as of March 31, 2025, and the executive compensation limitation. The difference between Stratus’ consolidated effective income tax rate of 3 percent for the first three months of 2024 and the U.S. Federal statutory income tax rate of 21 percent was primarily attributable to state income taxes, noncontrolling interests in subsidiaries, the presence of a valuation allowance against its U.S. Federal net deferred tax assets as of March 31, 2024, and the executive compensation limitation. 9. BUSINESS SEGMENTS Stratus is 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. Stratus generates revenues primarily from the sale of developed lots or homes and undeveloped land and the lease of developed retail, mixed-use and multi-family properties. Stratus has two operating segments, which are also its two reportable segments: Real Estate Operations and Leasing Operations. The Real Estate Operations segment includes properties under various stages of development: developed for sale, under development and available for development. In this segment, Stratus entitles, develops and sells properties. Properties that Stratus develops and then holds for investment become part of the Leasing Operations segment. Decisions about whether to continue to hold a property for investment or to sell it depend on various factors, including conditions in the real estate markets in which Stratus operates and the estimated fair value of the property, and are primarily driven by the objective of maximizing overall asset value. The Real Estate Operations segment is comprised of Stratus’ real estate assets, which consists of its properties in Austin, Texas (including the Barton Creek Community, which includes Holden Hills Phases 1 and 2, Amarra multi-family and commercial land, Amarra Villas, Amarra Drive lots and other vacant land; the Circle C community; the Lantana community, which includes a portion of Lantana Place planned for a multi-family phase known as The Saint Julia; The Saint George; and the land for The Annie B); in Lakeway, Texas, located in the greater Austin area (Lakeway); in College Station, Texas (land for future phases of retail and multi-family development and retail pad sites at Jones Crossing); and in Magnolia, Texas (potential development of approximately 11 acres planned for future multi-family use), Kingwood, Texas (a retail pad site) and New Caney, Texas (New Caney), each located in the greater Houston area. The Leasing Operations segment is comprised of Stratus’ real estate assets held for investment that are leased or available for lease and includes The Saint June, West Killeen Market, Kingwood Place, the retail portion of Lantana Place, the completed retail portion of Jones Crossing, retail pad sites subject to ground leases at Lantana Place, Kingwood Place and Jones Crossing, and, prior to its sale in third-quarter 2024, the retail portion of Magnolia Place. Stratus’ chief operating decision maker (CODM) is the chief executive officer. The CODM primarily uses segment profit (loss), which is operating income (loss) excluding general and administrative expenses, determined consistent with the measurement principles of U.S. GAAP, to measure the performance of Stratus’ reportable segments. The segment measure of profit (loss) provides a comprehensive view of the segments’ financial performance. The CODM makes decisions about the allocation of operating and capital resources to each segment based on assessment of the performance of the two segments and considering the capital needs for new and existing 12 Table of Contents projects and the objectives of Stratus’ overall business strategy. General and administrative expenses, which primarily consist of employee salaries, wages and other costs, are managed on a consolidated basis and are not allocated to Stratus’ operating segments. The following segment information reflects management determinations that may not be indicative of what the actual financial performance of each segment would be if it were an independent entity. Revenues from Contracts with Customers. Stratus’ revenues from contracts with customers follow (in thousands): Three Months Ended March 31, 2025 2024 Real Estate Operations: Developed property sales $ — $ 7,623 Undeveloped property sales — 14,500 Commissions and other 25 — 25 22,123 Leasing Operations: Rental revenue 5,018 4,384 5,018 4,384 Total revenues from contracts with customers $ 5,043 $ 26,507 Financial Information by Reportable Segment. Summarized financial information by reportable segment for the three months ended March 31, 2025, follows (in thousands): Real Estate Operations a Leasing Operations Total Revenue from unaffiliated customers $ 25 $ 5,018 $ 5,043 Segment expenses: Property taxes and insurance ( 357 ) ( 807 ) ( 1,164 ) Lease expense ( 285 ) ( 285 ) Professional fees ( 363 ) ( 363 ) Maintenance and repairs ( 509 ) ( 509 ) Allocated overhead costs ( 285 ) ( 285 ) Property management fees and payroll ( 285 ) ( 285 ) Utilities ( 40 ) ( 40 ) Other segment items b ( 190 ) ( 272 ) ( 462 ) Depreciation and amortization ( 47 ) ( 1,347 ) ( 1,394 ) Gain on sale of assets — 200 200 Segment (loss) profit ( 1,502 ) 1,958 456 General and administrative expenses ( 4,051 ) Operating loss ( 3,595 ) Loss on interest rate cap agreements ( 13 ) Loss on extinguishment of debt ( 183 ) Other income 64 Net loss before income taxes $ ( 3,727 ) Capital expenditures and purchases and development of real estate properties $ 7,212 $ 4,527 $ 11,739 a. Includes sales commissions and other revenues together with related expenses. b. For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities. For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment. 13 Table of Contents Summarized financial information by reportable segment for the three months ended March 31, 2024, follows (in thousands): Real Estate Operations a Leasing Operations Total Revenue from unaffiliated customers $ 22,123 $ 4,384 $ 26,507 Segment expenses Cost of real estate sold ( 13,949 ) ( 13,949 ) Property taxes and insurance ( 315 ) ( 724 ) ( 1,039 ) Lease expense ( 285 ) ( 285 ) Professional fees ( 266 ) ( 266 ) Maintenance and repairs ( 362 ) ( 362 ) Allocated overhead costs ( 249 ) ( 249 ) Property management fees and payroll ( 203 ) ( 203 ) Utilities ( 159 ) ( 159 ) Other segment items b ( 214 ) ( 230 ) ( 444 ) Depreciation and amortization ( 44 ) ( 1,357 ) ( 1,401 ) Segment profit 6,801 1,349 8,150 General and administrative expenses ( 4,465 ) Operating income 3,685 Loss on extinguishment of debt ( 59 ) Other income 173 Net income before income taxes $ 3,799 Capital expenditures and purchases and development of real estate properties $ 8,957 $ 8,141 $ 17,098 a. Includes sales commissions and other revenues together with related expenses. b. For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities. For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment. Total assets by segment were as follows (in thousands): March 31, 2025 2024 Real Estate Operations $ 371,355 $ 329,062 Leasing Operations 151,950 160,759 Corporate and other a 11,276 19,696 Total assets $ 534,581 $ 509,517 a. Corporate and other includes cash and cash equivalents and restricted cash of $ 11.1 million and $ 19.4 million at March 31, 2025 and 2024, respectively. The remaining cash and cash equivalents and restricted cash is reflected in the operating segments’ assets. 10. SUBSEQUENT EVENTS In April 2025, a water leak occurred at The Saint George multi-family project when construction was nearing completion and initial resident move-ins were occurring. The water line break resulted in damage that is currently estimated to cost $ 1.9 million to remediate and repair. Remediation and repairs are underway, and the event has been filed as a builder’s risk insurance claim. Repairs are anticipated to be completed in second-quarter 2025. Stratus is currently evaluating how these costs will be paid. Costs of the remediation and repairs to The Saint George Apartments, L.P., to the extent not covered by the insurance company and the general contractor, are currently estimated to be less than $ 1 million. 14 Table of Contents