STRATUS PROPERTIES INC 10-Q

Item 1. Financial Statements . STRATUS PROPERTIES INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) March 31, 2026 December 31, 2025 ASSETS Cash and cash equivalents $ 73,539 $ 74,288 Restricted cash 757 335 Real estate held for sale 8,477 8,476 Real estate under development 187,095 186,093 Land available for development 81,636 74,529 Real estate held for investment, net 166,068 167,471 Lease right-of-use assets 10,071 10,237 Deferred tax assets 206 206 Other assets 4,644 4,691 Assets held for sale — 37,102 Total assets $ 532,493 $ 563,428 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 9,891 $ 8,589 Accrued liabilities, including taxes 10,171 10,118 Debt 143,759 142,957 Lease liabilities 15,986 16,033 Deferred gain 717 833 Other liabilities 1,541 4,432 Liabilities held for sale — 33,387 Total liabilities 182,065 216,349 Commitments and contingencies Equity: Stockholders’ equity: Common stock 98 98 Capital in excess of par value of common stock 203,725 202,256 Retained earnings 47,210 40,583 Common stock held in treasury ( 39,318 ) ( 38,451 ) Total stockholders’ equity 211,715 204,486 Noncontrolling interests in subsidiaries 138,713 142,593 Total equity 350,428 347,079 Total liabilities and equity $ 532,493 $ 563,428 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 2 Table of Conten ts STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (In Thousands, Except Per Share Amounts) Three Months Ended March 31, 2026 2025 Revenues: Real estate operations $ 82 $ 25 Leasing operations 3,709 5,018 Total revenues 3,791 5,043 Cost of sales: Real estate operations 2,120 1,480 Leasing operations 2,128 1,913 Depreciation and amortization 1,449 1,394 Total cost of sales 5,697 4,787 General and administrative expenses 5,590 4,051 H-E-B profit participation 78 — Gain on sale of assets ( 22,976 ) ( 200 ) Total ( 11,611 ) 8,638 Operating income (loss) 15,402 ( 3,595 ) Interest expense, net ( 60 ) — Loss on interest rate cap agreements — ( 13 ) Loss on extinguishment of debt ( 383 ) ( 183 ) Other income, net 666 64 Income (loss) before income taxes 15,625 ( 3,727 ) Provision for income taxes ( 2,116 ) ( 30 ) Net income (loss) and total comprehensive income (loss) 13,509 ( 3,757 ) Total comprehensive (income) loss attributable to noncontrolling interests ( 6,882 ) 882 Net income (loss) and total comprehensive income (loss) attributable to common stockholders $ 6,627 $ ( 2,875 ) Basic net income (loss) per share attributable to common stockholders $ 0.83 $ ( 0.36 ) Diluted net income (loss) per share attributable to common stockholders $ 0.82 $ ( 0.36 ) Weighted-average shares of common stock outstanding: Basic 7,962 8,037 Diluted 8,055 8,037 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 3 Table of Conten ts STRATUS PROPERTIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Three Months Ended March 31, 2026 2025 Cash flow from operating activities: Net income (loss) $ 13,509 $ ( 3,757 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,449 1,394 Loss on interest rate cap agreements — 13 Loss on extinguishment of debt 383 183 Stock-based compensation 1,463 369 Debt issuance cost amortization 252 345 Gain on sale of assets ( 22,976 ) ( 200 ) H-E-B profit participation 78 — Purchases and development of real estate properties ( 7,729 ) ( 7,212 ) Decrease in other assets 299 792 Decrease in accounts payable, accrued liabilities and other ( 2,323 ) ( 5,422 ) Net cash used in operating activities ( 15,595 ) ( 13,495 ) Cash flow from investing activities: Capital expenditures ( 42 ) ( 4,527 ) Proceeds from sale of assets, net of selling costs 59,980 — Payments on master lease obligations ( 140 ) ( 166 ) Net cash provided by (used in) investing activities 59,798 ( 4,693 ) Cash flow from financing activities: Borrowings from credit facility — 4,000 Borrowings from project and term loans 366 57,969 Payments on project and term loans ( 33,150 ) ( 48,916 ) Payment of dividends — ( 236 ) Finance lease principal payments ( 4 ) ( 4 ) Stock-based awards net payments ( 378 ) ( 336 ) Noncontrolling interest distributions ( 10,762 ) ( 856 ) Purchases of treasury stock ( 489 ) ( 410 ) Financing costs ( 113 ) ( 1,220 ) Net cash (used in) provided by financing activities ( 44,530 ) 9,991 Net decrease in cash, cash equivalents and restricted cash ( 327 ) ( 8,197 ) Cash, cash equivalents and restricted cash at beginning of year 74,623 21,154 Cash, cash equivalents and restricted cash at end of period $ 74,296 $ 12,957 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 Conten ts 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, 2025 9,792 $ 98 $ 202,256 $ 40,583 1,833 $ ( 38,451 ) $ 204,486 $ 142,593 $ 347,079 Vested stock-based awards 55 — — — — — — — — Director fees paid in shares of common stock — — 6 — — — 6 — 6 Stock-based compensation — — 317 — — — 317 — 317 Grant of restricted stock units (RSUs) under the Profit Participation Incentive Plan (PPIP) — — 1,146 — — — 1,146 — 1,146 Tender of shares for stock-based awards — — — — 12 ( 378 ) ( 378 ) — ( 378 ) Common stock repurchases — — — — 19 ( 489 ) ( 489 ) — ( 489 ) Noncontrolling interest distributions — — — — — — — ( 10,762 ) ( 10,762 ) Total comprehensive income — — — 6,627 — — 6,627 6,882 13,509 Balance at March 31, 2026 9,847 $ 98 $ 203,725 $ 47,210 1,864 $ ( 39,318 ) $ 211,715 $ 138,713 $ 350,428 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 The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements. 5 Table of Conten ts 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, 2025, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K for the year ended December 31, 2025 (Stratus 2025 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission on March 27, 2026. 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. For additional information regarding Stratus’ related parties, including LCHM Holdings, LLC and JBM Trust, refer to Notes 1 and 2 in the Stratus 2025 Form 10-K and Note 3 herein. Plan of Liquidation. On March 24, 2026, after concluding the strategic alternatives review announced in December 2025, Stratus’ Board of Directors (Board) approved a plan of complete liquidation and dissolution of Stratus (Plan of Liquidation) and determined to submit it to Stratus’ stockholders for approval. If Stratus’ stockholders approve the Plan of Liquidation, Stratus will be dissolved and will conduct an orderly sale of all or substantially all of Stratus’ assets and distribute the net proceeds over time to Stratus’ stockholders, after payment of or reasonable provision for Stratus’ liabilities and obligations. The Plan of Liquidation remains subject to stockholder approval and other contingencies, including obtaining lender, partner and other third-party consents. Because the Plan of Liquidation remains subject to stockholder approval, Stratus continues to prepare its financial statements on a going-concern basis, and the results presented do not reflect liquidation basis accounting. 2. EARNINGS PER SHARE Stratus’ basic net income (loss) per share of common stock was calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. A reconciliation of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating diluted net income (loss) per share follows (in thousands, except per share amounts): Three Months Ended March 31, 2026 2025 Net income (loss) and total comprehensive income (loss) $ 13,509 $ ( 3,757 ) Total comprehensive (income) loss attributable to noncontrolling interests ( 6,882 ) 882 Net income (loss) and total comprehensive income (loss) attributable to common stockholders $ 6,627 $ ( 2,875 ) Basic weighted-average shares of common stock outstanding 7,962 8,037 Add shares issuable upon vesting of dilutive restricted stock units (RSUs) a 93 — Diluted weighted-average shares of common stock outstanding 8,055 8,037 Basic net income (loss) per share attributable to common stockholders $ 0.83 $ ( 0.36 ) Diluted net income (loss) per share attributable to common stockholders $ 0.82 $ ( 0.36 ) a. For the first three months of March 31, 2026, excludes 14 thousand shares of common stock associated with RSUs that were anti-dilutive. 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. 6 Table of Conten ts 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: Partnership Indirect Equity Interest Holden Hills, L.P. 50.00 % Holden Hills Phase 2, L.P. 50.00 % Stratus Block 150, L.P. 31.00 % Stratus Kingwood Place, L.P. a 60.00 % The Saint George Apartments, L.P. 10.00 % The Saint June, L.P. 34.13 % a. Kingwood Place was sold in January 2026. Refer to Note 4 for further discussion. Stratus Kingwood Place, L.P. As discussed further in Note 4, the Stratus Kingwood Place, L.P. (Kingwood L.P.) sold Kingwood Place in January 2026. In connection with the sale, Stratus received $ 16.2 million from Kingwood L.P. and $ 10.6 million of the net proceeds were distributed to the noncontrolling interest holders, including $ 1.8 million to each of LCHM Holdings, LLC and JBM Trust, which are related parties. Refer to Notes 1 and 2 in the Stratus 2025 Form 10-K. Operating Loans and Advances; Distributions from 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 2026, Stratus made an operating loan of $ 550 thousand, and one of the Class B limited partners made an operating loan of $ 250 thousand. In first-quarter 2025, Stratus made an operating loan of $ 1.5 million. As of March 31, 2026, Stratus’ and one of the Class B limited partners’ operating loans outstanding to Stratus Block 150, L.P. totaled $ 8.9 million and $ 250 thousand, respectively. Stratus and the Class B limited partner in The Saint June partnership 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 anticipated because of prior 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 third-quarter 2025, The Saint June partnership was amended to allow for up to $ 3.0 million of distributions to the partners prior to the repayment of the operating loans. As of March 31, 2026, Stratus’ and the Class B limited partner’s operating loans outstanding to The Saint June, L.P. totaled $ 962 thousand and $ 493 thousand, respectively. As of March 31, 2026, Stratus had advanced $ 1.6 million to Holden Hills, L.P. to fund costs not included in the original project budget. In first-quarter 2026, Stratus modified the Holden Hills Phase 1 construction loan to provide a short-term extension of the maturity date to June 8, 2026, while a longer-term extension is negotiated with the lender. As of March 31, 2026, Stratus had advanced approximately $ 3.0 million to the Holden Hills Phase 2, L.P. (the Holden Hills Phase 2 partnership) to fund certain project costs. The Holden Hills Phase 2 partnership is working to establish an approximately $ 10.0 million revolving credit facility for the development of Holden Hills Phase 2 and expects to use these funds to reimburse Stratus, as approved by the partners. In first-quarter 2026, Stratus advanced $ 2.1 million to The Saint George Apartments, L.P. to support the partnership’s ability to pay debt service and project costs, including costs related to damage remediation and repairs for a water leak that occurred in April 2025. The Saint George Apartments, L.P. will pay $ 1.0 million of the costs of remediation and repairs, and the remainder will be covered by insurance and the general contractor. In first-quarter 2026, The Saint June, L.P. made distributions of approximately $ 118 thousand and $ 61 thousand to the Class B limited partner in The Saint June partnership and Stratus, respectively. 7 Table of Conten ts 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 Holden Hills, L.P. Stratus Kingwood Place, L.P. The Saint George Apartments, L.P. The Saint June, L.P. Stratus Third-party Class B Limited Partner Stratus Third-party Class B Limited Partners Stratus Third-party Class B Limited Partner Stratus Third-party Class B Limited Partner Until all partners have received a return of their capital contributions and a 9.00 percent cumulative return; 50.00 % 50.00 % 60.00 % 40.00 % 10.00 % 90.00 % 34.13 % 65.87 % 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; 55.00 45.00 — — 20.00 80.00 44.13 55.87 Until the Class B limited partner has received an 18.00 percent cumulative return; — — — — 30.00 70.00 — — Thereafter 65.00 35.00 76.00 24.00 50.00 50.00 54.13 45.87 Accounting for Limited Partnerships. Stratus has performed evaluations and concluded that all of these limited partnerships are variable interest entities (VIEs) and that Stratus is the primary beneficiary of each VIE. Accordingly, the partnerships’ financial statements 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. As of March 31, 2026, cash and cash equivalents totaling $ 1.7 million held at certain of these limited partnerships are subject to restrictions on distribution to Stratus pursuant to the individual partnership loan agreements. 8 Table of Conten ts Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships (in thousands) except those related to Kingwood Place that are presented as held for sale in Stratus’ consolidated balance sheet as of December 31, 2025. All intercompany balances are eliminated. Refer to Note 4 for further details of the Kingwood Place sale and assets and liabilities held for sale. March 31, 2026 December 31, 2025 Assets: a Cash and cash equivalents $ 3,254 $ 4,627 Restricted cash 278 123 Real estate under development 150,545 144,828 Land available for development 35,013 34,971 Real estate held for investment 147,354 148,494 Other assets 770 779 Total assets 337,214 333,822 Liabilities: b Accounts payable 6,245 5,752 Accrued liabilities, including taxes 1,869 2,696 Debt 120,062 119,296 Other liabilities 179 313 Total liabilities 128,355 128,057 Net assets $ 208,859 $ 205,765 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, and The Saint George construction loan, for which Stratus has a 25 percent repayment guaranty obligation. The creditors for the remaining liabilities do not have recourse to the general credit of Stratus. See Note 6 of the Stratus 2025 Form 10-K for additional information. 4. ASSET SALES Kingwood Place. In January 2026, Kingwood, L.P. sold Kingwood Place for $ 60.8 million. The sale generated pre-tax net cash proceeds of approximately $ 27.0 million, after selling costs and payment of the $ 33.0 million project loan, and a pre-tax gain of approximately $ 23.0 million ($ 13.4 million, net of noncontrolling interests). After establishing a reserve for remaining costs of the partnership, Stratus received $ 16.2 million from the partnership in connection with the sale, and $ 10.6 million of the net proceeds were distributed to the noncontrolling interest holders. In connection with the sale, H-E-B earned a profit participation of $ 78 thousand. See Notes 2 and 9 of the Stratus 2025 Form 10-K for further discussion of Kingwood, L.P., Kingwood Place and H-E-B profit participation. 9 Table of Conten ts The assets and liabilities of Kingwood Place have been reported as held for sale in the consolidated balance sheet as of December 31, 2025. The carrying amounts of the major classes of assets and liabilities for Kingwood Place presented in assets held for sale as of December 31, 2025, follow (in thousands): December 31, 2025 Assets: Land available for development $ 1,967 Real estate held for investment, net 32,468 Other assets 2,667 Total assets held for sale $ 37,102 Liabilities: Accrued liabilities $ 460 Debt 32,600 Other liabilities 327 Total liabilities held for sale $ 33,387 Kingwood Place had rental revenue of $ 0.3 million in first-quarter 2026 prior to the sale and $ 1.1 million in first-quarter 2025. Operating income was $ 0.2 million in first-quarter 2026 and $ 0.6 million in first-quarter 2025. Interest expense on the Kingwood Place loan was $ 0.2 million in first-quarter 2026 and $ 0.5 million in first-quarter 2025. 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 2025 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, which 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 $ 0.7 million at March 31, 2026 and $ 0.8 million at December 31, 2025. 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. 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. A summary of the carrying amount and fair value of Stratus’ interest rate caps follows (in thousands): March 31, 2026 December 31, 2025 Carrying Value Fair Value Carrying Value Fair Value Assets Interest rate caps $ — $ — $ — $ — Interest Rate Cap Agreements. In November 2024, Kingwood, 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 at that time) 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 10 Table of Conten ts 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 income (loss). 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 in other assets in the consolidated balance sheets. Debt. The fair value of Stratus’ debt 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. 6. DEBT AND EQUITY Debt The components of Stratus’ debt follow (in thousands): March 31, 2026 December 31, 2025 Fifth Third Bank revolving credit facility $ — $ — Jones Crossing loan 23,697 23,661 The Annie B land loan 11,839 11,732 Construction loans: The Saint George 52,416 52,327 The Saint June 33,225 33,202 Holden Hills Phase 1 22,582 22,035 Total debt a $ 143,759 $ 142,957 a. Includes net reductions for unamortized debt issuance costs of $ 0.6 million at March 31, 2026, and $ 0.8 million at December 31, 2025. Excludes debt related to Kingwood Place which was presented in liabilities held for sale at December 31, 2025. Kingwood Place was sold in January 2026 (refer to Note 4). Fifth Third Bank revolving credit facility. As of March 31, 2026, the maximum amount that could be borrowed under the Fifth Third Bank (formerly Comerica Bank) revolving credit facility was $ 28.1 million, resulting in availability of $ 24.7 million, net of $ 3.4 million of letters of credit. Letters of credit have been issued under the revolving credit facility, $ 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 first-quarter 2026, Stratus entered into an amendment to its revolving credit facility that extended the maturity date to March 27, 2028. Holden Hills Phase 1 construction loan. In first-quarter 2026, Stratus modified the loan to provide a short-term extension of the maturity date to June 8, 2026, while a longer-term extension is negotiated with the lender. For additional information regarding Stratus’ debt, refer to Note 6 in the Stratus 2025 Form 10-K. Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled $ 2.6 million in first-quarter 2026 and $ 3.8 million in first-quarter 2025. Substantially all interest costs were capitalized in both periods. Capitalized interest in first-quarter 2026 was primarily related to development activities at Holden Hills Phases 1 and 2. Capitalized interest in first-quarter 2025 was primarily related to development activities at Holden Hills Phases 1 and 2 and The Saint George. 11 Table of Conten ts Equity The revolving credit facility, The Annie B land loan, and The Saint George and Holden Hills Phase 1 construction loans require Fifth Third Bank’s prior written consent for any common stock repurchases in excess of $ 1.0 million or any dividend payments. Share Repurchase Program. In November 2023, with written consent from Fifth Third Bank, Stratus’ Board approved a new share repurchase program, which authorized repurchases of up to $ 5.0 million of Stratus’ common stock. In June 2025, with written consent from Fifth Third Bank, Stratus’ Board approved an increase in the share repurchase program, authorizing repurchases of up to $ 25.0 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 2026, Stratus acquired 18,886 shares of its common stock for a total cost of $ 0.5 million at an average price of $ 25.88 per share. As of March 31, 2026, Stratus has acquired 235,421 shares of its common stock for a total cost of $ 5.2 million at an average price of $ 22.14 per share, and $ 19.8 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. 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 2025 Form 10-K for further discussion. In August 2025, Magnolia 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 Magnolia Place was $ 1.3 million at December 31, 2025, and $ 1.1 million of the liability was settled in RSUs with a three-year vesting period awarded to eligible participants in first-quarter 2026. 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. The RSUs awarded for Magnolia Place had a grant date value $ 570 thousand greater than the accrued liability. Stratus transferred $ 1.1 million of the accrued liability under the PPIP for Magnolia Place to capital in excess of par value and is amortizing the $ 570 thousand balance of the grant-date value with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year vesting period of the RSUs. A summary of PPIP and LTIP costs follows (in thousands): Three Months Ended March 31, 2026 2025 (Credited) charged to general and administrative expense $ ( 89 ) $ 68 Capitalized to project development costs — 8 Total PPIP and LTIP costs $ ( 89 ) $ 76 At March 31, 2026, outstanding awards under the PPIP included Amarra Villas, Jones Crossing – Retail, and The Saint June, and the only outstanding awards under the LTIP related to The Saint George. The accrued liability for the PPIP and LTIP totaled $ 0.4 million at March 31, 2026, and $ 1.7 million at December 31, 2025 (included in other liabilities). 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 2025 Form 10-K. 12 Table of Conten ts Stratus has a full valuation allowance against its U.S. Federal net deferred tax assets as of both March 31, 2026 and December 31, 2025. Stratus has recorded a deferred tax asset totaling $ 206 thousand at both March 31, 2026 and December 31, 2025 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. During 2026, Stratus expects to incur current U.S. Federal income taxes and state income taxes primarily associated with income generated from the sale of Kingwood Place, as discussed in Note 4, partially offset by available operating losses and other tax attributes, subject to valuation allowance considerations. The difference between Stratus’ consolidated effective income tax rate of 14 percent for the first three months of 2026 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, 2026, the sale of Kingwood Place discussed in Note 4 and the executive compensation limitation. 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. On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was enacted into law. Key corporate tax provisions of OBBB include the restoration of 100 percent bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, Income Taxes , Stratus has recognized the effects of the new tax law in the period of enactment. The impact of OBBB for the quarter ended March 31, 2026 did not have a material impact on Stratus’ consolidated financial statements. 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. Historically, decisions about whether to continue to hold a property for investment or to sell it have depended on various factors, including conditions in the real estate markets in which Stratus operates and the estimated fair value of the property, and have been primarily driven by the objective of maximizing overall asset value. The Real Estate Operations segment is comprised of Stratus’ real estate assets, which consist 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 homes, an Amarra Drive lot 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; and the land for The Annie B); in Lakeway, Texas, located in the greater Austin area; in College Station, Texas (undeveloped land for additional retail space or pad sites and multi-family development at Jones Crossing); and in Magnolia, Texas (potential development of approximately 11 acres planned for future multi-family use), New Caney, Texas and Kingwood, Texas (a vacant retail pad site prior to its sale in first-quarter 2026), each located in the greater Houston area. The New Caney land is under contract to sell, subject to satisfaction or waiver of closing conditions. As discussed below, an offer has been received for the retail component of Jones Crossing, including the undeveloped commercial land. 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 George (which was completed in second-quarter 2025 and reclassified 13 Table of Conten ts from the Real Estate Operations segment to the Leasing Operations segment), The Saint June, the completed retail portion of Jones Crossing, and retail pad sites subject to ground leases at Jones Crossing. The segment also included Kingwood Place (including retail pad sites subject to ground leases) prior to its sale in first-quarter 2026, the retail portion and a hotel pad site subject to a ground lease at Lantana Place – Retail prior to its sale in fourth-quarter 2025 and West Killeen Market prior to its sale in second-quarter 2025. In March 2026, Stratus received an offer for the retail component, including undeveloped commercial acreage, of Jones Crossing and is negotiating a sales contract. 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 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, 2026 2025 Real Estate Operations: Commissions and other $ 82 $ 25 82 25 Leasing Operations: Rental revenue 3,709 5,018 3,709 5,018 Total revenues from contracts with customers $ 3,791 $ 5,043 14 Table of Conten ts Financial Information by Reportable Segment. Summarized financial information by reportable segment for the three months ended March 31, 2026, follows (in thousands): Real Estate Operations a Leasing Operations Total Revenue from unaffiliated customers $ 82 $ 3,709 $ 3,791 Segment expenses: Property taxes and insurance ( 349 ) ( 1,024 ) ( 1,373 ) Lease expense ( 285 ) ( 285 ) Professional fees ( 722 ) ( 722 ) Maintenance and repairs ( 404 ) ( 404 ) Allocated overhead costs ( 333 ) ( 333 ) Property management fees and payroll ( 297 ) ( 297 ) Utilities ( 168 ) ( 168 ) Other segment items b ( 431 ) ( 235 ) ( 666 ) Depreciation and amortization ( 50 ) ( 1,399 ) ( 1,449 ) H-E-B profit participation c ( 78 ) ( 78 ) Gain on sale of assets d — 22,976 22,976 Segment (loss) profit ( 2,088 ) 23,080 20,992 General and administrative expenses ( 5,590 ) Operating income 15,402 Interest expense, net ( 60 ) Loss on extinguishment of debt ( 383 ) Other income 666 Net income before income taxes $ 15,625 Capital expenditures and purchases and development of real estate properties $ 7,729 $ 42 $ 7,771 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. c. H-E-B earned a profit participation of $ 78 thousand in connection with the sale of Kingwood Place. d. Reflects an approximately $ 23.0 million pre-tax gain on the sale of Kingwood Place ($ 13.4 million, net of noncontrolling interests). 15 Table of Conten ts 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 c — 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. c. Reflects a portion of previously deferred gain of $ 0.2 million related to The Oaks at Lakeway. Total assets by segment were as follows (in thousands): March 31, 2026 2025 Real Estate Operations $ 281,634 $ 371,355 Leasing Operations 178,459 151,950 Corporate and other a 72,400 11,276 Total assets $ 532,493 $ 534,581 a. Corporate and other includes cash and cash equivalents and restricted cash of $ 73.0 million and $ 11.1 million at March 31, 2026 and 2025, respectively. The remaining cash and cash equivalents and restricted cash is reflected in the operating segments’ assets. Corporate and other also includes elimination of intersegment balances. 10. SUBSEQUENT EVENTS In April 2026, Stratus sold one Amarra Villas home for $ 3.6 million. In May 2026, Stratus entered into a contract to sell the last Amarra Villas home for $ 3.6 million, which is subject to satisfaction of closing conditions. In April 2026, one of the Barton Creek Municipal Utility Districts (MUDs) sold bonds that resulted in reimbursements of costs incurred in connection with the Holden Hills Phase 1 project and the Tecoma Improvements of approximately $ 13.0 million and payment of interest of $ 1.4 million to the Holden Hills Phase 1 partnership and Stratus. Of the total, $ 10.5 million was paid to the Holden Hills Phase 1 partnership, and $ 3.9 million (including Stratus’ share of the Tecoma Improvement costs) was paid to Stratus. From this bond offering, Stratus also received payment of interest, including interest deferred from previous bond offerings, totaling $ 1.1 million and 16 Table of Conten ts reimbursement of other costs of $ 200 thousand. The Holden Hills Phase 1 partnership used its $ 10.5 million share of the reimbursement and interest to pay down the Holden Hills Phase 1 construction loan. Also, in April 2026, the Magnolia MUD sold bonds and Stratus was reimbursed costs totaling $ 1.6 million and was paid interest of $ 186 thousand. Stratus evaluated events after March 31, 2026, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements. 17 Table of Conten ts