Core Insights - Stratus Properties Inc. reported a net loss of 62 cents per share for Q3 2025, a significant increase from a net loss of 5 cents per share in the same quarter last year [1] - The company's revenues fell 44% to $5 million from $8.9 million in Q3 2024, primarily due to the absence of real estate sales [2] - Stratus incurred a net loss attributable to common stockholders of $5 million, compared to a net loss of $0.4 million in the prior year [2] Financial Performance - EBITDA turned negative at $5.5 million for the quarter, down from a modest $0.01 million in Q3 2024 [3] - Real estate operations posted a segment loss of $4.5 million, worsening from a $1.4 million loss in the previous year [3] - Leasing operations remained stable with revenue flat at $4.9 million, but segment profit decreased significantly from $3.3 million in the year-ago period [4] Management Commentary - The CEO highlighted the strategic repositioning efforts and announced an agreement to sell Lantana Place – Retail for approximately $57.4 million, which will help repay a project loan [5] - The company maintains a strong liquidity profile with a cash balance of $55 million and no outstanding draws on its revolving credit facility as of September 30, 2025 [6] Factors Influencing Results - The decline in revenues and profits was primarily driven by a sharp decrease in property sales, with real estate operations generating only $0.05 million in revenue compared to $4 million in the prior year [7] - The termination of a potential development project resulted in a $2.9 million write-off of previously capitalized planning costs [8] - General and administrative expenses rose to $3.9 million from $3.4 million, reflecting higher compensation and overhead costs [8] Other Developments - In October 2025, Stratus entered into an amended agreement to sell Lantana Place – Retail, expected to close in Q4 2025, with proceeds used to repay a project loan of $29.8 million [10] - The company repurchased 180,899 shares at an average price of $21.59 per share, totaling $3.9 million, with $21.1 million remaining under the share repurchase authorization [11]

Revenue Performance - Revenues totaled $5.0 million in Q3 2025 and $21.6 million for the first nine months of 2025, down from $8.9 million and $43.9 million in the same periods of 2024, respectively[110] - The decrease in revenues for Q3 2025 was primarily due to no sales of Amarra Villas homes compared to a $4.0 million sale in Q3 2024[110] - Revenues from developed property sales were $0 for the three months ended September 30, 2025, compared to $3,950,000 for the same period in 2024[149] Net Loss and Operating Performance - The net loss attributable to common stockholders was $(5.0) million, or $(0.62) per diluted share in Q3 2025, compared to a net loss of $(0.4) million, or $(0.05) per diluted share in Q3 2024[112] - The company reported an operating loss of $8,093,000 for the three months ended September 30, 2025, compared to an operating loss of $1,519,000 for the same period in 2024[145] - Net loss attributable to common stockholders was $4,978,000 for the three months ended September 30, 2025, compared to a net loss of $364,000 for the same period in 2024[145] Cash Flow and Liquidity - As of September 30, 2025, consolidated cash was $55.0 million, with an additional $17.5 million available under a revolving credit facility[96] - Cash used in operating activities totaled $24.1 million for the first nine months of 2025, compared to $2.4 million for the same period in 2024, primarily due to reduced revenue from fewer property sales[165] - Cash provided by financing activities was $53.9 million for the first nine months of 2025, significantly higher than $5.3 million for the same period in 2024[168] Development Projects - The company has a development portfolio of approximately 1,500 acres of commercial and residential projects under development or undeveloped land[92] - The company anticipates starting home construction or selling home sites in Holden Hills Phase 1 in 2026, pending regulatory approvals[119] - The company secured rights to develop a multi-family project on 35 acres in Lakeway, Texas, with construction of required infrastructure set to begin in Q4 2025[128] Partnerships and Asset Sales - A pre-tax gain of approximately $5.0 million was recorded from the sale of West Killeen Market during the first nine months of 2025[111] - A cash distribution of $47.8 million was received from the Holden Hills Phase 2 partnership during the first nine months of 2025[104] - The company plans to sell Lantana Place – Retail for approximately $57.4 million, expected to close in Q4 2025[104] Rental Revenue and Leasing - Rental revenue for the first nine months of 2025 was $14,749,000, an increase of 4.1% compared to $14,165,000 for the same period in 2024[154] - As of September 30, 2025, the company had signed leases for substantially all of the completed retail space at Jones Crossing, totaling 154,092 square feet, with additional commercial development potential of approximately 104,750 square feet on 22 undeveloped acres[140] - Kingwood Place has constructed 151,877 square feet of retail space, with signed leases for substantially all of the retail space as of September 30, 2025[140] Debt and Financing - As of September 30, 2025, total debt was $205.7 million, an increase from $196.7 million at December 31, 2024[173] - The company expects to successfully extend or refinance outstanding debt maturing in the next 12 months[193] - The company had firm commitments totaling approximately $5.2 million for construction projects as of September 30, 2025, and expects to make a capital contribution of $150 thousand to The Saint George partnership[191] Market Conditions and Future Outlook - Despite macroeconomic challenges, the company remains optimistic about real estate market conditions in Texas over the next 12 months, with strong rental performance at The Saint June and encouraging absorption rates for new multi-family units in downtown Austin[142] - Future operating and financial performance will depend on the ability to sell or lease properties profitably and refinance debt as it becomes due[194] - The company faces risks including increases in operating costs, economic downturns, and changes in market conditions that could affect performance[206] Accounting and Compliance - The company is currently assessing the adoption timing and impact of new accounting standards effective after December 15, 2026[198][199] - As of September 30, 2025, the company was in compliance with all financial covenants across its debt agreements[182] - Under Comerica Bank debt agreements, the company is restricted from repurchasing common stock in excess of $1.0 million without prior consent[204] Share Repurchase Program - The company returned $3.9 million to stockholders through a share repurchase program from 2024 to November 7, 2025[104] - The company has a $25.0 million share repurchase program approved by Comerica Bank[204]

Financial Performance - Net loss attributable to common stockholders was $(5.0) million, or $(0.62) per diluted share, in Q3 2025, compared to a net loss of $(0.4) million, or $(0.05) per diluted share, in Q3 2024[3]. - Revenues for Q3 2025 were $5.0 million, down from $8.9 million in Q3 2024, primarily due to no sales in Q3 2025 compared to one home sale in Q3 2024[3]. - Total revenues for the first nine months of 2025 were $21.6 million, a decrease from $43.9 million in the same period of 2024, attributed to fewer home sales[3]. - Total revenue for the nine months ended September 30, 2025, was $21,617,000, compared to $43,888,000 for the same period in 2024, reflecting a decrease of approximately 50.8%[35][38]. - For the three months ended September 30, 2025, Stratus reported a net loss of $8,007,000 compared to a net loss of $1,414,000 for the same period in 2024[42]. - For the nine months ended September 30, 2025, Stratus reported a net loss of $14,059,000 compared to a net loss of $495,000 for the same period in 2024[42]. - EBITDA for the first nine months of 2025 was $(8.0) million, compared to $3.9 million in the same period of 2024[3]. - EBITDA for the nine months ended September 30, 2025, was $(8,025,000), while for the same period in 2024, it was $3,877,000[42]. - EBITDA for the three months ended September 30, 2025, was $(5,507,000), while for the same period in 2024, it was $9,000[42]. Cash and Liquidity - Stratus had $55.0 million in cash and cash equivalents as of September 30, 2025, with no amounts drawn on its revolving credit facility[3]. - Cash and cash equivalents increased to $55,040,000 as of September 30, 2025, from $20,178,000 at the end of 2024[24]. - Cash flow used in operating activities for the nine months ended September 30, 2025, was $24,140,000, compared to $2,402,000 in 2024[26]. Assets and Liabilities - Total assets rose to $572,562,000 as of September 30, 2025, compared to $532,606,000 at the end of 2024[24]. - Total liabilities increased to $240,476,000 as of September 30, 2025, from $235,039,000 at the end of 2024[24]. - Consolidated debt totaled $203.9 million as of September 30, 2025, compared to $194.9 million at the end of 2024[8]. Capital Expenditures - Capital expenditures for the first nine months of 2025 were $28.6 million, down from $45.9 million in the same period of 2024[10]. - Capital expenditures for the nine months ended September 30, 2025, totaled $28,618,000, compared to $45,887,000 in the same period of 2024, showing a decrease of approximately 37.5%[35][38]. Real Estate Operations - Real estate operations generated revenues of $45,000 in Q3 2025, a significant drop from $3,971,000 in Q3 2024[22]. - Real Estate Operations segment reported revenue from unaffiliated customers of $45,000 for Q3 2025, compared to $3,971,000 in Q3 2024, indicating a significant increase[32][34]. - The segment loss for Real Estate Operations in Q3 2025 was $(4,544,000), while Leasing Operations reported a profit of $317,000, leading to a total segment loss of $(4,227,000)[32]. Leasing Operations - Leasing operations revenues remained stable at $4,924,000 in Q3 2025, compared to $4,920,000 in Q3 2024[22]. - Leasing Operations segment generated revenue from unaffiliated customers of $4,924,000 in Q3 2025, slightly down from $4,920,000 in Q3 2024[32][34]. Share Repurchase and Future Plans - The company acquired 180,899 shares of its common stock for $3.9 million at an average price of $21.59 per share, with $21.1 million remaining for repurchases under its $25.0 million program[11]. - The Board is exploring cash utilization opportunities, including share repurchases and reinvestment in project pipelines, based on market conditions[12]. - An agreement was made to sell Lantana Place – Retail for approximately $57.4 million, expected to close in Q4 2025[4]. - The company plans to close the sale of Lantana Place – Retail in Q4 2025, subject to closing conditions[30]. General and Administrative Expenses - General and administrative expenses for Q3 2025 amounted to $3,866,000, contributing to an operating loss of $(8,093,000)[32]. Other Financial Metrics - Depreciation and amortization for the three months ended September 30, 2025, was $2,072,000, compared to $1,365,000 in 2024[42]. - Interest expense, net for the three months ended September 30, 2025, was $749,000, while there was no interest expense reported for the same period in 2024[42]. - The benefit from provision for income taxes for the three months ended September 30, 2025, was $(321,000), compared to $58,000 in 2024[42]. Management Commentary - Management emphasizes that EBITDA should not be considered in isolation or as a substitute for GAAP measures[42]. - The company encourages investors to review its consolidated financial statements and publicly filed reports in their entirety[42]. - EBITDA may not be comparable to similarly titled measures reported by other companies due to different calculation methods[42].

Core Insights - Stratus Properties Inc. reported a net loss of $(5.0) million for Q3 2025, compared to a loss of $(0.4) million in Q3 2024, indicating a significant decline in performance [4] - The company’s revenues for Q3 2025 were $5.0 million, down from $8.9 million in Q3 2024, primarily due to no real estate sales during the quarter [4][8] - Stratus is exploring cash utilization strategies following the anticipated sale of Lantana Place – Retail for approximately $57.4 million, which is expected to close in Q4 2025 [3][30] Financial Performance - Net loss attributable to common stockholders for the first nine months of 2025 was $(7.6) million, compared to a net income of $2.5 million in the same period of 2024 [4] - Total revenues for the first nine months of 2025 were $21.6 million, down from $43.9 million in the first nine months of 2024, largely due to reduced real estate sales [4][8] - EBITDA for the first nine months of 2025 was $(8.0) million, compared to $3.9 million in the same period of 2024 [4] Cash and Liquidity - As of September 30, 2025, Stratus had $55.0 million in cash and cash equivalents, a significant increase from $20.2 million at the end of 2024 [9] - The company’s consolidated debt totaled $203.9 million as of September 30, 2025, compared to $194.9 million at the end of 2024 [9][10] Development and Operations - The lease-up of The Saint George is progressing, and the company is preparing for homebuilding at Holden Hills Phase 1 in 2026 [5] - Stratus has incurred capital expenditures of $28.6 million for the first nine months of 2025, primarily related to ongoing developments [11] Share Repurchase Program - As of November 7, 2025, Stratus has repurchased 180,899 shares at an average price of $21.59 per share, with $21.1 million remaining under its $25.0 million share repurchase program [12]

Financial Data and Key Metrics Changes - The company reported a net sales increase of 11.5% year over year, reaching ILS 3,100,000,000 for the quarter, with a 15.5% increase when excluding the impact of a stronger shekel [42][43] - EBIT improved significantly, with higher operating profit attributed to increased net sales and ongoing productivity measures, despite raw material price inflation [43][44] - Net income was negatively impacted by higher financing and tax expenses, with financing expenses increasing by ILS 57,000,000 in Q2 due to the stronger shekel and higher interest rates [44][45] Business Line Data and Key Metrics Changes - The coffee international segment became the largest business segment in terms of net sales, driven primarily by pricing strategies [42] - Strauss Israel saw a 9% growth in sales, with significant contributions from the Health and Wellness segment, while the funding indulgence sector faced challenges due to high cocoa input prices [14][44] - The international coffee business experienced a 30% increase in sales, primarily due to price increases, particularly in Brazil [20][22] Market Data and Key Metrics Changes - In Israel, the overall market share increased from 34.1% to 35.1%, despite price increases in several segments [18] - The Brazilian market showed a record EBIT margin of 8%, with profits reaching ILS 88,000,000 in Q2, attributed to a 100% price increase in the roasted and ground coffee portfolio [21][22] - The water business in Israel and the UK experienced 4-5% top-line growth, although impacted by the war in June [49] Company Strategy and Development Direction - The company is focusing on core activities and major brands to improve profitability and market share, with a strong emphasis on productivity and operational excellence [34][36] - New product launches, including alternative milk and water purification machines, are expected to drive growth in the coming quarters [31][33] - The company aims to transition from a single product to a multiproduct company, enhancing its market position in various segments [26][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation and cost of goods but expressed confidence in the company's ability to pass on costs to consumers [61] - The company expects improvements in net income in the coming quarters as one-time financial costs and tax assessments are not anticipated to recur [61][62] - Future relief in commodity pricing, particularly in cocoa, is expected, which should positively impact the funding indulgence segment [54][56] Other Important Information - The company received a stable outlook upgrade and maintained a strong AA1 rating, reflecting its solid financial position [46] - The productivity initiative is on track to achieve between $300,000,000 to $400,000,000 in productivity improvements [29] Q&A Session Summary Question: What are the expected benefits of the new Jotvita facility? - The new facility will address a demand gap of 20-25% in sales, leading to substantial increases in volume and value, thus improving EBIT and margins [50][51] Question: What relief is being seen in commodity pricing? - Some relief is noted in coffee prices, while cocoa prices have decreased significantly, which is expected to benefit the funding indulgence segment [54][56] Question: How will the acquisition of JDE Peet by Keurig impact the markets? - Management does not foresee significant impacts in the markets where the company operates, as competition dynamics remain unchanged [57][58]

Financial Data and Key Metrics Changes - The company reported a net sales increase of 11.5% year over year, reaching ILS 3,100,000,000 for the quarter, with a 15.5% increase when excluding the impact of a stronger shekel [42][43] - EBIT improved significantly, with higher operating profit attributed to increased net sales and ongoing productivity measures, despite raw material price inflation [43][44] - Net income was negatively impacted by increased financing and tax expenses, with financing expenses rising by ILS 57,000,000 in Q2 due to the stronger shekel and higher interest rates [45][46] Business Line Data and Key Metrics Changes - Strauss Israel saw a 9% growth in sales, driven by both volume and price increases, with Health and Wellness performing particularly well [14][48] - The coffee segment in Israel experienced volume increases, especially in roasted and ground coffee, although EBIT remained stable due to rising coffee prices [16][49] - The international coffee business, particularly in Brazil, reported a significant turnaround with a 30% increase in sales, primarily driven by price increases [20][21] Market Data and Key Metrics Changes - The company increased its overall market share in Israel from 34.1% to 35.1%, despite price increases in several segments [18] - The water business experienced 4-5% top-line growth in Q2, supported by a higher installed base and improved sales mix, although impacted by the war in June [50] - In China, the company faced increased competition, particularly from Xiaomi, which affected sales and net income [27][28] Company Strategy and Development Direction - The company is focusing on core activities and major brands to improve profitability and market share, with a strong emphasis on productivity and operational excellence [34][36] - New product launches, including alternative milk and water purification machines, are expected to drive growth in the coming quarters [31][33] - The company aims to transition from a single product to a multiproduct company, enhancing its market position and expanding its product offerings [26][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation and raw material costs but expressed confidence in the company's ability to pass on costs to consumers [63] - The company expects improvements in net income in the coming quarters as one-time financial costs and tax issues are resolved [63] - Future growth is anticipated from productivity initiatives and new product launches, with a focus on maintaining EBIT margins despite rising costs [41][63] Other Important Information - The company received a stable outlook upgrade and maintained a strong AA1 rating, reflecting its solid financial position [47] - The cocoa prices have shown a significant decrease, which is expected to positively impact the funding indulgence segment moving forward [55][56] Q&A Session Summary Question: What are the expected benefits of the new Jotvita facility? - The new facility will address unmet market demand, allowing for a substantial increase in sales volume and value, thereby improving EBIT and margins [51][52] Question: What relief is being seen in commodity pricing? - Some relief is noted in coffee prices, although recent increases are concerning. Cocoa prices have decreased significantly, which is expected to benefit the funding indulgence segment [55][56] Question: How will the acquisition of JDE Peet by Keurig impact the markets? - The company does not anticipate significant impacts in its operating markets, as competition remains strong and JD is already a competitor in those regions [58][59]

Group Performance Summary - Strauss Group's Q2 2025 net sales increased by 11.5% to NIS 3,073 million, and H1 2025 net sales increased by 13.5% to NIS 6,063 million[19] - Q2 2025 EBIT increased by 60.8% to NIS 245 million, and H1 2025 EBIT increased by 19.8% to NIS 426 million[19] - Q2 2025 net income decreased by 1.8% to NIS 80 million, and H1 2025 net income decreased by 36.7% to NIS 153 million[19] Segment Performance - Strauss Israel's Q2 2025 net sales increased by 8.9% to NIS 1,319 million, and H1 2025 net sales increased by 7.7% to NIS 2,715 million[25, 113, 118] - Strauss Coffee International's Q2 2025 net sales increased by 27.4% to NIS 1,536 million, and H1 2025 net sales increased by 35.4% to NIS 2,924 million[34, 136] - Strauss Water's Q2 2025 net sales increased by 3.9% to NIS 218 million, and H1 2025 net sales increased by 5.3% to NIS 424 million[45, 154] Commodities Price Development - Average Robusta price in Q2 2025 increased by 17% compared to Q2 2024, and H1 2025 increased by 39% compared to H1 2024[21] - Average Arabica price in Q2 2025 increased by 65% compared to Q2 2024, and H1 2025 increased by 80% compared to H1 2024[21] - Average Cocoa price in Q2 2025 decreased by 18% compared to Q2 2024, but H1 2025 increased by 10% compared to H1 2024[21]

Core Insights - Stratus Properties Inc. (STRS) shares increased by 10.2% following the earnings report for Q2 2025, contrasting with a 1.2% rise in the S&P 500 index during the same period [1] - Despite the initial positive reaction, the stock has decreased by 3.6% over the past month, underperforming the S&P 500's 2.5% growth [1] Financial Performance - The company reported a net income per share of 3 cents for Q2 2025, a turnaround from a net loss of 21 cents per share in the same quarter last year [2] - Revenues increased to $11.6 million, marking a 36.7% rise from $8.5 million in Q2 2024, primarily due to the sale of two Amarra Villas homes compared to one in the prior year [2] - Net income attributable to common stockholders was $0.3 million, reversing a net loss of $1.7 million from the previous year [2] Key Business Metrics - EBITDA improved significantly, with a loss of only $0.2 million compared to a loss of $1.3 million a year earlier [3] - Leasing operations generated an operating profit of $6.3 million, up from $1.8 million last year, aided by a $5 million pre-tax gain from the sale of the West Killeen Market retail project [3] - Real estate operations faced a loss of $3.5 million, partly due to a $1 million write-off of receivables related to previously sold properties [3] Capital Expenditures and Cash Position - Capital expenditures and development spending totaled $9.8 million, mainly for the Holden Hills Phase 1 and The Saint George multi-family project [4] - As of June 2025, the company had $59.4 million in cash and cash equivalents, a significant increase from $20.2 million at the end of 2024, with no borrowings on its revolving credit facility [4] Management Commentary - Chairman and CEO William H. Armstrong III noted that the company achieved "significant milestones" in H1 2025, including the completion of The Saint George and the last two Amarra Villas homes [5] - The CEO highlighted a $47.8 million cash distribution from the Holden Hills Phase 2 joint venture and the sale of West Killeen Market, which enhanced liquidity [5] - The strengthened cash position allows for flexibility in share repurchases, debt reduction, or reinvestment in development [5] Factors Influencing Results - Revenue growth was primarily transaction-driven, particularly from higher-value Amarra Villas home sales and the disposal of West Killeen Market [6] - Lower aggregate sales in the first half compared to last year's significant land and home transactions negatively impacted year-to-date results [6] - Increased real estate operating expenses and a receivables write-off affected margins, although leasing operations helped mitigate some of these challenges [6] Other Developments - Stratus entered a joint venture for the development of Holden Hills Phase 2, a 570-acre mixed-use project, which returned $47.8 million in cash to the company [7] - The board approved an expansion of the share repurchase program from $5 million to $25 million, with $22 million remaining available as of August 8, 2025 [7]

PART I. FINANCIAL INFORMATION Presents Stratus Properties Inc.'s unaudited consolidated financial statements and management's discussion and analysis for periods ended June 30, 2025 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents Stratus Properties Inc.'s unaudited consolidated financial statements and notes for periods ended June 30, 2025 [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) This section presents the company's financial position, including assets, liabilities, and equity, as of specific dates - Total Assets increased by **$42.2 million (7.9%)** from **$532.6 million** at December 31, 2024, to **$574.8 million** at June 30, 2025[9](index=9&type=chunk) - Cash and cash equivalents increased significantly by **$39.2 million (194.2%)** from **$20.2 million** at December 31, 2024, to **$59.4 million** at June 30, 2025[9](index=9&type=chunk) - Real estate held for investment, net, increased by **$91.9 million (67.4%)** from **$136.3 million** at December 31, 2024, to **$228.1 million** at June 30, 2025, while real estate under development decreased by **$98.2 million (35.8%)**[9](index=9&type=chunk) - Total Equity increased by **$40.8 million (13.7%)** from **$297.6 million** at December 31, 2024, to **$338.3 million** at June 30, 2025, primarily driven by a **$43.5 million** increase in noncontrolling interests[9](index=9&type=chunk) Key Balance Sheet Figures (in Thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :---------------- | :--------- | | Cash and cash equivalents | $59,386 | $20,178 | $39,208 | 194.3% | | Real estate under development | $175,916 | $274,105 | $(98,189) | -35.8% | | Real estate held for investment, net | $228,112 | $136,252 | $91,860 | 67.4% | | Total assets | $574,821 | $532,606 | $42,215 | 7.9% | | Debt | $199,434 | $194,853 | $4,581 | 2.4% | | Total liabilities | $236,497 | $235,039 | $1,458 | 0.6% | | Total stockholders' equity | $191,908 | $194,705 | $(2,797) | -1.4% | | Noncontrolling interests in subsidiaries | $146,416 | $102,862 | $43,554 | 42.3% | | Total equity | $338,324 | $297,567 | $40,757 | 13.7% | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) This section details the company's financial performance, including revenues, expenses, and net income or loss, for the reported periods - Total Revenues for the three months ended June 30, 2025, increased by **$3.1 million (36.7%)** to **$11.6 million**, while for the six months ended June 30, 2025, they decreased by **$18.4 million (52.6%)** to **$16.6 million**[10](index=10&type=chunk) - Operating loss improved from **$2.9 million** in Q2 2024 to **$0.8 million** in Q2 2025, but for the six months, it declined from an income of **$0.8 million** in 2024 to a loss of **$4.4 million** in 2025[10](index=10&type=chunk) - Net income attributable to common stockholders swung from a loss of **$1.7 million ($0.21** per diluted share) in Q2 2024 to an income of **$0.3 million ($0.03** per diluted share) in Q2 2025[10](index=10&type=chunk) - For the six months ended June 30, 2025, net loss attributable to common stockholders was **$2.6 million ($0.32** per diluted share), compared to a net income of **$2.8 million ($0.35** per diluted share) in the prior year[10](index=10&type=chunk) - A **$5.0 million** gain on the sale of assets was recognized in Q2 2025, contributing to the improved operating results for the quarter[10](index=10&type=chunk) Key Income Statement Figures (in Thousands, Except Per Share Amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Real estate operations revenue | $6,798 | $3,629 | $6,823 | $25,752 | | Leasing operations revenue | $4,807 | $4,861 | $9,825 | $9,245 | | Total revenues | $11,605 | $8,490 | $16,648 | $34,997 | | Total cost of sales | $13,807 | $7,568 | $18,594 | $25,925 | | General and administrative expenses | $3,557 | $3,842 | $7,608 | $8,307 | | Gain on sale of assets | $(5,000) | — | $(5,200) | — | | Operating (loss) income | $(759) | $(2,920) | $(4,354) | $765 | | Net (loss) income and total comprehensive (loss) income | $(2,295) | $(2,778) | $(6,052) | $919 | | Net income (loss) attributable to common stockholders | $260 | $(1,725) | $(2,615) | $2,827 | | Net income (loss) per share (basic and diluted) | $0.03 | $(0.21) | $(0.32) | $0.35 | [Consolidated Statements of Cash Flows (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods - Net cash used in operating activities increased significantly to **$15.2 million** for the first six months of 2025, compared to **$1.7 million** used in the same period of 2024, primarily due to higher purchases and development of real estate properties[13](index=13&type=chunk)[159](index=159&type=chunk) - Net cash provided by investing activities was **$5.8 million** for the first six months of 2025, a substantial improvement from **$16.5 million** used in 2024, driven by **$13.0 million** in proceeds from asset sales and **$0.4 million** in MUD reimbursements[13](index=13&type=chunk)[160](index=160&type=chunk) - Net cash provided by financing activities surged to **$48.6 million** for the first six months of 2025, compared to **$0.2 million** used in 2024, largely due to a **$47.8 million** noncontrolling interest contribution[13](index=13&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - The net increase in cash, cash equivalents, and restricted cash was **$39.2 million** in 2025, resulting in an ending balance of **$60.4 million** at June 30, 2025[13](index=13&type=chunk) Key Cash Flow Figures (in Thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Net (loss) income | $(6,052) | $919 | $(6,971) | -758.5% | | Purchases and development of real estate properties | $(14,397) | $(16,317) | $1,920 | -11.8% | | Net cash used in operating activities | $(15,179) | $(1,716) | $(13,463) | 784.6% | | Capital expenditures | $(7,161) | $(16,142) | $8,981 | -55.6% | | Proceeds from sale of assets, net of fees | $12,979 | — | $12,979 | N/A | | Net cash provided by (used in) investing activities | $5,811 | $(16,542) | $22,353 | -135.1% | | Borrowings from project loans | $59,886 | $21,754 | $38,132 | 175.3% | | Noncontrolling interest contributions | $47,847 | — | $47,847 | N/A | | Net cash provided by (used in) financing activities | $48,597 | $(213) | $48,810 | -22915.5% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $39,229 | $(18,471) | $57,700 | -312.4% | | Cash, cash equivalents and restricted cash at end of period | $60,383 | $13,961 | $46,422 | 332.5% | [Consolidated Statements of Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Equity%20(Unaudited)) This section presents changes in the company's equity, including common stock, retained earnings, and noncontrolling interests, for the reported periods - Total Equity increased by **$40.8 million (13.7%)** from **$297.6 million** at December 31, 2024, to **$338.3 million** at June 30, 2025, primarily due to a significant noncontrolling interest contribution[15](index=15&type=chunk) - Noncontrolling Interests in Subsidiaries increased by **$43.5 million (42.3%)** to **$146.4 million** at June 30, 2025, largely driven by a **$47.8 million** contribution in Q2 2025[15](index=15&type=chunk) - Retained Earnings decreased by **$2.6 million (9.1%)** to **$26.0 million** at June 30, 2025, reflecting total comprehensive losses[15](index=15&type=chunk) - The company repurchased **$0.5 million** of common stock in the first six months of 2025[15](index=15&type=chunk) Key Equity Figures (in Thousands) | Metric | December 31, 2024 | June 30, 2025 | Change (Absolute) | Change (%) | | :------------------------------------ | :---------------- | :-------------- | :---------------- | :--------- | | Common Stock (At Par Value) | $97 | $98 | $1 | 1.0% | | Capital in Excess of Par Value | $200,972 | $201,651 | $679 | 0.3% | | Retained Earnings | $28,601 | $25,986 | $(2,615) | -9.1% | | Common Stock Held in Treasury (Cost) | $(34,965) | $(35,827) | $(862) | 2.5% | | Total Stockholders' Equity | $194,705 | $191,908 | $(2,797) | -1.4% | | Noncontrolling Interests in Subsidiaries | $102,862 | $146,416 | $43,554 | 42.3% | | Total Equity | $297,567 | $338,324 | $40,757 | 13.7% | [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1. GENERAL](index=8&type=section&id=1.%20GENERAL) This note provides general information about the company and its significant accounting policies - Stratus' President and CEO's son was employed by the company, receiving standard benefits and incentive awards. He resigned in September 2024, forfeiting outstanding Profit Participation Incentive Plan (PPIP) awards[21](index=21&type=chunk) [2. EARNINGS PER SHARE](index=8&type=section&id=2.%20EARNINGS%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share for the reported periods - Basic and Diluted EPS increased to **$0.03** in Q2 2025 from **$(0.21)** in Q2 2024[22](index=22&type=chunk) - Basic and Diluted EPS decreased to **$(0.32)** for the first six months of 2025 from **$0.35** in the same period of 2024[22](index=22&type=chunk) - Weighted-average shares outstanding (basic) increased slightly from **8,072 thousand** in Q2 2024 to **8,082 thousand** in Q2 2025[22](index=22&type=chunk) [3. LIMITED PARTNERSHIPS](index=9&type=section&id=3.%20LIMITED%20PARTNERSHIPS) This note describes the company's interests in and transactions with various limited partnerships - Holden Hills Phase 2, L.P. was formed in Q2 2025 for a **570-acre** mixed-use development. Stratus contributed land valued at **$95.7 million**, and an unaffiliated equity investor contributed **$47.8 million** cash, which was then distributed to Stratus. Stratus holds a **50%** equity interest and consolidates the partnership[24](index=24&type=chunk) - The Holden Hills Phase 2 partnership is establishing a separate revolving credit facility for future operating costs and to reimburse Stratus for initial project costs[28](index=28&type=chunk) - Stratus made a **$1.5 million** operating loan to Stratus Block 150, L.P. in Q1 2025, bringing the total outstanding to **$7.2 million** as of June 30, 2025[30](index=30&type=chunk) - Stratus and the Class B limited partner in The Saint June partnership have made operating loans totaling **$962 thousand** and **$493 thousand**, respectively, as of June 30, 2025, to support construction loan interest payments[31](index=31&type=chunk) Stratus' Indirect Equity Interests in 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. | 60.00 % | | The Saint George Apartments, L.P. | 10.00 % | | The Saint June, L.P. | 34.13 % | Consolidated Partnership Assets and Liabilities (in Thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total assets | $364,825 | $276,756 | | Total liabilities | $158,529 | $151,433 | | Net assets | $206,296 | $125,323 | [4. ASSET SALES](index=11&type=section&id=4.%20ASSET%20SALES) This note provides details on significant asset sales completed during the reporting periods - Stratus completed the sale of the West Killeen Market retail project in Q2 2025 for **$13.3 million**, generating approximately **$7.8 million** in pre-tax net cash proceeds and a **$5.0 million** pre-tax gain[37](index=37&type=chunk) - Two Amarra Villas homes were sold in Q2 2025 for a total of **$6.8 million**, leading to the repayment and termination of the **$1.7 million** Amarra Villas credit facility[38](index=38&type=chunk) - A **$0.2 million** portion of the previously deferred gain related to The Oaks at Lakeway was recognized in Q1 2025, with **$1.3 million** remaining deferred at June 30, 2025[36](index=36&type=chunk) - In Q1 2024, Stratus sold **47 acres** of undeveloped land at Magnolia Place for **$14.5 million**, which included the repayment of an **$8.8 million** construction loan[39](index=39&type=chunk) [5. FAIR VALUE MEASUREMENTS](index=12&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) This note explains the fair value measurements of financial instruments and their classification within the fair value hierarchy - Stratus Kingwood Place, L.P. and College Station 1892 Properties, L.L.C. entered into interest rate cap agreements in November 2024 and March 2025, respectively, to manage variable interest rate risk[42](index=42&type=chunk) - The fair value of Stratus' debt approximates its carrying value due to variable interest rates and is classified within Level 2 of the fair value hierarchy[44](index=44&type=chunk) Fair Value of Interest Rate Caps (in Thousands) | Metric | June 30, 2025 (Carrying Value) | June 30, 2025 (Fair Value) | December 31, 2024 (Carrying Value) | December 31, 2024 (Fair Value) | | :----------------- | :------------------------------- | :----------------------- | :------------------------------- | :----------------------- | | Interest rate caps | $1 | $1 | $19 | $19 | [6. DEBT AND EQUITY](index=13&type=section&id=6.%20DEBT%20AND%20EQUITY) This note provides detailed information on the company's debt obligations and equity structure, including recent changes and financing arrangements - Total debt increased to **$199.4 million** at June 30, 2025, from **$194.9 million** at December 31, 2024[45](index=45&type=chunk) - The Comerica Bank revolving credit facility's maturity was extended to March 27, 2027, and the interest rate was lowered in March 2025. Its borrowing base was reduced by **$24.8 million** in June 2025[46](index=46&type=chunk)[48](index=48&type=chunk) - The Lantana Place construction loan was refinanced in January 2025 with a **$29.8 million**, four-year term loan, generating **$3.0 million** in net cash proceeds[51](index=51&type=chunk) - The Jones Crossing loan was refinanced in March 2025 with a **$24.0 million**, three-year term loan, generating **$1.2 million** in net cash proceeds[52](index=52&type=chunk) - The Annie B land loan's maturity was extended to September 1, 2027, in July 2025, with new monthly principal payments[53](index=53&type=chunk) - The Amarra Villas credit facility was fully repaid and terminated in June 2025, and the West Killeen Market construction loan was repaid in May 2025[54](index=54&type=chunk)[55](index=55&type=chunk) - The share repurchase program was increased from **$5.0 million** to **$25.0 million** in June 2025. As of August 8, 2025, **$3.0 million** has been repurchased, with **$22.0 million** remaining available[60](index=60&type=chunk) Debt Components (in Thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Kingwood Place loan | $32,502 | $32,408 | | Lantana Place loan | $29,425 | $25,509 | | Jones Crossing loan | $23,588 | $22,428 | | The Annie B land loan | $11,962 | $12,568 | | The Saint George (Construction) | $51,502 | $47,741 | | The Saint June (Construction) | $31,925 | $32,109 | | Holden Hills Phase 1 (Construction) | $18,530 | $15,265 | | West Killeen Market (Construction) | — | $5,194 | | Amarra Villas credit facility | — | $1,631 | | **Total debt** | **$199,434** | **$194,853** | [7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN](index=15&type=section&id=7.%20PROFIT%20PARTICIPATION%20INCENTIVE%20PLAN%20AND%20LONG-TERM%20INCENTIVE%20PLAN) This note describes the company's incentive compensation plans and related accrued liabilities - The accrued liability for the PPIP and LTIP totaled **$2.0 million** at June 30, 2025, up from **$1.9 million** at December 31, 2024[64](index=64&type=chunk) - Outstanding awards under PPIP include Amarra Villas, Jones Crossing – Retail, Magnolia Place, and The Saint June, while The Saint George is under LTIP[64](index=64&type=chunk) PPIP/LTIP Costs (in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Charged to general and administrative expense | $30 | $76 | $98 | $159 | | Capitalized to project development costs | $8 | $2 | $16 | $113 | | **Total PPIP/LTIP costs** | **$38** | **$78** | **$114** | **$272** | [8. INCOME TAXES](index=15&type=section&id=8.%20INCOME%20TAXES) This note details the company's income tax provisions, deferred tax assets, and effective tax rates - Stratus maintains a full valuation allowance against its U.S. Federal net deferred tax assets as of June 30, 2025, and December 31, 2024[66](index=66&type=chunk) - A deferred tax asset of **$153 thousand** is recorded for state income taxes at both periods[66](index=66&type=chunk) - The consolidated effective income tax rate was **(9)%** for the first six months of 2025, compared to **14%** for the same period in 2024, primarily due to state income taxes, noncontrolling interests, the valuation allowance, the Holden Hills Phase 2 transaction, and executive compensation limitations[69](index=69&type=chunk) [9. BUSINESS SEGMENTS](index=16&type=section&id=9.%20BUSINESS%20SEGMENTS) This note presents financial information by the company's reportable operating segments: Real Estate Operations and Leasing Operations - Stratus operates in two reportable segments: Real Estate Operations and Leasing Operations[70](index=70&type=chunk) - Real Estate Operations focuses on entitlement, development, and sale of multi-family and single-family residential and residential-centric mixed-use properties[70](index=70&type=chunk)[101](index=101&type=chunk) - Leasing Operations comprises real estate assets held for investment that are leased or available for lease, including The Saint George (completed Q2 2025), The Saint June, Kingwood Place, Lantana Place retail, and Jones Crossing retail[72](index=72&type=chunk)[102](index=102&type=chunk) Segment Profit (Loss) (Three Months Ended June 30, 2025, in Thousands) | Segment | Revenue | Segment (Loss) Profit | | :-------------------- | :------ | :-------------------- | | Real Estate Operations | $6,798 | $(3,536) | | Leasing Operations | $4,807 | $6,334 | | **Total** | **$11,605** | **$2,798** | Segment Profit (Loss) (Six Months Ended June 30, 2025, in Thousands) | Segment | Revenue | Segment (Loss) Profit | | :-------------------- | :------ | :-------------------- | | Real Estate Operations | $6,823 | $(5,038) | | Leasing Operations | $9,825 | $8,292 | | **Total** | **$16,648** | **$3,254** | Total Assets by Segment (in Thousands) | Segment | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Real Estate Operations | $271,985 | $342,089 | | Leasing Operations | $246,214 | $159,314 | | Corporate and other | $56,622 | $12,613 | | **Total assets** | **$574,821** | **$514,016** | [10. SUBSEQUENT EVENTS](index=21&type=section&id=10.%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - The One Big Beautiful Bill Act (OBBB) was enacted after June 30, 2025, extending certain tax provisions and reinstating immediate expensing. Stratus is evaluating its impact but does not expect a material effect on its financial statements[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of Stratus Properties Inc.'s financial condition, operations, and cash flows for periods ended June 30, 2025 [OVERVIEW](index=22&type=section&id=OVERVIEW) This section provides a general description of Stratus Properties Inc.'s business, development portfolio, and primary revenue sources - Stratus is a residential and retail-focused real estate company primarily engaged in entitlement, development, management, leasing, and sale of properties in Austin, Texas, and other select Texas markets[84](index=84&type=chunk) - The development portfolio consists of approximately **1,500 acres** of commercial, multi-family, and single-family residential projects under development or held for future use[84](index=84&type=chunk) - Main revenue sources include sales of developed and undeveloped properties, lease of retail, mixed-use, and multi-family properties, and development and asset management fees[84](index=84&type=chunk) [BUSINESS STRATEGY](index=22&type=section&id=BUSINESS%20STRATEGY) This section outlines the company's core objectives, investment focus, capital allocation, and financing approach for property development - The primary business objective is to create stockholder value by methodically developing and enhancing properties, then selling or holding them for lease when market conditions are favorable[86](index=86&type=chunk) - Investment strategy focuses on pure residential and residential-centric mixed-use projects in Austin and other attractive Texas markets[86](index=86&type=chunk) - The Board may return capital to stockholders through special cash dividends or share repurchases, with a **$25.0 million** share repurchase program approved in June 2025[87](index=87&type=chunk) - Properties are developed using project-level debt and third-party equity capital through joint ventures, aiming for increased returns above relative equity interest upon achieving negotiated hurdles[88](index=88&type=chunk) - Anticipates making future operating loans to The Annie B totaling up to **$2.8 million** and a capital contribution to The Saint George of **$430 thousand** over the next **12 months**[91](index=91&type=chunk) - As of June 30, 2025, Stratus had **$59.4 million** in consolidated cash and **$17.7 million** available under its revolving credit facility[92](index=92&type=chunk) - Despite difficult real estate conditions with elevated costs, interest rates generally declined in late 2024 and early 2025, enabling the refinancing or amendment of several project loans[93](index=93&type=chunk)[94](index=94&type=chunk) - During the first six months of 2025, Stratus received a **$47.8 million** cash distribution from the Holden Hills Phase 2 partnership, sold West Killeen Market for **$13.3 million**, and two Amarra Villas homes for **$6.8 million**[96](index=96&type=chunk)[97](index=97&type=chunk) [OVERVIEW OF FINANCIAL RESULTS](index=24&type=section&id=OVERVIEW%20OF%20FINANCIAL%20RESULTS) This section summarizes the key financial performance indicators, including revenues, net income, and cash position, for the reported periods - Total revenues for Q2 2025 were **$11.6 million**, up from **$8.5 million** in Q2 2024, primarily due to increased Amarra Villas home sales[103](index=103&type=chunk) - Total revenues for the first six months of 2025 were **$16.6 million**, down from **$35.0 million** in the same period of 2024, mainly due to fewer Amarra Villas sales and no undeveloped land sales compared to 2024[103](index=103&type=chunk) - A **$5.0 million** pre-tax gain was recorded from the sale of West Killeen Market in Q2 2025[104](index=104&type=chunk) - Net income attributable to common stockholders for Q2 2025 was **$0.3 million ($0.03** diluted EPS), a significant improvement from a **$1.7 million** loss (**$0.21** diluted EPS) in Q2 2024[105](index=105&type=chunk) - For the first six months of 2025, net loss attributable to common stockholders was **$2.6 million ($0.32** diluted EPS), compared to a **$2.8 million** income (**$0.35** diluted EPS) in the prior year[105](index=105&type=chunk) - Cash and cash equivalents substantially increased in Q2 2025, primarily due to a **$47.8 million** distribution from the newly-formed Holden Hills Phase 2 partnership[106](index=106&type=chunk) [RECENT DEVELOPMENT ACTIVITIES](index=25&type=section&id=RECENT%20DEVELOPMENT%20ACTIVITIES) This section details the progress and status of the company's ongoing and recently completed residential and commercial development projects [Recent Residential Activities](index=25&type=section&id=Recent%20Residential%20Activities) This section provides updates on the company's residential development projects, including sales, construction, and lease-up status - Construction on the last two Amarra Villas homes was completed in Q2 2025, and two homes were sold for **$6.8 million**. Three completed homes remain available for sale as of August 8, 2025[109](index=109&type=chunk) - The Saint June, a **182-unit** multi-family project, completed construction in Q4 2023 and achieved full lease-up during 2024[110](index=110&type=chunk) - Holden Hills Phase 1 road and utility infrastructure was substantially completed in Q2 2025. Development plans are being adjusted due to its removal from Austin's ETJ, with home building/site sales anticipated in late 2025[112](index=112&type=chunk) - The Holden Hills Phase 2 partnership was formed in June 2025 for a **570-acre** mixed-use project. Stratus contributed land valued at **$95.7 million** and received a **$47.8 million** cash distribution from the partner. Development plans are being adjusted for increased density due to ETJ removal[117](index=117&type=chunk) - The Saint George, a **316-unit** multi-family project, had its first units available in April 2025 and was completed in Q2 2025. Approximately **26%** of units were leased as of August 8, 2025[120](index=120&type=chunk) - A water leak at The Saint George in April 2025 resulted in **$1.9 million** in remediation and repair costs, with Stratus' estimated share of uncovered costs not exceeding **$1.0 million**[121](index=121&type=chunk) [Recent Commercial Activities](index=28&type=section&id=Recent%20Commercial%20Activities) This section provides updates on the company's commercial development projects, including leasing and sales activities - Holden Hills Phase 2 is envisioned to include a significant commercial component, with development plans being adjusted due to the ETJ process[129](index=129&type=chunk) - As of June 30, 2025, Stratus owned and operated stabilized retail projects including Jones Crossing, Lantana Place, and Kingwood Place, all with substantially all retail space leased[130](index=130&type=chunk) - The West Killeen Market retail project was sold in Q2 2025 for **$13.3 million**, generating **$7.8 million** in pre-tax net cash proceeds and a **$5.0 million** pre-tax gain[131](index=131&type=chunk) [Potential Development Projects and Pipeline](index=29&type=section&id=Potential%20Development%20Projects%20and%20Pipeline) This section discusses future development opportunities and the company's strategy for financing these projects - A lease agreement for a potential development project in Austin has a review period expiring September 1, 2025. Stratus may terminate the lease, potentially incurring a **$2.8 million** charge for previously capitalized fees[132](index=132&type=chunk) - For future significant development projects like The Annie B, The Saint Julia, and multi-family developments at Lakeway and College Station, Stratus intends to pursue project-level debt and third-party equity capital through joint ventures[133](index=133&type=chunk) - Stratus is working to establish a credit facility for Holden Hills Phase 2 and anticipates seeking additional debt to finance future development in Holden Hills Phase 1[133](index=133&type=chunk) [Market Conditions](index=29&type=section&id=Market%20Conditions) This section analyzes current real estate market trends, economic factors, and their potential impact on the company's operations - The industry is experiencing construction and labor cost increases, supply chain constraints, labor shortages, higher borrowing costs, and tightening bank credit[134](index=134&type=chunk) - The Federal Reserve lowered interest rates by **100 basis points** cumulatively between September and December 2024, following significant increases from March 2022 through July 2023[134](index=134&type=chunk) - Changes in U.S. tariffs and trade policies in the first six months of 2025 introduce additional uncertainties, potentially leading to higher construction costs, supply chain disruptions, and increased capital costs[134](index=134&type=chunk)[205](index=205&type=chunk) - Despite macroeconomic challenges, Stratus sees reasons for optimism in its Texas markets, citing strong rents at The Saint June, encouraging absorption of new downtown Austin multi-family units, and sales opportunities[136](index=136&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance across its operating segments and non-operating items [Real Estate Operations](index=31&type=section&id=Real%20Estate%20Operations) This section analyzes the revenue, costs, and operating results of the company's real estate development and sales segment - Total revenues for Real Estate Operations increased to **$6.8 million** in Q2 2025 from **$3.6 million** in Q2 2024, driven by sales of two Amarra Villas homes[143](index=143&type=chunk) - Total revenues for the first six months of 2025 decreased to **$6.8 million** from **$25.8 million** in the prior year, due to fewer Amarra Villas sales and no undeveloped property sales[143](index=143&type=chunk) - Operating loss for Real Estate Operations increased to **$(3.5) million** in Q2 2025 and **$(5.0) million** for the first six months of 2025[143](index=143&type=chunk) - A **$1.0 million** charge was recorded in Q2 2025 to write off receivables from previously sold properties[145](index=145&type=chunk) - Professional fees and allocated overhead costs increased in 2025 periods, primarily due to the formation of the Holden Hills Phase 2 partnership[147](index=147&type=chunk) Developed Property Sales (dollars in thousands) | Metric | Q2 2025 (Homes) | Q2 2025 (Revenues) | Q2 2024 (Homes) | Q2 2024 (Revenues) | 6M 2025 (Homes) | 6M 2025 (Revenues) | 6M 2024 (Homes) | 6M 2024 (Revenues) | | :-------------------- | :-------------- | :----------------- | :-------------- | :----------------- | :-------------- | :----------------- | :-------------- | :----------------- | | Amarra Villas homes | 2 | $6,760 | 1 | $3,625 | 2 | $6,760 | 3 | $11,248 | [Leasing Operations](index=32&type=section&id=Leasing%20Operations) This section analyzes the revenue, costs, and operating results of the company's property leasing segment - Rental revenue for Leasing Operations was **$4.8 million** in Q2 2025 and **$9.8 million** for the first six months of 2025, with the six-month increase primarily reflecting revenue from The Saint June[148](index=148&type=chunk) - Operating income for Leasing Operations increased significantly to **$6.3 million** in Q2 2025 and **$8.3 million** for the first six months of 2025[148](index=148&type=chunk) - A **$5.0 million** pre-tax gain was recognized from the sale of the West Killeen Market project in Q2 2025, and an additional **$0.2 million** deferred gain related to The Oaks at Lakeway was recognized in Q1 2025[150](index=150&type=chunk) [Non-Operating Results](index=32&type=section&id=Non-Operating%20Results) This section discusses financial items outside of core operations, including interest costs, other income/loss, and income taxes - Interest costs (before capitalization) totaled **$3.9 million** in Q2 2025 and **$7.6 million** for the first six months of 2025. All debt is variable-rate, with rates decreasing over the past year due to refinancings and overall market declines[151](index=151&type=chunk)[152](index=152&type=chunk) - Capitalized interest totaled **$3.6 million** in Q2 2025 and **$7.4 million** for the first six months of 2025, primarily related to development activities at Barton Creek properties (Holden Hills Phases 1 and 2) and The Saint George[153](index=153&type=chunk) - Other (loss) income, net, in both 2025 periods includes a **$1.0 million** charge for the estimated cost to repair water leak damage at The Saint George[154](index=154&type=chunk) - The provision for income taxes was **$457 thousand** in Q2 2025 and **$487 thousand** for the first six months of 2025, an increase from comparable 2024 periods[155](index=155&type=chunk) - Total comprehensive loss attributable to noncontrolling interests increased to **$2.6 million** in Q2 2025 and **$3.4 million** for the first six months of 2025, primarily due to initial operating expenses for The Saint George Apartments, L.P[156](index=156&type=chunk) Operating (Loss) Income (in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Real Estate Operations | $(3,536) | $(839) | $(5,038) | $5,962 | | Leasing Operations | $6,334 | $1,761 | $8,292 | $3,110 | | General and administrative expenses | $(3,557) | $(3,842) | $(7,608) | $(8,307) | | **Operating (loss) income** | **$(759)** | **$(2,920)** | **$(4,354)** | **$765** | Net Income (Loss) Attributable to Common Stockholders (in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) attributable to common stockholders | $260 | $(1,725) | $(2,615) | $2,827 | [CAPITAL RESOURCES AND LIQUIDITY](index=33&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) This section assesses the company's financial resources, cash flow, debt arrangements, and ability to meet its short-term and long-term obligations [Comparison of Cash Flows for the Six Months Ended June 30, 2025 and 2024](index=33&type=section&id=Comparison%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's cash flow activities across operating, investing, and financing categories for the reported periods - Cash used in operating activities increased to **$15.2 million** for the first six months of 2025, compared to **$1.7 million** in 2024, mainly due to higher expenditures for real estate development[159](index=159&type=chunk) - Cash provided by investing activities was **$5.8 million** for the first six months of 2025, a shift from **$16.5 million** used in 2024, driven by **$13.0 million** from the sale of West Killeen Market and MUD reimbursements[160](index=160&type=chunk) - Cash provided by financing activities totaled **$48.6 million** for the first six months of 2025, significantly up from **$0.2 million** used in 2024, primarily due to a **$47.8 million** noncontrolling interest contribution for Holden Hills Phase 2[161](index=161&type=chunk)[162](index=162&type=chunk) - Stratus acquired **26,819 shares** of its common stock for **$0.5 million** under its share repurchase program in the first six months of 2025[164](index=164&type=chunk) [Revolving Credit Facility and Other Financing Arrangements](index=34&type=section&id=Revolving%20Credit%20Facility%20and%20Other%20Financing%20Arrangements) This section details the company's credit facilities, outstanding debt, and compliance with financial covenants - As of June 30, 2025, Stratus had **$59.4 million** in cash and cash equivalents, **$1.0 million** in restricted cash, and **$17.7 million** available under its revolving credit facility[165](index=165&type=chunk) - Total debt outstanding was **$201.3 million** at June 30, 2025, an increase from **$196.7 million** at December 31, 2024[166](index=166&type=chunk) - The Comerica Bank revolving credit facility's maximum borrowing amount was reduced to **$29.3 million**, with **$11.6 million** committed in letters of credit, and the Holden Hills Phase 2 property was removed from its borrowing base[166](index=166&type=chunk) - Operating loans outstanding to Stratus Block 150, L.P. totaled **$7.2 million** as of June 30, 2025, including a **$1.5 million** loan made in Q1 2025[168](index=168&type=chunk) - The Lantana Place construction loan was refinanced in January 2025 for **$29.8 million**, maturing February 2029, with a variable interest rate (SOFR + **2.35%**)[170](index=170&type=chunk) - The Jones Crossing loan was refinanced in March 2025 for **$24.0 million**, maturing April 2028, with a variable interest rate (SOFR + **1.95%**) and a required interest rate cap[171](index=171&type=chunk) - The Annie B land loan's maturity was extended to September 1, 2027, in July 2025[172](index=172&type=chunk) - Stratus was in compliance with all financial covenants as of June 30, 2025[174](index=174&type=chunk) - Stratus typically guarantees all or a significant portion of project loans, with specific limitations for Kingwood Place, Jones Crossing, Lantana Place, The Saint June (**50%**), and The Saint George (**25%**)[177](index=177&type=chunk) [Debt Maturities and Other Contractual Obligations](index=36&type=section&id=Debt%20Maturities%20and%20Other%20Contractual%20Obligations) This section outlines the schedule of the company's debt maturities and other significant contractual commitments - The Saint June construction loan matures on October 2, 2025, with an option for a **12-month** extension; Stratus is evaluating refinancing or extension options[180](index=180&type=chunk) Total Debt Maturities (in Thousands) | Year | Amount | | :--------- | :------- | | 2025 | $43,931 | | 2026 | $70,894 | | 2027 | $33,365 | | 2028 | $24,385 | | 2029 | $28,757 | | Thereafter | $0 | | **Total** | **$201,332** | Weighted-Average Interest Rates (Three Months Ended June 30, 2025) | Loan Type | Weighted-Average Interest Rate | | :-------------------------------- | :----------------------------- | | Comerica Bank revolving credit facility | 7.42 % | | Kingwood Place loan | 6.12 % | | Lantana Place loan | 6.67 % | | Jones Crossing loan | 6.27 % | | The Annie B land loan | 7.42 % | | The Saint George (Construction) | 6.77 % | | The Saint June (Construction) | 6.67 % | | Holden Hills Phase 1 (Construction) | 7.42 % | [Liquidity Outlook](index=37&type=section&id=Liquidity%20Outlook) This section provides management's expectations regarding the company's future cash position and ability to fund its operations and commitments - Firm commitments totaled approximately **$5.8 million** at June 30, 2025, primarily related to Holden Hills Phase 1 construction[183](index=183&type=chunk) - Stratus expects to make a **$430 thousand** capital contribution to The Saint George partnership and up to **$2.8 million** in operating loans to Stratus Block 150, L.P. over the next **12 months**[183](index=183&type=chunk) - Stabilized retail and multi-family properties are projected to generate sufficient cash flow to cover debt service over the next **12 months**[184](index=184&type=chunk) - Current cash (**$59.4 million**) and revolving credit facility availability (**$17.7 million**) are expected to be sufficient to fund projected cash requirements for the next **12 months**[184](index=184&type=chunk) - Stratus expects to successfully extend or refinance outstanding debt maturing in the next **12 months**[185](index=185&type=chunk) - Long-term liquidity depends on future operating and financial performance, including profitable property sales/leases and debt refinancing, subject to economic and market factors[187](index=187&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=38&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section discusses the significant accounting judgments and estimates that are crucial to the company's financial reporting - There have been no changes in critical accounting estimates from those discussed in the 2024 Form 10-K[189](index=189&type=chunk) [RECENT ACCOUNTING STANDARDS](index=38&type=section&id=RECENT%20ACCOUNTING%20STANDARDS) This section provides updates on newly issued accounting pronouncements and their potential impact on the company's financial statements - The FASB issued ASU No. **2024-03**, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses," effective for fiscal years beginning after December 15, 2026. Stratus is currently assessing its adoption timing and effect[191](index=191&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=38&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section describes the company's off-balance sheet activities and their potential financial implications - Stratus engages in certain off-balance sheet activities in the ordinary course of business, as discussed in "Capital Resources and Liquidity" and Note **9** to its consolidated financial statements in the 2024 Form 10-K[193](index=193&type=chunk) [CAUTIONARY STATEMENT](index=38&type=section&id=CAUTIONARY%20STATEMENT) This section provides important disclaimers regarding forward-looking statements and the inherent risks and uncertainties in the report - This Quarterly Report contains forward-looking statements regarding future performance, including plans, projections, and expectations related to market conditions, debt obligations, development projects, and financial performance[195](index=195&type=chunk) - Comerica Bank debt agreements restrict common stock repurchases exceeding **$1.0 million** or dividend payments without prior written consent, which was obtained for the current **$25.0 million** share repurchase program[196](index=196&type=chunk) - Actual results may differ materially from forward-looking statements due to various risk factors, including business strategy implementation, cost increases, inflation, interest rates, tariffs, debt repayment ability, market value declines, and regulatory changes[198](index=198&type=chunk) - Stratus cautions investors that it undertakes no obligation to update its forward-looking statements[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No quantitative or qualitative disclosures about market risk are applicable for the reported period - This item is not applicable to the registrant[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms effective disclosure controls and procedures as of June 30, 2025, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[202](index=202&type=chunk) - There was no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2025[203](index=203&type=chunk) PART II. OTHER INFORMATION This part contains additional non-financial disclosures, including risk factors, equity sales, and exhibits [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Supplements risk factors, focusing on potential adverse effects of changes in U.S. tariffs and trade policies on business - Changes in U.S. tariffs and trade policies could adversely affect Stratus' business[205](index=205&type=chunk) - Higher tariffs on construction materials (e.g., steel, lumber) are likely to disrupt supply chains and increase construction costs[205](index=205&type=chunk) - Uncertainties regarding future U.S. tariffs and trade policies could lead to higher inflation, interest rates, slower economic growth, increased capital costs, lower demand from real estate buyers, and higher tenant default rates[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered equity sales and summarizes common stock repurchases under the expanded $25.0 million program - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[206](index=206&type=chunk) - The Board approved an increase in the share repurchase program from **$5.0 million** to **$25.0 million** on June 13, 2025[207](index=207&type=chunk) - In June 2025, **6,125 shares** were repurchased at an average price of **$18.94** per share, with **$22.9 million** remaining available under the program as of June 30, 2025[207](index=207&type=chunk) - Through August 8, 2025, Stratus acquired **135,620 shares** for a total cost of **$3.0 million** at an average price of **$22.13** per share, with **$22.0 million** remaining available[207](index=207&type=chunk) Summary of Share Repurchases (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :--------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | April 1, 2025 through April 30, 2025 | — | $— | — | $3,000,635 | | May 1, 2025 through May 31, 2025 | — | $— | — | $3,000,635 | | June 1, 2025 through June 30, 2025 | 6,125 | $18.94 | 6,125 | $22,884,598 | | **Total** | **6,125** | **$18.94** | **6,125** | **$22,884,598** | [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or officer of Stratus adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[208](index=208&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with Form 10-Q, including agreements, certifications, and XBRL documents - Key exhibits filed with this Form 10-Q include the Limited Partnership Agreement of Holden Hills Phase 2, L.P., the First Amendment to Amended and Restated Limited Partnership Agreement of Holden Hills, L.P., certifications of principal executive and financial officers, and various XBRL documents[209](index=209&type=chunk) [Signature](index=42&type=section&id=Signature) Official signature of Stratus Properties Inc. by its SVP and CFO, certifying the report filing on August 12, 2025 - The report was signed by Erin D. Pickens, Senior Vice President and Chief Financial Officer, on behalf of Stratus Properties Inc. on August 12, 2025[214](index=214&type=chunk)

[Company Overview and Highlights](index=1&type=section&id=Company%20Overview%20and%20Highlights) Stratus Properties Inc. achieved a Q2 2025 net income turnaround, fueled by real estate sales, asset gains, and an expanded stock repurchase program [Highlights and Recent Developments](index=1&type=section&id=Highlights%20and%20Recent%20Developments) Q2 2025 highlights include net income turnaround, driven by real estate sales, asset gains, project completions, and an expanded stock repurchase program - **Q2 and Six Months 2025 Financial Highlights** | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) Attributable to Common Stockholders | $0.3 million | $(1.7) million | $(2.6) million | $2.8 million | | Diluted Net Income (Loss) Per Share | $0.03 | $(0.21) | $(0.32) | $0.35 | | Total Revenue | $11.6 million | $8.5 million | $16.6 million | $35.0 million | | EBITDA | $(0.2) million | $(1.3) million | $(2.5) million | $3.9 million | - In Q2 2025, the company formed a joint venture with a third-party equity investor to develop the Holden Hills Phase 2 project, receiving a **$47.8 million cash distribution**[3](index=3&type=chunk) - In Q2 2025, the company sold the West Killeen Market retail project, generating approximately **$5.0 million in pre-tax gains**[3](index=3&type=chunk) - As of June 30, 2025, the company held **$59.4 million in cash and cash equivalents**, with its revolving credit facility undrawn[3](index=3&type=chunk) - The board approved increasing the stock repurchase program from **$5.0 million to $25.0 million**, with **$3.0 million in stock repurchased** as of August 8, 2025[3](index=3&type=chunk) [CEO Statement](index=3&type=section&id=CEO%20Statement) CEO highlighted H1 2025 progress: successful joint ventures, asset sales, and project completions, enhancing cash and flexibility - The company successfully formed the Holden Hills Phase 2 joint venture in the first six months of 2025, receiving a **$47.8 million cash distribution**[4](index=4&type=chunk) - The company sold the West Killeen Market retail project and two Amarra Villas homes, totaling **$20.1 million**[4](index=4&type=chunk) - Construction of The Saint George multi-family project and the final two Amarra Villas homes was completed, with Holden Hills Phase 1 infrastructure substantially finished[4](index=4&type=chunk) - An enhanced cash position provides the board flexibility to explore various attractive alternatives to create shareholder value[4](index=4&type=chunk) [Consolidated Financial Performance](index=3&type=section&id=Consolidated%20Financial%20Performance) Q2 2025 saw revenue and net income growth, but H1 revenue and net income declined year-over-year due to prior large land sales, with negative EBITDA [Summary Financial Results](index=3&type=section&id=Summary%20Financial%20Results) Q2 2025 revenue and net income increased, but H1 saw declines due to prior large land sales, with EBITDA turning negative - **Summary of Consolidated Financial Performance (USD thousands)** | Metric (USD thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | **Revenue** | | | | | | Real Estate Operations | 6,798 | 3,629 | 6,823 | 25,752 | | Leasing Operations | 4,807 | 4,861 | 9,825 | 9,245 | | **Total Consolidated Revenue** | **11,605** | **8,490** | **16,648** | **34,997** | | **Operating Income (Loss)** | | | | | | Real Estate Operations | (3,536) | (839) | (5,038) | 5,962 | | Leasing Operations | 6,334 | 1,761 | 8,292 | 3,110 | | General and Administrative Expenses | (3,557) | (3,842) | (7,608) | (8,307) | | **Total Consolidated Operating Income (Loss)** | **(759)** | **(2,920)** | **(4,354)** | **765** | | **Net Income (Loss)** | **(2,295)** | **(2,778)** | **(6,052)** | **919** | | Net Income (Loss) Attributable to Common Stockholders | 260 | (1,725) | (2,615) | 2,827 | | Diluted Net Income (Loss) Per Share | 0.03 | (0.21) | (0.32) | 0.35 | | EBITDA | (185) | (1,332) | (2,518) | 3,868 | [Detailed Results of Operations](index=4&type=section&id=Detailed%20Results%20of%20Operations) Q2 2025 total revenue increased year-over-year, driven by real estate sales; leasing revenue stable, with a pre-tax gain from asset sale - Total revenue for Q2 2025 was **$11.6 million**, an increase of **$3.1 million** from **$8.5 million** in Q2 2024[7](index=7&type=chunk) - Real Estate Operations revenue increased by **$3.2 million**, primarily due to the sale of **two Amarra Villas homes ($6.8 million)** in Q2 2025, compared to **one home ($3.6 million)** in Q2 2024[7](index=7&type=chunk) - Leasing Operations revenue remained flat in Q2 2025 compared to the same period in 2024[8](index=8&type=chunk) - Operating income from Leasing Operations includes approximately **$5.0 million in pre-tax gains** from the sale of West Killeen Market[8](index=8&type=chunk) - The Saint George multi-family residential project was completed and commenced leasing operations in Q2 2025[8](index=8&type=chunk) [Financial Position and Capital Management](index=4&type=section&id=Financial%20Position%20and%20Capital%20Management) As of June 30, 2025, cash and equivalents significantly increased from the Holden Hills Phase 2 JV, with slight debt rise and undrawn credit [Debt and Liquidity](index=4&type=section&id=Debt%20and%20Liquidity) As of June 30, 2025, cash and equivalents significantly increased from Holden Hills Phase 2 JV distribution, with slight debt rise and undrawn credit - **Debt and Liquidity Overview (USD thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Consolidated Debt | 199,400 | 194,900 | | Consolidated Cash and Cash Equivalents | 59,400 | 20,200 | - Cash and cash equivalents significantly increased, primarily due to a **$47.8 million distribution** received from the Holden Hills Phase 2 joint venture in Q2 2025[9](index=9&type=chunk) - As of June 30, 2025, the company had **$17.7 million available** under its revolving credit facility, with no amounts drawn[10](index=10&type=chunk) [Capital Expenditures and Real Estate Development](index=4&type=section&id=Capital%20Expenditures%20and%20Real%20Estate%20Development) H1 2025 saw reduced real estate development and capital expenditures, focusing on Holden Hills Phase 1 and The Saint George projects - **Capital Expenditures and Real Estate Development (USD thousands)** | Metric | H1 2025 | H1 2024 | | :------------------------------------------------- | :------------ | :------------ | | Purchases and Development of Real Estate Properties and Capital Expenditures (Total) | 21,600 | 32,500 | - Investments primarily focused on the development of Holden Hills Phase 1 and The Saint George[11](index=11&type=chunk) [Share Repurchase Program](index=4&type=section&id=Share%20Repurchase%20Program) Board significantly increased share repurchase authorization to $25.0 million, reflecting enhanced financial flexibility post-asset sales and JV - The stock repurchase program authorization increased from **$5.0 million to $25.0 million**[12](index=12&type=chunk) - As of August 8, 2025, the company repurchased **135,620 shares of common stock** at a total cost of **$3.0 million**, averaging **$22.13 per share**[12](index=12&type=chunk) - An additional **$22.0 million** remains available under the repurchase program[12](index=12&type=chunk) [Business Strategy and Company Profile](index=5&type=section&id=Business%20Strategy%20and%20Company%20Profile) Board is evaluating cash use from Holden Hills Phase 2 JV and asset sales, considering repurchases, deleveraging, reinvestment, or shareholder returns [Strategy](index=5&type=section&id=Strategy) Board explores cash use opportunities: stock repurchases, deleveraging, project reinvestment, and/or other shareholder returns - The board is exploring opportunities for cash utilization, including **stock repurchases, deleveraging, reinvestment in the project pipeline, and/or other cash returns to shareholders**[14](index=14&type=chunk) [About Stratus](index=5&type=section&id=About%20Stratus) Stratus Properties Inc. develops, manages, leases, and sells multi-family, single-family, and commercial real estate in Austin, Texas and other markets - The company's primary business involves the ownership, development, management, leasing, and sale of multi-family, single-family, and commercial real estate in the Austin, Texas area and other specific markets[15](index=15&type=chunk) - The company owns a portfolio of approximately **1,500 acres** of commercial and residential projects under development or held for development[15](index=15&type=chunk) - Revenue and cash flow are primarily generated from the sale of developed and undeveloped properties, leasing of retail, mixed-use, and multi-family properties, and development and asset management fees[15](index=15&type=chunk) [Forward-Looking Statements and Non-GAAP Measures](index=6&type=section&id=Forward-Looking%20Statements%20and%20Non-GAAP%20Measures) This release contains forward-looking statements on future performance, influenced by inflation, interest rates, supply chain, debt, real estate markets, and regulatory risks [Cautionary Statement](index=6&type=section&id=Cautionary%20Statement) Forward-looking statements are subject to risks like inflation, interest rates, supply chain, debt, real estate markets, and regulatory changes; actual results may differ - Forward-looking statements cover expectations regarding **inflation, interest rates, supply chain constraints, debt repayment, bank credit, future cash flows, Austin and Texas real estate markets, development projects (including costs and completion times), asset sale plans, MUD reimbursements, regulatory matters (such as the ETJ bill), leasing activities, tax rates, capital expenditures, joint ventures, and future cash returns to shareholders**[17](index=17&type=chunk) - Under the Comerica Bank debt agreement, the company cannot repurchase more than **$1.0 million** of common stock or pay dividends without written consent, but has obtained consent for the current **$25.0 million** stock repurchase program[18](index=18&type=chunk) - Actual results may differ materially from forward-looking statements due to various important factors, including **ability to implement business strategies, increased operating and construction costs, rising inflation and interest rates, debt repayment capacity, decreased market values, changes in real estate demand, economic and geopolitical conditions, financing availability, loss of key personnel, joint venture risks, public health crises, MUD reimbursement eligibility, industry risks, changes in the regulatory environment, and environmental and litigation risks**[19](index=19&type=chunk) [Non-GAAP Measure: EBITDA Explanation](index=6&type=section&id=Non-GAAP%20Measure%3A%20EBITDA%20Explanation) EBITDA, a non-GAAP measure, helps assess recurring operating performance by excluding financing impacts, but should not supersede GAAP measures and may not be comparable - **EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)** is a non-GAAP financial measure used to assess the company's recurring operating performance, particularly its profitability after excluding the impact of financing and similar decisions[21](index=21&type=chunk) - Management believes EBITDA helps investors evaluate the company's business, but it should not be considered more significant than GAAP measures and may not be comparable[21](index=21&type=chunk) [Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) Q2 2025 saw a net income turnaround to $0.3 million, from a $1.7 million loss, though H1 2025 recorded a $2.6 million net loss, down from prior year's $2.8 million net income [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q2 2025 saw a net income turnaround to $0.3 million, from a $1.7 million loss, though H1 2025 recorded a $2.6 million net loss, down from prior year's $2.8 million net income - **Summary of Consolidated Statements of Comprehensive Income (Loss) (USD thousands)** | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Total Revenue | 11,605 | 8,490 | 16,648 | 34,997 | | Cost of Sales | 13,807 | 7,568 | 18,594 | 25,925 | | Gain on Sale of Assets | (5,000) | — | (5,200) | — | | Operating Income (Loss) | (759) | (2,920) | (4,354) | 765 | | Net Income (Loss) and Total Comprehensive Income (Loss) | (2,295) | (2,778) | (6,052) | 919 | | Net Income (Loss) and Total Comprehensive Income (Loss) Attributable to Common Stockholders | 260 | (1,725) | (2,615) | 2,827 | | Diluted Net Income (Loss) Per Share | 0.03 | (0.21) | (0.32) | 0.35 | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased from year-end 2024, driven by higher cash and investment properties, with slight liability growth and increased equity - **Summary of Consolidated Balance Sheets (USD thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and Cash Equivalents | 59,386 | 20,178 | | Real Estate Held for Sale | 11,618 | 11,211 | | Real Estate Under Development | 175,916 | 274,105 | | Land Held for Development | 76,620 | 65,009 | | Investment Properties, Net | 228,112 | 136,252 | | **Total Assets** | **574,821** | **532,606** | | **Liabilities** | | | | Debt | 199,434 | 194,853 | | **Total Liabilities** | **236,497** | **235,039** | | **Equity** | | | | Total Stockholders' Equity | 191,908 | 194,705 | | Noncontrolling Interests in Subsidiaries | 146,416 | 102,862 | | **Total Equity** | **338,324** | **297,567** | - Cash and cash equivalents increased from **$20.2 million** at year-end 2024 to **$59.4 million** as of June 30, 2025[27](index=27&type=chunk) - Investment properties, net, increased from **$136.3 million** at year-end 2024 to **$228.1 million** as of June 30, 2025[27](index=27&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw increased operating cash outflow, a shift to investing cash inflow, and significant financing cash flow from noncontrolling interests, boosting period-end cash - **Summary of Consolidated Statements of Cash Flows (USD thousands)** | Metric | H1 2025 | H1 2024 | | :--------------------------------------------------------- | :------------ | :------------ | | Net Cash Used in Operating Activities | (15,179) | (1,716) | | Net Cash Provided by (Used in) Investing Activities | 5,811 | (16,542) | | Net Cash Provided by (Used in) Financing Activities | 48,597 | (213) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 39,229 | (18,471) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | 60,383 | 13,961 | - Cash flow from financing activities significantly increased, primarily including **$59.9 million in project loan borrowings** and **$47.8 million in noncontrolling interest contributions**[29](index=29&type=chunk) - Cash flow from investing activities shifted from a net outflow of **$16.5 million** in the first six months of 2024 to a net inflow of **$5.8 million** in the first six months of 2025, primarily due to **$13.0 million in proceeds from asset sales**[29](index=29&type=chunk) [Business Segments Financial Information](index=11&type=section&id=Business%20Segments%20Financial%20Information) Stratus Properties Inc. operates two segments: Real Estate (ownership, development, sales) and Leasing (investment properties), with CEO assessing performance by segment profit [Business Segments Overview](index=11&type=section&id=Business%20Segments%20Overview) Stratus Properties Inc. has two segments: Real Estate (ownership, development, sales) and Leasing (investment properties), with CEO evaluating performance by segment profit - The company has two reportable operating segments: **Real Estate Operations** and **Leasing Operations**[31](index=31&type=chunk) - Real Estate Operations include properties at various stages of development, involving ownership, development, and sales[31](index=31&type=chunk) - Leasing Operations include real estate assets held for investment and lease, such as The Saint George, The Saint June, and the retail portion of Lantana Place[33](index=33&type=chunk) - The CEO measures segment performance based on segment profit, excluding general and administrative expenses[34](index=34&type=chunk) [Segment Financial Information - Three Months Ended June 30, 2025](index=12&type=section&id=Segment%20Financial%20Information%20-%20Three%20Months%20Ended%20June%2030%2C%202025) Q2 2025: Real Estate Ops had $6.8M revenue but $3.5M loss; Leasing Ops had $4.8M revenue and $6.3M profit, boosted by a $5.0M asset sale gain - **Segment Financial Information - Three Months Ended June 30, 2025 (USD thousands)** | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 6,798 | 4,807 | 11,605 | | Cost of Sales | (6,244) | — | (6,244) | | Gain on Sale of Assets | — | 5,000 | 5,000 | | Segment Income (Loss) | (3,536) | 6,334 | 2,798 | | Capital Expenditures and Real Estate Development Purchases | 7,185 | 2,634 | 9,819 | - Real Estate Operations recorded a **$1.0 million accounts receivable write-off expense** in Q2 2025[37](index=37&type=chunk) [Segment Financial Information - Three Months Ended June 30, 2024](index=13&type=section&id=Segment%20Financial%20Information%20-%20Three%20Months%20Ended%20June%2030%2C%202024) Q2 2024: Real Estate Ops generated $3.6M revenue with an $0.8M loss; Leasing Ops reported $4.9M revenue and a $1.8M profit - **Segment Financial Information - Three Months Ended June 30, 2024 (USD thousands)** | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 3,629 | 4,861 | 8,490 | | Cost of Sales | (3,173) | — | (3,173) | | Segment Income (Loss) | (839) | 1,761 | 922 | | Capital Expenditures and Real Estate Development Purchases | 7,360 | 8,001 | 15,361 | [Segment Financial Information - Six Months Ended June 30, 2025](index=14&type=section&id=Segment%20Financial%20Information%20-%20Six%20Months%20Ended%20June%2030%2C%202025) H1 2025: Real Estate Ops had $6.8M revenue but $5.0M loss due to costs; Leasing Ops had $9.8M revenue and $8.3M profit, benefiting from asset sales - **Segment Financial Information - Six Months Ended June 30, 2025 (USD thousands)** | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 6,823 | 9,825 | 16,648 | | Cost of Sales | (6,244) | — | (6,244) | | Gain on Sale of Assets | — | 5,200 | 5,200 | | Segment Income (Loss) | (5,038) | 8,292 | 3,254 | | Capital Expenditures and Real Estate Development Purchases | 14,397 | 7,161 | 21,558 | - Real Estate Operations recorded a **$1.0 million accounts receivable write-off expense** in the first six months of 2025[42](index=42&type=chunk) - Leasing Operations' gain on asset sales includes a **$5.0 million pre-tax gain** from West Killeen Market and a **$0.2 million deferred gain** from The Oaks at Lakeway[43](index=43&type=chunk) [Segment Financial Information - Six Months Ended June 30, 2024](index=15&type=section&id=Segment%20Financial%20Information%20-%20Six%20Months%20Ended%20June%2030%2C%202024) H1 2024: Real Estate Ops generated $25.8M revenue and $6.0M profit from land sales; Leasing Ops reported $9.2M revenue and $3.1M profit - **Segment Financial Information - Six Months Ended June 30, 2024 (USD thousands)** | Metric | Real Estate Operations | Leasing Operations | Total | | :----------------------------------------- | :--------------------- | :----------------- | :---- | | Revenue from Unaffiliated Customers | 25,752 | 9,245 | 34,997 | | Cost of Sales | (17,122) | — | (17,122) | | Segment Income (Loss) | 5,962 | 3,110 | 9,072 | | Capital Expenditures and Real Estate Development Purchases | 16,317 | 16,142 | 32,459 | [Total Assets by Segment](index=15&type=section&id=Total%20Assets%20by%20Segment) As of June 30, 2025, Leasing Operations' total assets significantly increased, while Real Estate Operations' assets decreased, reflecting asset allocation shifts - **Total Assets by Segment (USD thousands)** | Segment | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Real Estate Operations | 271,985 | 342,089 | | Leasing Operations | 246,214 | 159,314 | | Corporate and Other | 56,622 | 12,613 | | **Total Assets** | **574,821** | **514,016** | - Leasing Operations assets increased from **$159.3 million** as of June 30, 2024, to **$246.2 million** as of June 30, 2025[46](index=46&type=chunk) - Real Estate Operations assets decreased from **$342.1 million** as of June 30, 2024, to **$272.0 million** as of June 30, 2025[46](index=46&type=chunk) [Reconciliation of Non-GAAP Measure](index=15&type=section&id=Reconciliation%20of%20Non-GAAP%20Measure) The company reconciles net income (loss) to EBITDA, showing negative EBITDA for Q2 and H1 2025, reflecting operating performance before interest, taxes, depreciation, and amortization [EBITDA Reconciliation](index=15&type=section&id=EBITDA%20Reconciliation) The company reconciles net income (loss) to EBITDA, showing negative EBITDA for Q2 and H1 2025, reflecting operating performance before interest, taxes, depreciation, and amortization - **EBITDA Reconciliation (USD thousands)** | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) | (2,295) | (2,778) | (6,052) | 919 | | Depreciation and Amortization | 1,376 | 1,402 | 2,770 | 2,803 | | Net Interest Expense | 277 | — | 277 | — | | Provision for Income Taxes | 457 | 44 | 487 | 146 | | **EBITDA** | **(185)** | **(1,332)** | **(2,518)** | **3,868** |