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** |

Core Viewpoint - Zacks Investment Research has initiated coverage of Stratus Properties Inc. with a Neutral recommendation, highlighting a combination of development potential and operational challenges [1] Group 1: Company Overview - Stratus Properties Inc. is a Texas-based real estate development and leasing company, positioned to unlock value through disciplined capital recycling and a substantial land bank in high-growth markets [2] - The company has recently refinanced major properties, resulting in over $12 million in cash and expanded credit capacity, as it shifts focus to new developments in Austin and surrounding areas [2] Group 2: Valuation and Asset Management - Asset sales have validated Stratus's valuation strategy, with the sale of West Killeen Market generating $7.8 million in net proceeds, exceeding the company's NAV estimate [3] - Management's ability to extract value and redeploy capital is further demonstrated through transactions involving Magnolia Place and Amarra Villas [3] Group 3: Development Pipeline - Stratus controls over 1,500 acres of entitled land, with projects like Holden Hills and The Saint George addressing housing demand in Austin [4] - Recent regulatory changes in Texas have eased permitting constraints, enhancing long-term development potential [4] Group 4: Financial Performance and Challenges - Revenues fell sharply in Q1 2025 to $5 million from $26.5 million a year earlier, leading to a $2.9 million quarterly net loss due to no property sales during the period [5] - The company faces high leverage with $210 million in floating-rate debt, exposing it to interest rate volatility and liquidity pressures, as indicated by negative operating cash flow in Q1 2025 [6] Group 5: Market Position and Investor Sentiment - Stratus's stock performance has lagged behind peers, trading at a discount to its underlying asset value, but with elevated valuation multiples relative to the broader sector [7] - The market appears to be pricing in execution risks and limited earnings visibility, warranting caution for investors [8]

Investor Presentation March 28, 2025 CAUTIONARY STATEMENT This presentation contains forward-looking statements in which Stratus discusses factors it believes may affect its future performance. Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to inflation, interest rates, tariffs, supply chain constraints, Stratus' ability to pay or refinance its debt obligations as they become due, availability of bank credit, Stratus ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements for the quarter ended March 31, 2025, include balance sheets, income statements, cash flows, and equity [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Consolidated Balance Sheets | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Cash and cash equivalents | $12,006 | $20,178 | | Real estate under development | $274,625 | $274,105 | | Land available for development | $76,312 | $65,009 | | Total assets | $534,581 | $532,606 | | Debt | $207,838 | $194,853 | | Total liabilities | $241,998 | $235,039 | | Total equity | $292,583 | $297,567 | [Consolidated Statements of Comprehensive (Loss) Income (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20(Unaudited)) Consolidated Statements of Comprehensive (Loss) Income | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Real estate operations revenue | $25 | $22,123 | | Leasing operations revenue | $5,018 | $4,384 | | Total revenues | $5,043 | $26,507 | | Operating (loss) income | $(3,595) | $3,685 | | Net (loss) income attributable to common stockholders | $(2,875) | $4,552 | | Basic net (loss) income per share | $(0.36) | $0.57 | | Diluted net (loss) income per share | $(0.36) | $0.56 | [Consolidated Statements of Cash Flows (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Net (loss) income | $(3,757) | $3,697 | | Net cash (used in) provided by operating activities | $(13,495) | $6,547 | | Net cash used in investing activities | $(4,693) | $(8,392) | | Net cash provided by (used in) financing activities | $9,991 | $(9,059) | | Net decrease in cash, cash equivalents and restricted cash | $(8,197) | $(10,904) | | Cash, cash equivalents and restricted cash at end of period | $12,957 | $21,528 | [Consolidated Statements of Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Equity%20(Unaudited)) Consolidated Statements of Equity | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Total stockholders' equity | $191,459 | $194,705 | | Noncontrolling interests in subsidiaries | $101,124 | $102,862 | | Total equity | $292,583 | $297,567 | - Total comprehensive loss for the three months ended March 31, 2025, was **$(3,757) thousand**, compared to total comprehensive income of **$3,697 thousand** for the same period in 2024[16](index=16&type=chunk) - In Q1 2025, the company repurchased **21 thousand shares** of common stock for **$(410) thousand**[16](index=16&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [1. GENERAL](index=7&type=section&id=1.%20GENERAL) - The unaudited condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and reflect normal recurring adjustments[18](index=18&type=chunk) - In Q1 2024, the CEO's son received a **$22 thousand** annual incentive award and had an annual salary of **$124 thousand** before resigning in September 2024, forfeiting PPIP awards[19](index=19&type=chunk) [2. EARNINGS PER SHARE](index=7&type=section&id=2.%20EARNINGS%20PER%20SHARE) Earnings Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net (loss) income attributable to common stockholders | $(2,875) thousand | $4,552 thousand | | Basic weighted-average shares outstanding | 8,037 thousand | 8,026 thousand | | Diluted weighted-average shares outstanding | 8,037 thousand | 8,151 thousand | | Basic net (loss) income per share | $(0.36) | $0.57 | | Diluted net (loss) income per share | $(0.36) | $0.56 | - For Q1 2025, **161 thousand shares** associated with RSUs were anti-dilutive due to a net loss, compared to **21 thousand** anti-dilutive shares in Q1 2024[20](index=20&type=chunk) [3. LIMITED PARTNERSHIPS](index=7&type=section&id=3.%20LIMITED%20PARTNERSHIPS) - Stratus holds indirect equity interests ranging from **10.0% to 60.0%** in five limited partnerships (Holden Hills, The Saint George Apartments, Stratus Block 150, The Saint June, Stratus Kingwood Place)[21](index=21&type=chunk) - Stratus made operating loans of **$1.5 million** to Stratus Block 150, L.P. in Q1 2025, bringing the total outstanding to **$7.2 million** as of March 31, 2025[22](index=22&type=chunk) Limited Partnerships Financial Summary | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Total assets | $278,518 | $276,756 | | Total liabilities | $153,109 | $151,433 | | Net assets | $125,409 | $125,323 | [4. ASSET SALES](index=9&type=section&id=4.%20ASSET%20SALES) - In Q1 2025, **$200 thousand** of a previously deferred gain from The Oaks at Lakeway sale was recognized due to a sub-lease, with the remaining deferred gain at **$1.5 million** as of March 31, 2025[28](index=28&type=chunk) - In Q1 2024, Stratus sold two Amarra Villas homes for **$7.6 million** and 47 acres of undeveloped land at Magnolia Place for **$14.5 million**, which led to the repayment of an **$8.8 million** construction loan[29](index=29&type=chunk) [5. FAIR VALUE MEASUREMENTS](index=9&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) Fair Value of Interest Rate Caps | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Carrying Value (Interest rate caps) | $11 | $19 | | Fair Value (Interest rate caps) | $11 | $19 | - Stratus Kingwood Place, L.P. entered into a **$33.0 million** interest rate cap in November 2024, and College Station 1892 Properties, L.L.C. entered into a **$24.0 million** interest rate cap in March 2025[32](index=32&type=chunk) - Interest rate caps are derivative instruments not qualifying for hedge accounting, with fair values measured using market observable inputs (**Level 2**)[33](index=33&type=chunk) [6. DEBT AND EQUITY](index=10&type=section&id=6.%20DEBT%20AND%20EQUITY) Debt Summary | Debt Type | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------- | :------------------------- | :-------------------------- | | Comerica Bank revolving credit facility | $4,000 | $0 | | Kingwood Place loan | $32,453 | $32,408 | | Lantana Place loan | $29,400 | $25,509 | | Jones Crossing loan | $23,554 | $22,428 | | The Annie B land loan | $11,950 | $12,568 | | Construction loans | $104,719 | $105,309 | | Amarra Villas credit facility | $1,662 | $1,631 | | Total debt | $207,838 | $194,853 | - The Comerica Bank revolving credit facility was amended in March 2025, extending its maturity date to **March 27, 2027**, and lowering the interest rate[39](index=39&type=chunk) - In January 2025, the Lantana Place construction loan was refinanced with a **$29.8 million** term loan, generating approximately **$3.0 million** in net cash proceeds[41](index=41&type=chunk) - In Q1 2025, Stratus acquired **20,694 shares** of its common stock for **$0.4 million** under its **$5.0 million** share repurchase program, with **$3.0 million** remaining available[47](index=47&type=chunk) [7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN](index=12&type=section&id=7.%20PROFIT%20PARTICIPATION%20INCENTIVE%20PLAN%20AND%20LONG-TERM%20INCENTIVE%20PLAN) - The Profit Participation Incentive Plan (PPIP) and Long-Term Incentive Plan (LTIP) provide economic incentives tied to the success of designated development projects[48](index=48&type=chunk) PPIP and LTIP Costs | Cost Type | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :-------- | :------------------------------------------ | :------------------------------------------ | | Charged to general and administrative expense | $68 | $83 | | Capitalized to project development costs | $8 | $111 | | Total PPIP and LTIP costs | $76 | $194 | - The accrued liability for the PPIP and LTIP totaled **$1.9 million** at both March 31, 2025, and December 31, 2024[51](index=51&type=chunk) [8. INCOME TAXES](index=13&type=section&id=8.%20INCOME%20TAXES) - Stratus has a **full valuation allowance** against its U.S. Federal net deferred tax assets as of both March 31, 2025, and December 31, 2024[52](index=52&type=chunk) - The consolidated effective income tax rate was **(1)% for Q1 2025** and **3% for Q1 2024**, primarily due to state income taxes, noncontrolling interests, the valuation allowance, and executive compensation limitation[54](index=54&type=chunk) [9. BUSINESS SEGMENTS](index=13&type=section&id=9.%20BUSINESS%20SEGMENTS) - Stratus operates in two reportable segments: **Real Estate Operations** (entitlement, development, and sale of properties) and **Leasing Operations** (leasing developed retail, mixed-use, and multi-family properties)[55](index=55&type=chunk) Segment Revenues | Segment | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :------ | :------------------------------------------ | :------------------------------------------ | | Real Estate Operations Revenue | $25 | $22,123 | | Leasing Operations Revenue | $5,018 | $4,384 | | Total Revenues | $5,043 | $26,507 | Segment Profit (Loss) | Segment | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :------ | :------------------------------------------ | :------------------------------------------ | | Real Estate Operations Segment (loss) profit | $(1,502) | $6,801 | | Leasing Operations Segment profit | $1,958 | $1,349 | | Total Segment (loss) profit | $456 | $8,150 | Segment Assets | Segment | March 31, 2025 (Thousands) | March 31, 2024 (Thousands) | | :------ | :------------------------- | :------------------------- | | Real Estate Operations | $371,355 | $329,062 | | Leasing Operations | $151,950 | $160,759 | | Corporate and other | $11,276 | $19,696 | | Total assets | $534,581 | $509,517 | [10. SUBSEQUENT EVENTS](index=15&type=section&id=10.%20SUBSEQUENT%20EVENTS) - A water leak occurred at The Saint George multi-family project in April 2025, with estimated remediation and repair costs of **$1.9 million**[62](index=62&type=chunk) - Costs to The Saint George Apartments, L.P., after insurance and general contractor coverage, are currently estimated to be **less than $1 million**[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, business strategy, and capital resources for the quarter ended March 31, 2025 [OVERVIEW](index=16&type=section&id=OVERVIEW) - Stratus is a residential and retail-focused real estate company with headquarters in Austin, Texas, engaged in entitlement, development, management, leasing, and sale of properties[65](index=65&type=chunk) - The company's development portfolio consists of approximately **1,500 acres** of commercial, multi-family, and single-family residential projects under development or held for future use[65](index=65&type=chunk) [BUSINESS STRATEGY](index=16&type=section&id=BUSINESS%20STRATEGY) - Stratus' primary business objective is to create stockholder value by developing and enhancing properties for sale or lease, focusing on residential and residential-centric mixed-use projects in Austin and other select Texas markets[67](index=67&type=chunk) - The company utilizes project-level debt and third-party equity capital through joint ventures, with potential returns increasing above its relative equity interest as negotiated hurdles are achieved[69](index=69&type=chunk) - As of March 31, 2025, Stratus had repurchased **$2.0 million** of its shares under a new **$5.0 million** share repurchase program approved in November 2023[68](index=68&type=chunk)[77](index=77&type=chunk) - Consolidated cash totaled **$12.0 million** and **$34.5 million** was available under the revolving credit facility as of March 31, 2025[73](index=73&type=chunk) - In Q4 2024 and Q1 2025, Stratus refinanced several project loans (The Saint June, Kingwood Place, Lantana Place, Jones Crossing) at lower interest rates, generating additional cash proceeds[75](index=75&type=chunk) - A contract was entered into to sell the West Killeen Market retail property for **$13.3 million**, expected to generate approximately **$7.7 million** in pre-tax net cash proceeds[77](index=77&type=chunk) [OVERVIEW OF FINANCIAL RESULTS](index=19&type=section&id=OVERVIEW%20OF%20FINANCIAL%20RESULTS) Financial Results Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total revenues | $5,043 | $26,507 | | Net (loss) income attributable to common stockholders | $(2,875) | $4,552 | | Diluted net (loss) income per share | $(0.36) | $0.56 | - The **$22.1 million decrease** in Real Estate Operations revenue in Q1 2025 was due to no property sales, compared to **$14.5 million** from Magnolia Place land and **$7.6 million** from Amarra Villas homes in Q1 2024[83](index=83&type=chunk) - Leasing Operations revenue increased by **$634 thousand** in Q1 2025, mainly from The Saint June's lease-up, partially offset by the sale of Magnolia Place – Retail[83](index=83&type=chunk) [RECENT DEVELOPMENT ACTIVITIES](index=19&type=section&id=RECENT%20DEVELOPMENT%20ACTIVITIES) [Recent Residential Activities](index=19&type=section&id=Recent%20Residential%20Activities) - Amarra Villas has three completed homes in inventory, with the last two homes expected to be completed in Q2 2025; **five homes remain available for sale** as of May 9, 2025[87](index=87&type=chunk) - The Saint June, a 182-unit multi-family project, **completed its lease-up** during 2024[88](index=88&type=chunk) - Construction on Holden Hills Phase 1 road and utility infrastructure is expected to be completed in Q2 2025, with home building/site sales anticipated in **late 2025**[90](index=90&type=chunk) - Holden Hills Phase 2 development plans are being adjusted for a **significant increase in development density** due to the ETJ Law[92](index=92&type=chunk) - The Saint George, a 316-unit multi-family project, had its first units available for occupancy in April 2025 and is expected to be completed in **Q2 2025**[94](index=94&type=chunk) [Recent Commercial Activities](index=21&type=section&id=Recent%20Commercial%20Activities) - Holden Hills Phase 2 commercial component plans are being adjusted due to the ETJ process[102](index=102&type=chunk) - West Killeen Market is under contract for sale for **$13.3 million**, expected to close in Q2 2025, generating approximately **$7.7 million** in pre-tax net cash proceeds[103](index=103&type=chunk) - As of March 31, 2025, Jones Crossing had signed leases for **substantially all** of its 154,092 square feet of completed retail space, and Lantana Place had signed leases for **substantially all** of its 99,377 square feet of retail space[103](index=103&type=chunk) [Potential Development Projects and Pipeline](index=22&type=section&id=Potential%20Development%20Projects%20and%20Pipeline) - Future development projects (The Annie B, Holden Hills Phase 2, The Saint Julia, Lakeway, College Station multi-family) will require **significant additional capital**, to be pursued through project-level debt and third-party equity[105](index=105&type=chunk) - There is uncertainty regarding final development plans and successful execution due to the nature and cost of approval/development processes and market demand[105](index=105&type=chunk) [Market Conditions](index=22&type=section&id=Market%20Conditions) - The real estate industry is experiencing **elevated construction and labor costs**, supply chain constraints, labor shortages, higher borrowing costs, and tightening bank credit[106](index=106&type=chunk) - The Federal Reserve lowered interest rates by **100 basis points** cumulatively between September and December 2024, but inflation remains above the 2% target[106](index=106&type=chunk) - Changes to U.S. tariffs and trade policies in Q1 2025 introduce uncertainties, potentially leading to **higher costs, limited capital availability, and lower demand**[106](index=106&type=chunk)[170](index=170&type=chunk) [RESULTS OF OPERATIONS](index=22&type=section&id=RESULTS%20OF%20OPERATIONS) [Real Estate Operations](index=23&type=section&id=Real%20Estate%20Operations) Real Estate Operations Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total revenues | $25 | $22,123 | | Cost of real estate sold | $0 | $(13,949) | | Operating (loss) income | $(1,502) | $6,801 | - **No developed or undeveloped property sales** occurred in Q1 2025, compared to sales of two Amarra Villas homes (**$7.6 million**) and 47 acres of Magnolia Place land (**$14.5 million**) in Q1 2024[114](index=114&type=chunk)[115](index=115&type=chunk) [Leasing Operations](index=24&type=section&id=Leasing%20Operations) Leasing Operations Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Rental revenue | $5,018 | $4,384 | | Operating income | $1,958 | $1,349 | - The increase in rental revenue was primarily due to increased revenue from The Saint June, which completed its lease-up in 2024, partially offset by a decrease in revenue from Magnolia Place – Retail, which was sold in Q3 2024[117](index=117&type=chunk) [Non-Operating Results](index=25&type=section&id=Non-Operating%20Results) - Interest costs (before capitalized interest) decreased to **$3.8 million** in Q1 2025 from **$4.0 million** in Q1 2024, primarily due to lower interest rates; all interest costs were capitalized[119](index=119&type=chunk)[120](index=120&type=chunk) - Provision for income taxes was **$30 thousand** in Q1 2025 and **$102 thousand** in Q1 2024[121](index=121&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=25&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) [Comparison of Cash Flows for the Three Months Ended March 31, 2025 and 2024](index=25&type=section&id=Comparison%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031,%202025%20and%202024) - Operating cash flow shifted from providing **$6.5 million** in Q1 2024 to using **$(13.5) million** in Q1 2025, primarily due to the absence of property sales[124](index=124&type=chunk) - Investing activities used **$4.7 million** in Q1 2025, down from **$8.4 million** in Q1 2024, mainly due to lower capital expenditures for The Saint George[125](index=125&type=chunk) - Financing activities provided **$10.0 million** in Q1 2025, compared to using **$(9.1) million** in Q1 2024, driven by **$4.0 million** in Comerica Bank revolving credit facility borrowings and **$9.1 million** net borrowings on project/term loans[126](index=126&type=chunk) [Revolving Credit Facility and Other Financing Arrangements](index=26&type=section&id=Revolving%20Credit%20Facility%20and%20Other%20Financing%20Arrangements) - As of March 31, 2025, Stratus had **$12.0 million** in cash and cash equivalents, **$1.0 million** in restricted cash, and **$34.5 million** available under its revolving credit facility[131](index=131&type=chunk) - Total debt increased to **$210.0 million** at March 31, 2025, from **$196.7 million** at December 31, 2024[132](index=132&type=chunk) - The Comerica Bank revolving credit facility was amended in March 2025, extending maturity to **March 27, 2027**, and lowering the interest rate[133](index=133&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**[134](index=134&type=chunk) - Stratus was in **compliance with all financial covenants** as of March 31, 2025[140](index=140&type=chunk) [Debt Maturities and Other Contractual Obligations](index=29&type=section&id=Debt%20Maturities%20and%20Other%20Contractual%20Obligations) Debt Maturities | Year | Amount (Thousands) | | :--- | :----------------- | | 2025 | $49,227 | | 2026 | $70,309 | | 2027 | $37,365 | | 2028 | $24,385 | | 2029 | $28,757 | | Thereafter | $0 | | Total | $210,043 | Weighted-Average Interest Rates | Loan Type | Weighted-Average Interest Rate (March 31, 2025) | Weighted-Average Interest Rate (March 31, 2024) | | :-------- | :-------------------------------------------- | :-------------------------------------------- | | Comerica Bank revolving credit facility | 7.42% | —% | | Kingwood Place loan | 6.12% | 8.20% | | Lantana Place loan | 6.71% | 7.74% | | Jones Crossing loan | 6.26% | 7.70% | | The Annie B land loan | 7.45% | 8.41% | | The Saint George construction loan | 6.79% | 7.73% | | The Saint June construction loan | 6.71% | 8.19% | | Holden Hills Phase 1 construction loan | 7.44% | 8.39% | | West Killeen Market | 7.07% | 8.09% | | Amarra Villas credit facility | 6.70% | 8.39% | - Firm commitments totaled approximately **$8.3 million** at March 31, 2025, primarily related to construction of The Saint George and Holden Hills Phase 1[148](index=148&type=chunk) - Stratus anticipates making a **$370 thousand** capital contribution to The Saint George partnership and up to **$2.1 million** in operating loans to Stratus Block 150, L.P. over the next 12 months[148](index=148&type=chunk) - The company projects sufficient liquidity for the next 12 months through **$12.0 million** cash, **$34.5 million** revolving credit facility availability, and expected property sales (e.g., West Killeen Market for **$13.3 million**)[149](index=149&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=31&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) - There have been **no changes** in critical accounting estimates from those discussed in the 2024 Form 10-K[154](index=154&type=chunk) [RECENT ACCOUNTING STANDARDS](index=31&type=section&id=RECENT%20ACCOUNTING%20STANDARDS) - ASU No. 2024-03, requiring disaggregated disclosure of certain income statement expenses, is effective for fiscal years beginning after December 15, 2026, and Stratus is assessing its impact[156](index=156&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=31&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) - The company engages in off-balance sheet arrangements in the ordinary course of business, with further details available in "Capital Resources and Liquidity" and the 2024 Form 10-K[158](index=158&type=chunk) [CAUTIONARY STATEMENT](index=31&type=section&id=CAUTIONARY%20STATEMENT) - The report contains **forward-looking statements** about future performance, including projections on inflation, interest rates, property sales, debt, and development projects[160](index=160&type=chunk) - Actual results may differ materially from forward-looking statements due to factors such as business strategy implementation, cost increases, market conditions, debt compliance, and regulatory changes[163](index=163&type=chunk) - The company is not permitted to repurchase common stock over **$1.0 million** or pay dividends without Comerica Bank's prior written consent, which was obtained for the current share repurchase program[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable for this reporting period - This item is **not applicable** for the current reporting period[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal officers concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal controls - Disclosure controls and procedures were **effective** as of March 31, 2025[167](index=167&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended March 31, 2025[168](index=168&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=Part%20II.%20Other%20Information) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company highlights risks from changes in U.S. tariffs and trade policies, which could increase costs and negatively impact real estate demand - Changes in U.S. tariffs and trade policies could adversely affect the business by **disrupting supply chains**, increasing construction costs (e.g., steel, lumber), and creating uncertainty for project pricing and projections[170](index=170&type=chunk) - These changes could also lead to **higher inflation, interest rates, slower economic growth, or recession**, impacting capital availability, real estate demand, and project profitability[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered equity sales and details Q1 2025 common stock repurchases under its existing program - **No unregistered sales** of equity securities occurred during the three months ended March 31, 2025[171](index=171&type=chunk) Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares Remaining Available | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------- | | January 1 - January 31, 2025 | 17,025 | $19.80 | $3,072,888 | | February 1 - February 28, 2025 | 3,669 | $19.69 | $3,000,635 | | March 1 - March 31, 2025 | — | — | $3,000,635 | | Total (Q1 2025) | 20,694 | $19.78 | $3,000,635 | - As of March 31, 2025, **$3.0 million** remains available for repurchases under the **$5.0 million** share repurchase program[172](index=172&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[173](index=173&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, providing transparency into the company's legal and financial arrangements - The report includes various exhibits such as the Second Amended and Restated Revolving Promissory Note, Loan Agreements, and Certifications of Principal Executive and Financial Officers[174](index=174&type=chunk)[175](index=175&type=chunk) [Signature](index=36&type=section&id=Signature) The report was duly signed on behalf of the company by its Chief Financial Officer on May 15, 2025 - The report was signed by Erin D. Pickens, Senior Vice President and Chief Financial Officer, on **May 15, 2025**[179](index=179&type=chunk)

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Stratus Properties reported a net loss in Q1 2025 due to decreased revenue, while progressing on key development projects and strategic financial initiatives [First-Quarter 2025 Highlights](index=1&type=section&id=First-Quarter%202025%20Highlights) Stratus Properties reported a net loss of $2.9 million in Q1 2025, reversing prior-year net income, driven by a significant revenue decrease Key Financial Metrics (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Revenues** | $5.0 million | $26.5 million | | **Net (Loss) Income to Common Stockholders** | $(2.9) million | $4.6 million | | **Diluted (Loss) Income Per Share** | $(0.36) | $0.56 | | **EBITDA** | $(2.3) million | $5.2 million | - The revenue decline was primarily due to the absence of major land and home sales in Q1 2025, partially offset by increased revenue from the **Leasing Operations** segment, notably from The Saint June property[4](index=4&type=chunk) - As of March 31, 2025, the company held **$12.0 million in cash** and had **$34.5 million available** under its revolving credit facility[4](index=4&type=chunk) - Stratus contracted to sell West Killeen Market for **$13.3 million**, expected to close in Q2 2025 and generate approximately **$7.7 million of pre-tax net cash proceeds**[4](index=4&type=chunk) - The company refinanced project loans at Lantana Place and Jones Crossing, raising approximately **$4.2 million in additional cash proceeds**, and extended its revolving credit facility maturity to **2027** at a lower interest rate[4](index=4&type=chunk) [CEO Commentary and Strategic Progress](index=2&type=section&id=CEO%20Commentary%20and%20Strategic%20Progress) The CEO highlighted strategic progress, nearing completion of key projects, developing Holden Hills, and maintaining a pipeline of multi-family projects - Construction on The Saint George multi-family project and the last two Amarra Villas homes is expected to be completed in **Q2 2025**[5](index=5&type=chunk) - The company is focusing on the development of **Holden Hills Phase 1** (495-acre residential) and planning for **Holden Hills Phase 2** (570-acre mixed-use development)[5](index=5&type=chunk) - A pipeline of multi-family development projects, including The Annie B, Lakeway, and College Station, are ready for development subject to market conditions and financing[5](index=5&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=Detailed%20Financial%20Analysis) This section provides a detailed analysis of the company's operational results, debt and liquidity, and share repurchase program [Results of Operations](index=2&type=section&id=Results%20of%20Operations) Quarterly performance varied significantly, with Real Estate Operations revenue declining sharply and Leasing Operations revenue growing due to segment-specific activities - The decrease in Real Estate Operations revenue is attributed to the sales of **47 acres of undeveloped land** at Magnolia Place for **$14.5 million** and **two Amarra Villas homes** for **$7.6 million** in Q1 2024, with no such sales in Q1 2025[8](index=8&type=chunk)[9](index=9&type=chunk) - The increase in Leasing Operations revenue primarily reflects higher income from The Saint June, which was in the process of leasing up in Q1 2024[9](index=9&type=chunk) [Debt and Liquidity](index=3&type=section&id=Debt%20and%20Liquidity) The company's liquidity shifted, with cash decreasing and consolidated debt rising, yet maintaining capital access and continuing development spending Balance Sheet Items (in millions) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $12.0 million | $20.2 million | | **Consolidated debt** | $207.8 million | $194.9 million | - As of March 31, 2025, Stratus had **$34.5 million available** under its revolving credit facility[11](index=11&type=chunk) - Capital expenditures and real estate development costs totaled **$11.7 million** in Q1 2025, down from **$17.1 million** in Q1 2024, primarily related to Holden Hills Phase 1 and The Saint George[12](index=12&type=chunk) [Share Repurchase Program](index=3&type=section&id=Share%20Repurchase%20Program) Stratus continued its share repurchase program, buying back over 20,000 shares in Q1 2025, with $3.0 million remaining available under the authorization - In Q1 2025, Stratus repurchased **20,694 shares** of its common stock for **$0.4 million** at an average price of **$19.78 per share**[13](index=13&type=chunk) - Through May 9, 2025, total repurchases under the current program amounted to **83,380 shares** for **$2.0 million**, with **$3.0 million remaining available**[13](index=13&type=chunk) [Business Segments](index=9&type=section&id=Business%20Segments) This section outlines Stratus's two primary business segments, Real Estate Operations and Leasing Operations, and their respective financial performances [Overview of Business Segments](index=9&type=section&id=Overview%20of%20Business%20Segments) Stratus operates through Real Estate Operations, focusing on property development and sales, and Leasing Operations, managing income-producing leased properties - The **Real Estate Operations** segment includes properties under development for sale, such as Holden Hills, Amarra Villas, and The Saint George[32](index=32&type=chunk)[33](index=33&type=chunk) - The **Leasing Operations** segment comprises income-producing properties held for investment, including The Saint June, West Killeen Market, and the retail portions of Lantana Place and Jones Crossing[32](index=32&type=chunk)[34](index=34&type=chunk) [Segment Financial Performance](index=10&type=section&id=Segment%20Financial%20Performance) In Q1 2025, Real Estate Operations reported a loss due to lack of sales, while Leasing Operations saw profit growth from stronger leasing revenue Segment Performance (Q1 2025) (in thousands) | Segment Performance (Q1 2025) | Real Estate Operations | Leasing Operations | | :--- | :--- | :--- | | **Revenue** | $25 thousand | $5,018 thousand | | **Segment (Loss) Profit** | $(1,502) thousand | $1,958 thousand | Segment Performance (Q1 2024) (in thousands) | Segment Performance (Q1 2024) | Real Estate Operations | Leasing Operations | | :--- | :--- | :--- | | **Revenue** | $22,123 thousand | $4,384 thousand | | **Segment Profit** | $6,801 thousand | $1,349 thousand | Total Assets by Segment (in millions) | Total Assets by Segment | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | **Real Estate Operations** | $371.4 million | $329.1 million | | **Leasing Operations** | $152.0 million | $160.8 million | [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated statements of comprehensive (loss) income, balance sheets, and cash flows for the reporting period [Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) For Q1 2025, Stratus reported a significant revenue decline, resulting in an operating loss and net loss per diluted share, reversing prior-year income Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Income Statement (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $5,043 | $26,507 | | **Operating (Loss) Income** | $(3,595) | $3,685 | | **Net (Loss) Income** | $(3,757) | $3,697 | | **Diluted (Loss) Income Per Share** | $(0.36) | $0.56 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets slightly increased, primarily in real estate, while liabilities and debt rose, decreasing stockholders' equity Consolidated Balance Sheets (in thousands) | Balance Sheet (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $12,006 | $20,178 | | **Total Assets** | $534,581 | $532,606 | | **Debt** | $207,838 | $194,853 | | **Total Liabilities** | $241,998 | $235,039 | | **Total Stockholders' Equity** | $191,459 | $194,705 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, the company experienced a net cash outflow from operating activities, with financing activities partially offsetting cash used in investing Consolidated Statements of Cash Flows (in thousands) | Cash Flows (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(13,495) | $6,547 | | **Net cash used in investing activities** | $(4,693) | $(8,392) | | **Net cash provided by (used in) financing activities** | $9,991 | $(9,059) | | **Net decrease in cash** | $(8,197) | $(10,904) | [Non-GAAP Financial Measures](index=12&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of the company's non-GAAP financial measure, EBITDA [Reconciliation of EBITDA](index=12&type=section&id=Reconciliation%20of%20EBITDA) The company's EBITDA, a non-GAAP measure, was negative $2.3 million in Q1 2025, a significant decline from the positive $5.2 million in Q1 2024 EBITDA Reconciliation (in thousands) | EBITDA Reconciliation (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net (loss) income** | $(3,757) | $3,697 | | Depreciation and amortization | $1,394 | $1,401 | | Provision for income taxes | $30 | $102 | | **EBITDA** | **$(2,333)** | **$5,200** |

[Part I](index=3&type=section&id=Part%20I) [Business and Properties](index=3&type=section&id=Items%201.%20and%202.%20Business%20and%20Properties) Stratus Properties Inc. is a real estate company focused on residential and retail properties primarily in the Austin, Texas area, generating revenue from property sales, leasing, and management fees across Real Estate Operations and Leasing Operations segments, while navigating challenging market conditions. [Overview](index=3&type=section&id=Overview) Stratus Properties is a real estate company primarily engaged in the development, management, leasing, and sale of multi-family, single-family, and commercial properties in and around Austin, Texas, with recent major transactions including property sales, a joint venture, a special dividend, and share repurchases, all while maintaining its development pipeline and liquidity despite high interest rates. - The company is primarily a **residential and retail-focused real estate developer** in the Austin, Texas area and other select Texas markets[16](index=16&type=chunk) - Key transactions over the last three years include the sale of five Amarra Villas homes for **$18.9 million** and 47 acres at Magnolia Place for **$14.5 million** in 2024; a joint venture formation for the Holden Hills project generating **$35.8 million** in 2023; and the sale of Block 21 for **$112.3 million** in net proceeds in 2022[19](index=19&type=chunk) - Following the Block 21 sale, the Board declared a **special cash dividend of $4.67 per share ($40.0 million total)** in September 2022 and authorized share repurchase programs[18](index=18&type=chunk) - As of December 31, 2024, the company had **$20.2 million in cash** and **$39.0 million available** under its revolving credit facility, with no amounts drawn[21](index=21&type=chunk) - In late 2024 and early 2025, Stratus amended or refinanced loans for The Saint June, Kingwood Place, Lantana Place, and Jones Crossing at lower interest rates, generating approximately **$7.7 million in additional cash proceeds**[23](index=23&type=chunk)[24](index=24&type=chunk) [Operations](index=4&type=section&id=Operations) The company's operations are divided into Real Estate Operations, which contributed 64% of 2024 revenue and manages 1,517 acres for development, and Leasing Operations, which accounted for 36% of 2024 revenue from leasing commercial and multi-family properties with average retail rentals of $22.52 per square foot. Revenue Contribution by Segment | Segment | 2024 Revenue % | 2023 Revenue % | | :--- | :--- | :--- | | Real Estate Operations | 64% | 15% | | Leasing Operations | 36% | 85% | Real Estate Development Portfolio (Acreage as of Dec 31, 2024) | Category | Single Family | Multi-family | Commercial | Total | | :--- | :--- | :--- | :--- | :--- | | Acreage Under Development | 502 | 4 | — | 506 | | Undeveloped Acreage | 12 | 326 | 673 | 1,011 | | **Total Acreage** | **514** | **330** | **673** | **1,517** | - The Leasing Operations segment's principal properties include Jones Crossing, Kingwood Place, Lantana Place, West Killeen Market, and The Saint June[44](index=44&type=chunk) - Average retail rental rates increased to **$22.52 per square foot** as of December 31, 2024, from $22.29 a year prior; **73%** of leased retail square footage has lease expirations beyond 2029[41](index=41&type=chunk) [Properties](index=7&type=section&id=Properties) Stratus' property portfolio is concentrated in the Austin, Texas area, particularly within the Barton Creek community, with key developments including Amarra Villas, The Saint June, and the large-scale Holden Hills project, which is leveraging the new ETJ Law for potential density increases, alongside other projects like The Saint George and recent sales at Magnolia Place. - The Barton Creek community is a major focus, containing Amarra Drive lots, Amarra Villas (20-unit luxury development), The Saint June (182-unit multi-family), and the Holden Hills project[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - The Holden Hills project is split into Phase 1 (495-acre residential, in a JV) and Phase 2 (570-acre mixed-use); the company has removed this land from Austin's extraterritorial jurisdiction (ETJ) under a new state law, which is expected to streamline permitting and increase development density[50](index=50&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - The Saint George, a **316-unit multi-family project** in north central Austin, is under construction and expected to be completed in the first half of 2025[64](index=64&type=chunk) - In 2024, the company sold 47 acres of undeveloped land at Magnolia Place for **$14.5 million** and the Magnolia Place – Retail phase for **$8.9 million**[66](index=66&type=chunk)[67](index=67&type=chunk) [Human Capital and Sustainability](index=13&type=section&id=Human%20Capital%20and%20Sustainability) Stratus values its 34 non-unionized full-time employees and is a member of the U.S. Green Building Council, emphasizing sustainable development with a history of LEED-certified projects and green features in current and planned communities. - As of December 31, 2024, the company had **34 full-time employees**, none of whom are represented by a union[82](index=82&type=chunk) - Stratus is a member of the U.S. Green Building Council and focuses on sustainable development, with projects like Block 21 achieving LEED Silver certification and Holden Hills Phase 1 being designed with a focus on health, wellness, and sustainability[83](index=83&type=chunk) [Risk Factors](index=14&type=page&id=Item%201A.%20Risk%20Factors) The company faces a range of risks related to its business, debt, operations, and stock ownership, including strategic execution, capital access, market concentration, interest rate sensitivity, restrictive debt covenants, project delays, regulatory challenges (like the ETJ Law litigation), competition, and stock liquidity. [Risks Relating to our Business and Industry](index=14&type=section&id=Risks%20Relating%20to%20our%20Business%20and%20Industry) Stratus's success is not guaranteed and depends on executing its development plans amid challenging market conditions like high inflation and interest rates, which increase costs and can delay projects, with operations heavily concentrated in the Austin, Texas residential market, making it vulnerable to local economic downturns and difficulties in securing capital for future projects, while joint ventures introduce additional risks. - The company's business is sensitive to inflation, higher borrowing costs, tightened credit, and increased construction costs, which have adversely impacted project profitability and timelines[89](index=89&type=chunk) - Operations are heavily concentrated in the Austin, Texas area and focused on residential projects, creating vulnerability to local economic conditions and weakening in the Austin residential market[96](index=96&type=chunk)[98](index=98&type=chunk) - The capital-intensive nature of the industry means the company may not be able to raise additional debt or equity for future projects on acceptable terms, if at all[99](index=99&type=chunk) - Investments through joint ventures involve risks such as partners taking contrary actions, having inconsistent goals, or defaulting on financial obligations[102](index=102&type=chunk) [Risks Relating to our Indebtedness](index=20&type=section&id=Risks%20Relating%20to%20our%20Indebtedness) The company has significant variable-rate debt totaling $194.9 million as of year-end 2024, exposing it to interest rate fluctuations and requiring a substantial portion of cash flow for service payments, which limits funds for other corporate purposes and increases vulnerability to adverse economic conditions, while loan agreements contain restrictive covenants that could lead to default if not complied with. - As of December 31, 2024, total outstanding debt was **$194.9 million**, with principal payments of **$48.9 million** and estimated interest payments of **$12.9 million** due in 2025[112](index=112&type=chunk) - All consolidated debt as of year-end 2024 was **variable-rate**, making the company susceptible to increased interest costs if market rates rise[91](index=91&type=chunk)[112](index=112&type=chunk) - Debt agreements contain restrictive covenants that limit Stratus's ability to borrow additional money, pay dividends, repurchase equity, sell assets, or engage in mergers[115](index=115&type=chunk)[119](index=119&type=chunk) [Risks Relating to Real Estate Operations](index=22&type=section&id=Risks%20Relating%20to%20Real%20Estate%20Operations) The real estate industry's cyclical nature poses a significant risk, with development projects facing delays and cost overruns due to financing, permits, and labor issues, while ongoing litigation challenging the ETJ Law creates uncertainty for the Holden Hills development, and large holdings of undeveloped land are subject to value deterioration if demand weakens, further complicated by intensive regulatory approval processes and environmental regulations. - Development projects are subject to numerous risks including inability to obtain permits, financing challenges, cost overruns, and contractor defaults[121](index=121&type=chunk)[123](index=123&type=chunk) - Litigation challenging the Texas ETJ Law creates uncertainty for the Holden Hills Phases 1 and 2 projects; if the law is invalidated, it could make development more complex and costly, while if upheld, it could streamline the process and increase density[124](index=124&type=chunk)[125](index=125&type=chunk) - Real estate is an illiquid asset, and the company may not be able to sell properties at advantageous times or prices, potentially leading to losses or impairment charges[128](index=128&type=chunk) - Operations are subject to extensive regulatory approval processes and environmental laws, which can cause delays, increase costs, or prevent development entirely[130](index=130&type=chunk)[132](index=132&type=chunk) [Risks Relating to Leasing Operations](index=25&type=section&id=Risks%20Relating%20to%20Leasing%20Operations) The company's leasing operations face risks of being unable to achieve or sustain satisfactory occupancy and rental rates for both its retail and multi-family properties due to market oversupply, competition, economic conditions affecting tenants' ability to pay rent, and the ongoing threat of online shopping to brick-and-mortar retail, while short lease terms for multi-family properties make rental revenues sensitive to market declines. - Achieving satisfactory occupancy and rental rates is challenged by market oversupply, competition, and potential declines in market rental rates[136](index=136&type=chunk)[138](index=138&type=chunk) - Retail tenants face competition from online shopping, which could impact their ability to meet lease obligations[137](index=137&type=chunk) - Multi-family leases are typically for **12 months**, making rental revenues sensitive to short-term declines in market rents[139](index=139&type=chunk) [Cybersecurity](index=28&type=page&id=Item%201C.%20Cybersecurity) Stratus has implemented a cybersecurity risk management program based on the NIST Cybersecurity Framework, with oversight from the Audit Committee and day-to-day management by an internal IT Steering Committee and IT Security Team, and while incidents have occurred, none have had a material effect to date. - The company's cybersecurity program is based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[148](index=148&type=chunk) - Oversight is provided by the Board's Audit Committee, which receives reports from the Chief Financial Officer[150](index=150&type=chunk)[152](index=152&type=chunk) - An IT Steering Committee of senior management and an IT Security Team are responsible for managing cybersecurity risks and responding to incidents[153](index=153&type=chunk)[154](index=154&type=chunk) - To date, no cybersecurity threats or incidents have materially affected the company's business, operations, or financial condition[149](index=149&type=chunk) [Information About Our Executive Officers](index=29&type=page&id=Information%20About%20Our%20Executive%20Officers) The company's executive officers include William H. Armstrong III, Chairman, President, and CEO since 1992, and Erin D. Pickens, Senior Vice President and Chief Financial Officer since 2009. Executive Officers (as of March 21, 2025) | Name | Age | Position or Office | | :--- | :--- | :--- | | William H. Armstrong III | 60 | Chairman of the Board, President and Chief Executive Officer | | Erin D. Pickens | 63 | Senior Vice President and Chief Financial Officer | [Part II](index=31&type=section&id=Part%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Stratus's common stock trades on NASDAQ under "STRS," with its ability to pay dividends restricted by debt agreements, though special dividends were paid in 2017 and 2022, and the company completed a $10.0 million share repurchase program in October 2023, followed by a new $5.0 million program with $3.0 million remaining as of March 21, 2025, during which 62,686 shares were repurchased in Q4 2024. - The company's common stock trades on The Nasdaq Stock Market under the symbol "**STRS**"[165](index=165&type=chunk) - The ability to pay dividends or repurchase shares is restricted by debt covenants with Comerica Bank, requiring prior written consent[166](index=166&type=chunk)[167](index=167&type=chunk) - A **$10.0 million** share repurchase program was completed in October 2023; a new **$5.0 million** program was authorized in November 2023, with **$3.0 million** remaining as of March 21, 2025[167](index=167&type=chunk)[171](index=171&type=chunk) Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Oct 2024 | — | $ — | $5,000,000 | | Nov 2024 | 52,767 | $25.33 | $3,663,598 | | Dec 2024 | 9,919 | $25.58 | $3,409,906 | | **Total** | **62,686** | **—** | **$3,409,906** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Items%207.%20and%207A.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20and%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section provides management's perspective on the company's financial condition and results of operations, detailing a business strategy focused on developing and monetizing properties in Texas, primarily through project-level debt and joint ventures, which led to a significant revenue increase to $54.2 million in 2024 and a net income of $2.0 million, with management confident in sufficient liquidity for the next 12 months. [Business Strategy](index=32&type=section&id=Business%20Strategy) The company's primary objective is to create stockholder value by developing properties for sale or lease, focusing on residential and residential-centric mixed-use projects in Austin and other select Texas markets, utilizing project-level debt and third-party equity from joint ventures to earn fees and limit risk, while maintaining liquidity and potentially returning capital to stockholders. - The primary business objective is to create value by developing properties and then selling or holding them for lease based on favorable market conditions[176](index=176&type=chunk) - The company plans to continue developing properties using project-level debt and third-party equity through joint ventures, earning management fees and potential preferred returns[178](index=178&type=chunk) - Capital may be returned to stockholders via special dividends or share repurchases, as demonstrated in 2017, 2022, and 2023[177](index=177&type=chunk) [Overview of Financial Results for 2024](index=35&type=section&id=Overview%20of%20Financial%20Results%20for%202024) For fiscal year 2024, total revenues significantly increased to $54.2 million from $17.3 million in 2023, primarily driven by a $32.3 million increase in Real Estate Operations from property sales and a $4.6 million increase in Leasing Operations, resulting in a net income attributable to common stockholders of $2.0 million ($0.24 per diluted share), a substantial improvement from a $14.8 million net loss in 2023, despite increased multi-family supply and dropping rental rates in the Austin market. Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $54.2 million | $17.3 million | | Net Income (Loss) to Common Stockholders | $2.0 million | $(14.8) million | | Diluted EPS | $0.24 | $(1.85) | - The revenue increase in 2024 was primarily due to sales of five Amarra Villas homes (**$18.9 million**), 47 acres at Magnolia Place (**$14.5 million**), and one Amarra Drive lot (**$1.4 million**)[191](index=191&type=chunk) - In the Austin-Round Rock multi-family market in 2024, supply grew by **10.3%**, causing rental rates to drop by **6.9%**, while occupancy remained high at **92.8%**[196](index=196&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) The company's operating loss narrowed significantly to $2.2 million in 2024 from $16.9 million in 2023, driven by a turnaround in Real Estate Operations to a $4.7 million operating income from $34.9 million in property sales revenue, and an increase in Leasing Operations operating income to $8.1 million from higher rental revenue and a $1.6 million gain on sale, while general and administrative expenses remained stable and interest costs increased to $15.7 million due to higher rates and debt balances. Operating Income (Loss) by Segment (in thousands) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Real Estate Operations | $4,727 | $(7,219) | | Leasing Operations | $8,070 | $5,440 | | General & administrative expenses | $(14,952) | $(15,167) | | **Total Operating Loss** | **$(2,155)** | **$(16,946)** | - Real Estate Operations revenue surged to **$34.9 million** in 2024 from $2.6 million in 2023, primarily from sales of developed and undeveloped properties[235](index=235&type=chunk) - Leasing Operations rental revenue increased to **$19.3 million** in 2024 from $14.7 million in 2023, mainly reflecting a full year of operations from The Saint June[239](index=239&type=chunk) - A pre-tax gain of **$1.6 million** was recognized in Q3 2024 from the sale of Magnolia Place – Retail[241](index=241&type=chunk) [Capital Resources and Liquidity](index=45&type=section&id=Capital%20Resources%20and%20Liquidity) As of December 31, 2024, Stratus had $20.2 million in cash and $39.0 million available under its revolving credit facility, with total debt increasing to $196.7 million, while cash used in operating activities decreased significantly to $5.8 million, and the company made operating loans and capital contributions to joint ventures, recently refinancing several project loans to extend maturities and lower interest rates, with management confident in compliance with all financial covenants and sufficient liquidity for the next 12 months. Liquidity Position (as of Dec 31, 2024) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $20.2 million | | Availability under revolving credit facility | $39.0 million | | Total Debt (principal) | $196.7 million | - Cash used in operating activities totaled **$5.8 million** in 2024, a significant decrease from $51.3 million used in 2023[248](index=248&type=chunk) - The company made operating loans to The Annie B project (**$3.5 million** in 2024) and The Saint June project (**$424 thousand** in 2024) to support debt service and other costs[256](index=256&type=chunk)[257](index=257&type=chunk) - The company was in compliance with all financial covenants as of December 31, 2024[268](index=268&type=chunk) [Debt Maturities and Other Contractual Obligations](index=49&type=section&id=Debt%20Maturities%20and%20Other%20Contractual%20Obligations) As of December 31, 2024, the company has total debt maturities of $50.2 million in 2025, $88.3 million in 2026, and $58.2 million in 2027, all with variable interest rates, and projects it will meet its debt service and other cash obligations for at least the next 12 months, supported by cash, credit facility availability, and expected cash flows, while also having approximately $10 million in firm construction commitments. Debt Maturities by Year (Principal, in thousands, as of Dec 31, 2024) | Year | Amount | | :--- | :--- | | 2025 | $50,181 | | 2026 | $88,301 | | 2027 | $58,183 | | 2028 | $— | | 2029 | $— | | Thereafter | $— | | **Total** | **$196,665** | - Estimated interest payments for 2025 are approximately **$12.9 million**[277](index=277&type=chunk) - The company had firm construction commitments of approximately **$10 million** at year-end 2024, primarily for Holden Hills Phase 1 and The Saint George[278](index=278&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for fiscal years 2024 and 2023, including Management's Annual Report on Internal Control Over Financial Reporting, which concluded controls were effective, and the Independent Registered Public Accounting Firm's unqualified opinion, encompassing the Consolidated Balance Sheets, Statements of Comprehensive Income (Loss), Statements of Cash Flows, Statements of Equity, and detailed Notes. [Consolidated Financial Statements](index=57&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position and performance, with total assets increasing to $532.6 million in 2024 from $517.8 million in 2023, total liabilities growing to $235.0 million from $223.2 million, and a shift from a net loss of $16.5 million in 2023 to a net loss of $1.9 million in 2024, resulting in net income attributable to common stockholders of $2.0 million, while cash decreased by $11.3 million, ending the year with $21.2 million. Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $532,606 | $517,766 | | Total Liabilities | $235,039 | $223,161 | | Total Stockholders' Equity | $194,705 | $191,479 | | Total Equity | $297,567 | $294,605 | Consolidated Income Statement Highlights (in thousands) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $54,183 | $17,270 | | Operating Loss | $(2,155) | $(16,946) | | Net Loss | $(1,908) | $(16,493) | | Net Income (Loss) Attributable to Common Stockholders | $1,956 | $(14,807) | [Notes to Consolidated Financial Statements](index=61&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and financial statement line items, covering business and consolidation principles, extensive details on limited partnership and joint venture structures, a breakdown of real estate assets, recent asset sales, a comprehensive summary of all debt facilities including terms and covenants, income taxes, equity transactions, stock-based compensation plans, and various commitments and contingencies. - Stratus consolidates several limited partnerships (Holden Hills, The Saint George, The Annie B, The Saint June, Kingwood Place) as Variable Interest Entities (VIEs) for which it is the primary beneficiary[348](index=348&type=chunk)[373](index=373&type=chunk) - Total net real estate assets increased to **$486.6 million** at year-end 2024 from $459.6 million in 2023, with the largest component being 'Real estate under development' at **$274.1 million**[378](index=378&type=chunk) - Note 6 provides a detailed breakdown of the company's **$194.9 million in debt**, outlining terms, maturity dates, interest rates, and covenants for each facility, including the main revolving credit facility and various project-specific construction and land loans[392](index=392&type=chunk) - The company maintains a Profit Participation Incentive Plan (PPIP) and a Long-Term Incentive Plan (LTIP) to provide economic incentives to key employees tied to the success of designated development projects; the accrued liability for these plans was **$1.9 million** at year-end 2024[441](index=441&type=chunk)[447](index=447&type=chunk) [Controls and Procedures](index=87&type=page&id=Item%209A.%20Controls%20and%20Procedures) Based on an evaluation by the Chief Executive Officer and Chief Financial Officer, the company concluded that its disclosure controls and procedures were effective as of December 31, 2024, with no material changes to internal control over financial reporting during the fourth quarter of 2024. - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2024[471](index=471&type=chunk) [Other Information](index=87&type=page&id=Item%209B.%20Other%20Information) This section reports on significant events, including the amendment of the Comerica Bank revolving credit facility effective March 25, 2025, extending its maturity to March 27, 2027, and lowering the interest rate, and the entry into new three-year Severance and Change of Control Agreements with the CEO and CFO, effective April 1, 2025. - Effective March 25, 2025, the Comerica Bank revolving credit facility was amended to extend the maturity to **March 2027** and lower the interest rate[474](index=474&type=chunk)[475](index=475&type=chunk) - New Severance and Change of Control Agreements were entered into with the CEO and CFO, effective April 1, 2025, for a term through **March 31, 2028**[478](index=478&type=chunk) [Part III](index=89&type=section&id=Part%20III) [Directors, Executive Officers and Corporate Governance](index=89&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required for this item, including details on directors and corporate governance, will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference, with executive officer information presented in Part I of this report. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[485](index=485&type=chunk) [Executive Compensation](index=89&type=section&id=Item%2011.%20Executive%20Compensation) The information regarding executive compensation required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[486](index=486&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information regarding security ownership required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[487](index=487&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=89&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information regarding related party transactions and director independence required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[488](index=488&type=chunk) [Principal Accounting Fees and Services](index=89&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information regarding principal accounting fees and services required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[489](index=489&type=chunk) [Part IV](index=89&type=section&id=Part%20IV) [Exhibits, Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section indicates that the consolidated financial statements are included in Part II, Item 8, and provides a comprehensive list of all exhibits filed with the Form 10-K, including agreements, corporate governance documents, loan modifications, and certifications, many of which are incorporated by reference from previous filings. - This item lists all exhibits filed with the Form 10-K, including loan agreements, corporate bylaws, and executive compensation plans[492](index=492&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)

Financial Performance - Net income attributable to common stockholders for the year ended December 31, 2024, was $2.0 million, or $0.24 per diluted share, compared to a net loss of $14.8 million, or $1.85 per diluted share, in 2023[4] - Total revenues for 2024 were $54.2 million, a significant increase from $17.3 million in 2023, driven by sales of five Amarra Villas homes for $18.9 million and 47 acres of undeveloped land for $14.5 million[4] - EBITDA for 2024 was $4.1 million, compared to a loss of $10.7 million in 2023, indicating a substantial improvement in operational performance[4] - The net loss for 2024 was $1.908 million, a substantial improvement from a net loss of $16.493 million in 2023, reflecting a reduction of approximately 88%[30] - The company reported a total comprehensive loss attributable to common stockholders of $1.908 million in 2024, compared to a loss of $14.807 million in 2023[26] - The net loss before income taxes for 2024 was $1,466,000, a substantial improvement compared to a net loss of $15,034,000 in 2023[39] Revenue Growth - Total revenues for 2024 reached $54.183 million, a significant increase from $17.270 million in 2023, representing a growth of approximately 213%[26] - Real Estate Operations generated revenues of $34.887 million in 2024, compared to $2.551 million in 2023, indicating a growth of over 1,267%[26] - Revenue from unaffiliated customers for 2024 was $54,183,000, a significant increase from $17,270,000 in 2023, representing a growth of approximately 213%[37] Assets and Equity - Stratus had $20.2 million in cash and cash equivalents as of December 31, 2024, with no amounts drawn on its revolving credit facility, and $39.0 million available under the facility[4] - Total assets increased to $532.606 million in 2024, up from $517.766 million in 2023, marking a growth of about 2.4%[28] - Stratus' total stockholders' equity increased to $194.7 million at December 31, 2024, compared to $191.5 million in 2023, indicating a strengthening balance sheet[14] - The after-tax Net Asset Value (NAV) was $330.5 million, or $40.38 per share, as of December 31, 2024, up from $321.7 million, or $39.40 per share, in 2023[14] Debt and Liabilities - Consolidated debt increased to $194.9 million as of December 31, 2024, from $175.2 million in 2023, primarily due to project construction loans[10] - Total liabilities increased to $235 million in 2024 from $223.2 million in 2023, reflecting a rise of approximately 5.5%[53] - Stratus' debt increased to $194.853 million in 2024 from $175.168 million in 2023, representing an increase of about 11.3%[28] Capital Expenditures - Capital expenditures for the development of real estate properties totaled $58.7 million in 2024, down from $90.4 million in 2023, reflecting a strategic focus on key projects[13] - Capital expenditures for real estate properties in 2024 amounted to $58,661,000, down from $90,413,000 in 2023, indicating a reduction of about 35%[39] Share Repurchase and Stock Performance - The company repurchased 83,380 shares of its common stock for a total cost of $2.0 million under its share repurchase program, with $3.0 million remaining available for future repurchases[4] Operational Highlights - The company completed the lease-up of The Saint June, a 182-unit luxury multi-family project, in 2024, contributing to revenue growth[4] - Segment profit for Real Estate Operations in 2024 was $4,727,000, while Leasing Operations reported a profit of $8,070,000, leading to a total segment profit of $12,797,000[37] - The gain on the sale of assets in 2024 was $1,626,000, contributing positively to the overall financial performance[37] - General and administrative expenses for 2024 were $14,952,000, slightly lower than $15,167,000 in 2023, indicating cost management efforts[37]

Financial Performance - Net loss attributable to common stockholders was $0.4 million, or $0.05 per diluted share, in Q3 2024, a significant improvement from a net loss of $2.8 million, or $0.36 per diluted share, in Q3 2023[2] - Revenues for Q3 2024 were $8.9 million, up from $3.7 million in Q3 2023, primarily due to the sale of one Amarra Villas home for $4.0 million and increased rental revenue from The Saint June[3] - For the first nine months of 2024, revenues totaled $43.9 million compared to $13.0 million in the same period of 2023, driven by the sale of approximately 47 acres of undeveloped land for $14.5 million and four Amarra Villas homes for $15.2 million[3] - The company reported an operating loss of $1.519 million for Q3 2024, an improvement from a loss of $3.329 million in Q3 2023[31] - Net loss attributable to common stockholders for Q3 2024 was $364,000, compared to a net loss of $2.844 million in Q3 2023[31] - Net loss for the third quarter of 2024 was $495,000, a significant improvement from a net loss of $14.8 million in the same period of 2023[35] - Operating cash flow improved to a net cash used of $2.4 million, compared to $39.3 million in the third quarter of 2023[35] - EBITDA for the first nine months of 2024 was $3.9 million, a recovery from $(9.9) million in the same period of 2023[6] - EBITDA for the third quarter of 2024 was $3.88 million, compared to a negative EBITDA of $9.92 million in the same period of 2023[49] Assets and Liabilities - Total assets increased to $523.180 million as of September 30, 2024, up from $517.766 million at the end of 2023[33] - Debt levels rose to $181.540 million as of September 30, 2024, compared to $175.168 million at the end of 2023[33] - Cash and cash equivalents decreased to $19.638 million from $31.397 million at the end of 2023[33] - As of September 30, 2024, Stratus had $19.6 million in cash and cash equivalents and $39.6 million available under its revolving credit facility[5] Real Estate Operations - Real estate operations generated revenues of $3.971 million in Q3 2024, compared to $2.551 million in Q3 2023, marking a 56% increase[31] - Total revenues for the Real Estate Operations segment were $3.97 million, while the Leasing Operations segment generated $4.92 million, totaling $8.89 million in revenues[41] - Operating loss for the Real Estate Operations segment was $1.42 million, while the Leasing Operations segment reported an operating income of $3.25 million[41] - Stratus completed property sales totaling $38.6 million in the first nine months of 2024, with a notable average sales price increase for Amarra Villas homes compared to the prior year[8] - The occupancy rate at The Saint June was approximately 97% as of November 8, 2024, indicating strong demand for the luxury multi-family project[7] Capital Expenditures and Investments - Capital expenditures for the third quarter of 2024 amounted to $6.61 million for Real Estate Operations and $6.82 million for Leasing Operations, totaling $13.43 million[41] - Stratus is currently developing real estate valued at $261.212 million, slightly up from $260.642 million at the end of 2023[33] Share Repurchase and Financing - A new share repurchase program was approved, allowing for repurchases of up to $5.0 million of common stock, following the completion of a previous $10.0 million program[18] - The company has a share repurchase program of $5.0 million, subject to restrictions under its Comerica Bank debt agreements[24] - Stratus is exploring refinancing options for several construction loans, anticipating tighter spreads and potential additional proceeds[17] Legislative and Legal Considerations - The company anticipates potential impacts from Texas Senate Bill 2038 and ongoing litigation, which may affect future operations and development projects[25]

Financial Performance - Revenues for Q1 2024 totaled $26.5 million, a significant increase from $5.8 million in Q1 2023, driven by sales of approximately 47 acres of undeveloped land for $14.5 million and two homes for $7.6 million[84]. - Net income attributable to common stockholders in Q1 2024 was $4.6 million, or $0.56 per diluted share, compared to a net loss of $5.8 million, or $0.73 per diluted share, in Q1 2023[85]. - In Q1 2024, the company reported operating income of $3.685 million, a significant improvement from a loss of $5.593 million in Q1 2023[111]. - Total revenues for Real Estate Operations in Q1 2024 reached $22.123 million, compared to $2.493 million in Q1 2023, driven by developed and undeveloped property sales[113]. - Rental revenue in Q1 2024 was $4.384 million, up from $3.309 million in Q1 2023, primarily due to new leases and revenue from The Saint June[116]. - Operating cash flow increased to $6.5 million in Q1 2024 from a cash outflow of $18.4 million in Q1 2023, primarily due to property sales[125]. Development Projects - The company has a development portfolio of approximately 1,600 acres of commercial and residential projects under development or undeveloped land held for future use[70]. - The Saint June multi-family project achieved approximately 90% lease-up as of May 10, 2024, with the first units available for occupancy in July 2023[89]. - The Saint George project is expected to achieve substantial completion by Q3 2024, with 316 luxury units under development[95]. - The company plans to continue developing properties using project-level debt and third-party equity capital through joint ventures, aiming for attractive long-term returns[74]. - The ETJ Law, effective September 1, 2023, may streamline the development permitting process for the Holden Hills and Section N projects, potentially increasing development density[94]. Cash and Debt Management - As of March 31, 2024, consolidated cash totaled $20.7 million, with $39.6 million available under the revolving credit facility, net of $13.3 million in letters of credit[78]. - The company anticipates seeking additional capital through project-level debt and third-party equity capital arrangements for its development projects[104]. - Total debt as of March 31, 2024, was $170.1 million, down from $177.4 million at December 31, 2023[134]. - The company had $20.7 million in cash and cash equivalents as of March 31, 2024, with no borrowings under the revolving credit facility[133]. - Total debt maturities amount to $170.1 million as of March 31, 2024, with significant amounts due in 2024 ($67.1 million) and 2026 ($62.9 million)[144]. - The company plans to extend or refinance debt maturing in the next 12 months and will not incur material costs for new projects until adequate financing is secured[150]. Interest and Expenses - Interest expense in Q1 2024 totaled $4.0 million, an increase from $2.4 million in Q1 2023, reflecting higher interest rates and increased average debt balances[120]. - The weighted-average interest rate for the Jones Crossing loan increased to 7.70% in Q1 2024 from 6.73% in Q1 2023, while The Annie B land loan rose to 8.41% from 7.44%[147]. - The company recorded a provision for income taxes of $0.1 million in Q1 2024, down from $1.2 million in Q1 2023[121]. - Cash used in investing activities decreased to $8.4 million in Q1 2024 from $10.2 million in Q1 2023, with capital expenditures of $8.1 million primarily for The Saint George[126]. - Cash used in financing activities totaled $9.1 million in Q1 2024, compared to cash provided of $42.7 million in Q1 2023[127]. Future Outlook and Challenges - The company expects to generate approximately $7.2 million of pre-tax net cash proceeds from the sale of West Killeen Market, contracted for $12.8 million, expected to close in Q2 2024[80]. - Market conditions have been challenging due to inflation, higher borrowing costs, and supply chain constraints, impacting project profitability and timelines[105]. - The company does not expect to generate sufficient recurring cash flow to cover general and administrative expenses each period due to its development-focused business model[151]. - Future financial performance will depend on the ability to sell or lease properties profitably and extend or refinance debt as it becomes due[152]. Shareholder and Compliance Matters - A new share repurchase program was approved in November 2023, authorizing repurchases of up to $5.0 million of common stock[132]. - The company was in compliance with all financial covenants as of March 31, 2024[140]. - The company is subject to restrictions under its Comerica Bank debt agreements, limiting stock repurchases and dividend payments without prior consent[164].